What is a Bonded Warehouse?

A bonded warehouse is a building or secured location where dutiable goods are stored or go through manufacturing operations without paying duty. Furthermore, a bonded warehouse is either government-owned or managed by a large enterprise in a foreign country in accordance with the regulatory guidelines of that country’s customs agency. The primary advantage of bonded warehousing is that the customs duty is deferred until the goods are removed for domestic consumption.

Bonded Warehouse

Like standard warehouses, bonded warehouses also enable businesses to store their products closer to their customers’ locations for quick and efficient delivery. Furthermore, goods stored in a bonded warehouse can be modified in the following ways for the local market:

  • Labeling
  • Testing
  • Marking
  • Packaging
  • Grading
  • Dilution
  • Service and maintenance
Bonded Warehouse

Types of bonded warehouses

Several options are available for storing goods depending on the country or region.

Temporary storage premises (RTO)

It offers businesses a space for storing goods. In the European Union in particular, these goods enter the customs territory and await approval from the customs authorities for further treatment or use.

Type B customs warehouse

It is a public customs warehouse. It implies the administrator can make the bonded warehouse available for anyone who wishes to store goods with the customs authorities. More importantly, customs authorities license type B warehouses and serve as the custodian for storing goods until they have received duty from the importers.

Type C customs warehouse

It is a private customs warehouse. It implies that the warehouse keeper or administrator of the type C warehouse has the authority to store goods in the customs warehouse. They can store goods either for themself or on behalf of others. However, the warehouse keeper remains responsible for the goods in the bonded warehouse. 

Type D and E customs warehouses

Type D and E customs warehouses are also private customs warehouses. However, type D and E warehouses only allow the administrator or warehouse keeper to store goods in them.

Free warehouse

Anyone can store their goods in a free bonded warehouse. However, the building or premises remain guarded by the customs authority.

Special economic zone or free zone

Unlike other bonded warehouses, special economic zones or free zones are locations instead of buildings. The location is a geographical area carefully charted and recorded. Furthermore, often these areas are known as bonded logistics parks. 

What are Customs Bonded Warehouses?

A customs bonded warehouse is a facility where goods and inventory are stored, and further manufacturing, packing, re-packing, labeling, etc. is done. The customs duties are deferred at the time of import of goods. The duty is only payable after the clearance of manufactured goods for home consumption. No customs duty is payable if goods are exported directly from the warehouse. 

What are the Benefits of a Customs Bonded Warehouse?

Here are some of the primary benefits of customs bonded warehouses and why you should go for them:

  • The postponement of customs duty until the goods leave the warehouse results in cost savings and increased cash flow.
  • A privately owned customs bonded warehouse ought to have a designated area inside the warehouse used only for importing goods. 
  • Customs bonded warehouses enable long-term storage. It allows importers to develop strategic relationships with local vendors and suppliers. 
  • Importers get additional time to take care of the paperwork, as customs bonded warehouses allow storage of restricted goods for extended periods.
  • A customs bonded warehouse is ideal for international businesses, as it provides storage of goods in well-thought-out locations worldwide to be closer to customers.
  • You can improve service for your customers since the quality of your products can be preserved. 

What are Bonded Goods?

Bonded goods can be identified as landed import goods and inventory stored under the supervision of customs authorities. Furthermore, bonded goods are stored in bonded warehouses for which customs duty is yet to be paid. These goods are released for export after customs clearance and payment of customs duties. Taxes, customs duties, and other assessments must be made before bonded goods can be released to the importer.

How Does Bonded Warehousing Work?

Most bonded warehouses are located very close to ports. Furthermore, it means you can store your goods and inventory at the port of entry and distribute goods as and when required. Eventually, it reduces expenses across the entire supply chain network owing to reduced potential for damage, significant cost savings in transportation, reduced lead times, and lower carbon emissions.

Furthermore, the warehouse manager and importer are legally bound by a contract to incur financial and legal liabilities when the goods enter the bonded warehouse. Thus, the importer has enough time to arrange the funds required to pay customs duties. The bonded goods are safe and secure within the facility. Furthermore, the importer also holds the power to transfer the title of goods stored in the warehouse to the buyer. Buyers are then liable to pay the customs duties and gain the ownership and custody of the goods. 

An important benefit of using customs bonded warehouses is that importers can store items that have not yet been cleared by customs. Lastly, importers can avoid paying expensive container demurrage and even advance customs duties. 

To summarize, here’s how bonded warehouses work:

  • Goods are imported to the bonded warehouse
  • Goods are stored, manipulated, or undergo manufacturing activities
  • Customer orders are fulfilled or sent to the next destination
  • Upon release, duties, taxes, and fees are paid

Why Do Companies Use Bonded Warehousing?

Companies can put bonded warehouses to multiple uses. Here are some of the primary benefits of bonded warehouses:

Importing large quantities of goods

Importing large quantities of goods from foreign countries is quite expensive, with added taxes and duties and the cost of goods and transportation costs. Bonded warehouses allow businesses to control when they pay by releasing the goods or inventory instead of paying it all at once. Thus, retailers can significantly reduce the costs of importing large quantities of goods from foreign countries.

Local fulfillment and shipping vendors for international commerce

Bonded warehouses offer in-house fulfillment services. It’s an attractive option to many brands, as they can store goods abroad in different bonded warehouses. Furthermore, they don’t have to pay import duties until a product is bought and shipped from the warehouse. It simplifies global e-commerce selling as brands don’t have to worry about import, storage, and fulfillment.

Longer-term storage solutions

You can store goods in a bonded warehouse for an extended period. For example,  you can store goods for up to 5 years in the United States. 

Storage of restricted goods

Bonded warehouses are preferred for storing restricted goods, including beverages, alcohol, animal byproducts, and some food products. More often than not, importing restricted goods is complicated due to complex paperwork and other legal requirements. Furthermore, restricted goods come with a limited timeframe for sorting the paperwork. However, bonded warehouses are exempt from such limitations.

Bonded Warehouse

When Does 3PL Make More Sense than Bonded Warehousing?

Outsourcing a third-party logistics (3PL) provider makes more sense than bonded warehouses for retailers requiring efficient international fulfillment. Retailers can consider a 3PL in the following situations:

To fulfill orders in multiple locations

When working with multiple independent bonded warehouses in numerous locations, order accuracy, shipment times, and costs vary significantly. While a 3PL has fulfillment centers spread across various countries, it streamlines international fulfillment with uniform warehousing, pick and pack, and last-mile delivery services.

Worried about fulfillment and shipping experience

Bonded warehouses only offer essential fulfillment services. Thus, you wouldn’t get premium features, including custom packaging, order tracking, etc. However, a 3PL delivers a consistent fulfillment experience with real-time order tracking, quick issue resolutions, custom packaging, etc. 

When your customers are expecting fast shipping

A 3PL provides quick and affordable international shipping to fulfill international orders efficiently. Fulfillment centers are located in multiple countries, making getting the orders delivered to customers easier. Furthermore, 3PLs empower businesses to guarantee delivery of orders in not more than two days.

To keep fulfillment operations streamlined

You can’t manage all operations in one place with bonded warehouses since they don’t offer inventory management or fulfillment software. It also makes integrating new tools challenging to manage the processes. 3PLs offer powerful software for managing multiple aspects of international commerce. It allows you to track your order fulfillment, manage inventory levels, predict customer demand, and more. Furthermore, you can manage and streamline your logistics operations with 3PLs.

Who Operates Bonded Warehouses?

Who operates bonded warehouses depends entirely on the type of bonded warehouse. Several bonded warehouses are run by the state and are generally available to anyone who wants to use their services for safely storing goods. At the same time, other bonded warehouses are privately owned. As the name suggests, privately owned warehouses are only available to the warehouse administrator. Both types of bonded warehouses require supervision from the customs authority.

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What’s the Difference Between Bonded and Non-Bonded Warehouses?

A non-bonded warehouse is a storage facility for storing goods on which the duty has been paid. Furthermore, non-bonded warehouses don’t allow for deferring of customs duty and are operated by the port authorities instead of the customs authorities.

Importers use non-bonded warehouses to sell goods in domestic markets instead of re-exporting them. Furthermore, importers must immediately pay taxes and get the goods inspected. A long-term storage option is available only at additional costs, and restricted goods have a limited timeframe.

To sum up, bonded warehouses are importer-friendly warehouses with hassle-free, secure storage and transportation of goods. In contrast, non-bonded warehouses are not importer-friendly.

A bonded warehouse is a building or secured location where dutiable goods are stored or go through manufacturing operations without paying duty. Furthermore, a bonded warehouse is either government-owned or managed by a large enterprise in a foreign country in accordance with the regulatory guidelines of that country’s customs agency. The primary advantage of bonded warehousing is that the customs duty is deferred until the goods are removed for domestic consumption.

Like standard warehouses, bonded warehouses also enable businesses to store their products closer to their customers’ locations for quick and efficient delivery. Furthermore, goods stored in a bonded warehouse can be modified in the following ways for the local market:

  • Labeling
  • Testing
  • Marking
  • Packaging
  • Grading
  • Dilution
  • Service and maintenance

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FAQs

To get your warehouse bonded, you need to submit a written application to the local CBP director. More importantly, your written application must have information on the location, premises, and other relevant details. Furthermore, you should combine your written application with other necessary documents and permissions.

A bonded warehouse can be used for multiple functions. For example, it enables e-commerce businesses to store goods closer to their foreign customers’ locations. Furthermore, it holds goods and products that have not yet been certified by the customs authority.

Each country has different standards and requirements for bonded warehouses. It’s the importers’ responsibility to get familiar with the requirements of bonded warehouses in a particular location. 

The primary disadvantage of bonded warehouses is that importers might eventually fail to pay customs duties. It forces the customs authorities to auction the bonded goods to recover the customs duties. Furthermore, when the importer withdraws goods from a bonded warehouse, they pay a higher amount towards the customs duty if they pay the duty all at once.

A bonded warehouse is a place of storage for imported or bonded goods that have yet to be cleared by the customs authorities. Moreover, a bonded warehouse is a duty-free zone. Two types of goods can be stored in a bonded warehouse – wet and dry goods. Alcohol and tobacco can only be stored in a bonded warehouse designated for wet goods.

A customs bonded warehouse is a safe and secure location where goods and inventory can be stored, imported, and exported.

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