Bonded Warehouse

Stack of boxes stored inside bonded warehouse

A bonded warehouse is a secure facility where imported goods may be stored while deferring customs duty payments. Bonded goods may be re-exported tax-free or released domestically upon payment.

These warehouses may be privately or publicly owned and all activities are subject to local laws. Manufacturing operations may take place with relevant approvals from customs authorities.

In many countries, goods may be granted storage in these warehouses for several years.

Summary
  • A bonded warehouse is a customs-regulated facility typically used for the storage of duty-deferring imported goods.
  • Customs duties are only paid when goods are withdrawn from a bonded warehouse, into domestic markets.
  • Bonded warehouses may be state-owned or privately owned. Owners are obligated to obtain a warehouse bond from a recognized surety company before the facility is allowed to operate.
  • Types of Bonded Warehouses

    There are 2 main types of bonded warehouses – public and private.

    Public Bonded Warehouse

    Public customs bonded warehouses are owned and controlled by either the state or local port authorities. They can be used by anyone who wishes to store goods duty-free under the supervision of customs.

    Some subtypes include free warehouses and bonded logistics parks.

    Private Bonded Warehouse

    These warehouses are owned by private entities, licensed by local boards to store items without the need for customs clearance. There are 2 types of private bonded warehouses:

    1. Facilities where owners are only permitted to store their own goods within the premises. They cannot store goods on behalf of external entities.
    2. Facilities where owners may accept and store goods from external entities or clients.

    Advantages of a Bonded Warehouse

    Save Costs

    Businesses may import and re-export goods without having to pay for taxes and duties. Some manufacturers may even be permitted to process goods and materials within the warehouse. This may result in a tariff classification with lower duty rates, saving costs for businesses.

    Safe and Secure Storage

    Bonded warehouses tend to offer greater security due to round-the-clock surveillance. Items are also insured against theft and elemental or handling damages. Companies may thus store their items safely and reliably within these premises.

    Storage of Restricted Goods

    Bonded warehouses make it easier for businesses dealing with restricted goods or dangerous goods (e.g. alcohol, biodiesel products, batteries) to import these items. Products may be stored in these facilities while any necessary paperwork and authorizations are being sorted out.

    How to Become a Bonded Warehouse

    Companies who wish to benefit from the perks of operating a bonded warehouse may apply for licenses from relevant local customs authorities. Though the procedure may differ for each country, the general steps are outlined below.

    Step 1: Decide on the type or class

    First, businesses should determine what different bonded warehouse classes are recognized under a country’s regulations. They then need to decide which class they would like to register their warehouse under.

    Step 2: Submit an application to the local customs board

    Businesses then need to submit a formal application to the country’s relevant customs board.

    Step 3: Submit relevant documents

    Relevant documents must then be submitted. This may include:

    • Signed documents to certify the suitability of the warehouse’s infrastructure for safety and fire insurance purposes
    • Blueprints of the facility
    • Audited financial statements
    • Title deeds or proof of tenancy

    Step 4: Obtain a warehouse bond

    The company will also need to obtain a warehouse bond from a licensed surety company. These bonds protect users and warehousing clients from any losses caused by fire, theft or insufficient site maintenance. They also typically need to be renewed via annual payments.

    Many countries stipulate a minimum bond fee that may vary based on warehouse class and the type of goods being stored.

    Bonded Warehouse vs Non-bonded Warehouse vs Free Trade Zone (FTZ)

    An FTZ is an area where imported goods may be stored, manipulated and processed while customs duties payments are deferred. 

    A non-bonded warehouse is a storage facility for goods that have undergone customs duty payment.

    Below are some similarities and differences between bonded warehouses, non-bonded warehouses and FTZs.

    Bonded WarehouseFTZNon-bonded Warehouse
    Time limitSome countries impose a time limit for storage (e.g. 5 years in the US)Typically no time limit for storageTypically no time limit for storage
    Customs duties paymentImported goods are not subject to customs duties until they are withdrawn from facilitiesImported goods are not subject to customs duties until they are withdrawn from facilitiesImported goods are subject to customs duties before they are moved into facilities
    Permitted storageCan only be used for imported goodsCan be used for imported and domestic goodsCan be used for imported and domestic goods
    Supervision by authoritiesUsually supervised by customs authoritiesUsually supervised by customs authoritiesUsually supervised by port authorities
    Regulations followedFollows country’s customs regulations for tradeFollows international trade regulationsFollows country’s customs regulations for trade
    Manipulation and manufacturing of goodsGoods may only be manipulated or manufactured in certain licensed facilitiesGoods may generally be manipulated or manufactured in all facilitiesGoods may generally be manipulated or manufactured in all facilities
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