Bound tariffs are those tariffs at which a country – particularly in the World Trade Organization (WTO) context – has agreed to not increase the rate of duty beyond. Once a rate has been bound, it can only be raised if all affected parties are suitably compensated.
Applied tariffs are those that are actually applied by the country concerned. It may be the bound rate, but frequently is not.
Countries frequently try to allow themselves some wiggle room between what they agreed to on the international stage and domestic practice. For example, some countries may agree to bind their tariffs at a certain rate in the WTO, but the actual tariffs on the ground will be somewhat lower, enabling those countries to ratchet their tariffs back up to the WTO bound rate without provoking dispute settlement or compensation claims.
Nevertheless, bound rates are significant. They effectively create a baseline regime with a minimum level of standards that exporters can expect to encounter when they do business overseas.