BOUND TARIFF RATE Meaning and
Definition
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A bound tariff rate refers to a specific rate of customs or import duty that has been agreed upon and set by a country in its trade policy. It is a predetermined maximum limit on the tariff rate that a country may impose on imports of certain goods. The bound tariff rate is established through negotiations within international trade agreements, such as those at the World Trade Organization (WTO).
Bound tariff rates are designed to provide stability and predictability in international trade by limiting the discretion of countries to raise tariffs above the agreed-upon maximum. They provide a safeguard against sudden increases in import duties, thus ensuring that countries cannot apply arbitrary or discriminatory measures that could hinder international trade.
Whenever a country joins the WTO or engages in trade negotiations, it submits a list of its bound tariff rates. These rates are usually determined through bilateral or multilateral negotiations and are often lower than the applied or actual tariff rates that a country currently has in place.
The bound tariff rates are an essential component of the WTO's principle of non-discrimination, ensuring that all members are treated equally and that import duties are not used as a trade barrier. They offer clarity and transparency in international trade rules and promote a more open and fair trading system by preventing countries from implementing excessive or uncontrolled tariffs.
