Anyone who operates in the Ecommerce business on an international scale or imports products to the country from foreign producers will at some stage have to use the Customs Bonded Warehouse. It is an essential element in international trade. And it is good to know something about it.
Bonded Warehouse is a type of dedicated warehouse, approved by and under the supervision of National customs and tax authorities. It is intended for the storage of imported goods pending the payment of customs duties and other taxes.
To understand the operation and market need for the Bonded Warehouse, let’s go a little deeper into the subject.
What is a bonded warehouse in simple words?
The Bonded Warehouse is where the goods imported into the country are stored. There are rules established by the National Customs Office, which supervises such facilities.
You can keep the goods there until you pay customs duties and other taxes. It is a safe place that gives you time to settle the receivables and supplement any gaps in the customs documentation.
What is the difference between a warehouse and a bonded warehouse?
In a bonded warehouse, there are rules set by the Central Customs Office. You can keep the goods there for a certain period of time (depending on the country). In the U.S. this is up to 5 years. However, in the European Union, it will be 90 days.
You cannot simply take away such goods in Bonded Warehouse or use them. To do this, you must meet Customs obligations and pay duties. Only then are the goods delivered to you.
At Typical Warehouse, you can keep your goods as long as you like. It is not under the supervision of any services and it is usually a private property (your own, rented, or shared). You can also use the products freely and transport them freely whenever it is convenient for You.
Functions of Bonded Warehouse
Delay of Customs Duties Payments – Bonded Warehouse allows you to store goods temporarily without paying the Customs Duties until goods are picked from this type of Warehouse.
Temporarily storage of goods until payment of taxes. – According to cbp.gov In the U.S. the storage period limit is up to 5 years. This period depends on the Country where products are stored.
Separation of taxes into several parts if an item leaves the warehouse in batches. – This can facilitate settlements with local buyers and improve your Cashflow.
Repair Procedure – It allows you to carry out a repair procedure (importer’s markings, CE, instructions, required documentation, and certificates).
Saving taxes – You can save on customs Duties on goods intended to be re-exported. This is a situation where you import goods to the country to export them immediately to another country (Re-export)
What are the types of Bonded Warehouses?
There are 2 types of Bonded Warehouses:
Warehouses that are owned by one company or entity. They were built to meet the commercial needs of this particular company.
They are built to provide storage space to other economic entities. The storage service is provided on the basis of a temporary storage contract.
How long can goods stay in a Bonded Warehouse?
Depending on the country to which you import the goods, every max time will be different. In the United States, it will be 5 Years. Such a long storage time of goods allows you to better manage company money.
Due to the fact that the goods can be shipped to customers directly from Bonded Warehouse, a good solution when importing large quantities will be to divide it into smaller batches, which you will send to Your clients paying the duty for this batch only. The rest will remain in the Bonded Warehouse until you sell them, or for a maximum of 5 years.
Who owns the goods in a Bonded Warehouse?
In Bonded Warehouse the owner of goods is an entity that imported those goods. In this case, it is You or Your Company. The owner of the goods has access to the goods and can label, repack or separate them after it came to Warehouse.
However, products cannot be taken from the warehouse without paying the Customs Duty first. In some countries for example in the European Union Countries, you still need to pay VAT (Value Added Tax)
What is advantage of Bonded Warehouse?
Customs Duty Postpone
Due to the fact that the duty pays off only when the goods are left from the bonded warehouse, i.e. when they are introduced to the market of a given country, by storing goods in the Bonded Warehouse, you can postpone paying the duty and taxes in time.
Customs Duty Split
Thanks to the above-mentioned mechanism of collecting the duty at the moment of goods leaving the warehouse, and the fact that it is allowed to divide the goods into smaller batches, You can sell part of the goods earlier and the rest in some other time in the future
When our client is determined and pays us for the goods, we send him the batch directly from the Bonded Warehouse and pay customs duties only for that batch.
The rest of the goods are waiting their turn in the warehouses.
Place to Store Goods.
Sometimes we just need a temporary storage place for goods that we purchased, for example, from a manufacturer in China.
An example of a situation may be one in which our goods have already been sold, but the buyer needs time to collect the goods or we need to arrange transport.
A place like Bonded Warehouse is an ideal place for this type of storage, especially if we do not have a suitable warehouse ourselves. Of course, we will be charged a small fee for storage, but it is normal to use someone else’s service and pay for it. In addition, the costs of such storage will be less than the temporary rental of a typical warehouse just so that we can accept the goods.
Suppose you want to buy goods from China, bring them to the U.S. and then sell it in Brazil right away. In that case, you would have to pay duty in United States first and then in Brazil. Such a solution is not efficient from the economic point of view.
Importing the goods into the Bonded Warehouse in the U.S. you will not pay the duty if you ship the goods to another country. In such a case, the Goods have simply not been put on the market in America and are not dutiable.
What are the disadvantages of Bonded Warehouse?
The main disadvantage of Bonded Warehousese is that you cannot pick up the goods and start using them without paying customs first.
There may be a situation in which for some reason you will not be able to settle the customs duties or unexpected charges. Then you are exposed to storage fees. Especially if you have your own private warehouse and want to be able to use the goods that are waiting in Bonded Warehouse as soon as possible.
Can you export from a Bonded Warehouse?
Yes, You can export from a bonded warehouse to another country, but only if it is a comodity that you have imported previously and it has been placed in this Bonded Warehouse.
You must remember that if you want to avoid double customs duties, the goods should not be traded on your market before being re-exported.
However, if you want to export goods produced in your country through Bonded Warehouse, this is not possible. Only goods imported into the country are accepted at Bonded Warehouse.
What is sale from Bonded Warehouse?
The specified maximum time of keeping the goods in the Bonded Warehouse causes situations in which some importers, for various reasons, do not want or are unable to pick up or pay for the goods that go here.
That is why the administration of Bonded Warehouse from time to time organize sales of goods that have not been collected and paid for to reduce the costs of storing such goods. Often, such sales are very popular, because the warehouse wants to get rid of the goods and thus the asking prices can be really tempting.
What are the importance of Bonded Warehouse to international trade?
Due to the fact that Bonded Warehouses are controlled by customs and operate on predetermined rules that are publicly known, international trade can take place without major problems. The importer knows very well on what terms the goods are delivered to the country and what documentation must be provided to be able to place them on the market.
The Customs Office itself also has an easier task. Strict licensing of Bonded Warehouse means that the office only has to control those points that are registered as licensed Bonded Warehouses. If there were no such places, the office would have to chase all over the country for goods imported by various entrepreneurs and chaos would reign.
Bonded Warehouse play a very important role in the operation of the imported goods flow. Appart to Bonded Warehouses, there are a few other types of Warehouses that we will cover in another articles.