A tariff ceiling is a maximum tariff rate that a country promises not to exceed. It represents the upper limit for the customs duty a country can impose on imported goods.
Understanding Tariff Ceilings
In international trade agreements, countries often make commitments regarding the tariffs they will apply to imports. A tariff ceiling, also known as a bound tariff rate, is a specific commitment not to charge more than a certain percentage or amount on a particular product or category of products.
According to the reference provided, a tariff ceiling does not set the exact tariff rate a country will apply; rather it just sets a maximum tariff rate ('ceiling') for which a country promises not to exceed. For example, a country might agree to a tariff ceiling of 10% on imported cars. This means the country can charge any tariff rate up to 10% (e.g., 0%, 5%, 8%), but it cannot charge more than 10%. Ie, the country will not charge more than 10%.
Context in Trade Agreements
Tariff ceilings are typically established within the framework of trade agreements, such as those administered by the World Trade Organization (WTO). These agreed-upon maximum rates are formally documented. Essentially, a Schedule of Concessions is an entire 'promise' tariff schedule that is stapled to a trade agreement. This Schedule lists all the tariff ceilings (or bound rates) a country has committed to for various products.
These commitments provide predictability and stability for businesses involved in international trade, assuring them that tariffs will not rise above the agreed maximum levels. While a country is free to apply a tariff rate below its ceiling (this is called the applied rate), it is bound by treaty obligations not to exceed the ceiling rate.
