What is Bonded Warehouse
A bonded warehouse is a warehousing unit owned and operated by a company in a foreign land under the supervision of the country’s customs agency. A company can store imported products in a bonded warehouse without paying customs duty. However, the mentioned tax is levied before a product can be shipped to its destination.
Significance of Bonded Warehouse in an E-commerce Shipping and Delivery
Bonded warehouses are of great value to companies that trade across different jurisdictions. It helps them in terms of storage, payment, and transit time. These benefits have been explained below.
- Storage and inferred payment: A company must pay the customs duty only when a product leaves the warehouse. Therefore, any company can stock vast quantities of products beforehand and pay only when an order is received.
- Reduced transit time: A company can stock products in a foreign country without paying customs duty. It allows them to quickly dispatch the product once an order is received from a specific location in that country. The transit time is reduced significantly as the products have been pre-shipped.
How Bonded Warehouse Works and Prerequisites for Bonded Warehouse
The prerequisite of a bonded warehouse is to own or rent out a warehousing unit in a particular country where a company might get orders. These warehouses should comply with the country’s customs regulations.
Once a bonded warehouse is available, here’s how it works
- Prestocking: Companies ship products to a foreign land and store them in a bonded warehouse.
- Customs payment: Once an order is received, companies can pay the customs duty for that specific product.
- Delivery: The final delivery phase is initiated after clearing the customs duty.
Use Case With Bonded Warehouse
For example, a Singaporean company receives an average of 40 orders from Thailand per month. Therefore, to decrease the transit time, the Singaporean company rented a bonded warehouse in Thailand and stocked them with 120 products. When an order is received, the product is dispatched from the bonded warehouse after clearing customs duty.