Bonded Warehouse?

A bonded warehouse is a secured facility approved by a government customs agency to store imported goods that still need to be cleared for entry into the country or exported.

All goods stored in a bonded warehouse are under the customs’ supervision until they are either released into commerce upon payment of duties, taxes, and fees or exported out of the country after being processed through clearance procedures.

 

How Does a Bonded Warehouse Work?

The objective of a bonded warehouse is to allow imported goods to be stored within its confines while deferring the payment of import duties, taxes, and customs fees. Accurate records of the goods are maintained, and they can remain in the warehouse for up to five years from the date of importation without payment of duty. 

Owners can choose to release the goods for domestic consumption by paying the required duties and taxes or re-export them to another country, avoiding local customs duties. Some goods may undergo processing or assembly within the bonded warehouse, subject to customs approval. Regular customs inspections ensure compliance and security. 

 

What Are the Different Types of Bonded Warehouses?

Bonded warehouses are classified into the following 11 different classes:

  • Class 1 – Government-Owned Warehouse: These premises, which may be owned or leased by the government, are used for storing merchandise undergoing examination by CBP, under seizure, as well as pending final release from CBP custody. Goods are stored here only at CBP direction and are held under “general order.”
  • Class 2 – Private Bonded Warehouse: Importers may have private warehouses at their disposal that they use exclusively as a storage place for merchandise that belongs to them or that is consigned to them. In some cases, Class 4 or 5 warehouses can be bonded exclusively for storing goods imported by the proprietor, referred to as private bonded warehouses.
  • Class 3 – Public Bonded Warehouse: These warehouses are exclusively used for storing imported merchandise and are accessible to multiple importers and businesses.
  • Class 4 – Bonded Yards or Sheds: These facilities are used for the storage of heavy and bulky imported merchandise, as well as storage for imported animals and bulk liquid merchandise.
  • Class 5 – Bonded Bins: These are designated areas or parts of buildings used for the storage of grain.
  • Class 6 – Manufacturing Bonded Warehouse: Bonded warehouses in this class are established for the manufacture in bond, solely for exportation, of products made from imported materials or materials subject to internal revenue tax. They can also be used for the manufacture of cigars made entirely from tobacco imported from one country.
  • Class 7 – Smelting and Refining Bonded Warehouse: These warehouses are established for smelting and refining imported metal-bearing materials for either exportation or domestic consumption.
  • Class 8 – Processing Bonded Warehouse: Bonded warehouses in this class are used for activities such as cleaning, sorting, repacking, or otherwise changing the condition of imported goods under CBP supervision and at the expense of the proprietor.
  • Class 9 – Duty-Free Stores: These bonded warehouses, known as “duty-free stores,” are used to sell duty-free merchandise outside the Customs territory. 
  • Class 10 – International Travel Merchandise Bonded Warehouse: These warehouses are established for goods sold conditionally duty-free aboard aircraft and not at a duty-free store. Regulations for this type of warehouse are being developed based on amendments to 19 USC, section 1555(c).
  • Class 11 – General Order (G.O.) Warehouse: These bonded warehouses are used to store General Order (G.O.) merchandise, which refers to any merchandise that has not been claimed or entered for 15 days following its arrival in the US or its final US destination for in-bond shipments.

 

Frequently Asked Questions About Bonded Warehouses for SMBs

 

What Types of Items Are Typically Stored in Bonded Warehouses?

Bonded warehouses typically store a diverse array of goods related to international trade. These include imported merchandise awaiting customs clearance, raw materials and components for manufacturing, finished products destined for export, high-value items like electronics and luxury goods, perishable goods with specific storage requirements, alcoholic beverages, tobacco products, and even hazardous materials. Additionally, some bonded warehouses house automobiles, handle documentation and records for customs compliance, and store cigars and other commodities. The types of goods stored depend on the warehouse’s location, facilities, and the specific needs of businesses or individuals using them. 

 

What Are the Primary Purposes of a Bonded Warehouse? 

The primary purposes of a bonded warehouse are to facilitate international trade, defer customs duties, and provide flexibility for businesses and individuals engaged in importing, manufacturing, and exporting goods. 

By using these facilities as temporary storage, importers gain advantages such as delaying duty payments until the goods are ready for domestic sale, allowing time for value addition or processing, and re-exporting goods to other countries without being subject to local customs duties. 

 

Who Can Use a Bonded Warehouse?

Bonded warehouses primarily cater to the needs of importers and exporters engaged in international trade. Importers use these facilities to defer customs duties and taxes, offering flexibility in managing imported goods. Simultaneously, exporters benefit by centralizing their inventory management, consolidating shipments, and ensuring product quality before export. Bonded warehouses allow importers and exporters to streamline their supply chains, reduce financial burdens, and enhance global competitiveness.

 

What Are the Benefits of Using a Bonded Warehouse? 

The use of a bonded warehouse offers several benefits to businesses and individuals involved in international trade:

  • Deferred Customs Duties and Taxes: One of the primary advantages is the ability to defer the payment for import duties, taxes, and customs fees until the goods are released for domestic use. This deferral can help improve cash flow and reduce the financial burden on importers.
  • Storage Flexibility: Bonded warehouses provide secure storage facilities, allowing importers and exporters to store goods for extended periods without immediate customs clearance. This flexibility is especially valuable when managing seasonal or fluctuating inventory levels.
  • Processing and Value Addition: Goods stored in bonded warehouses can often undergo processing, assembly, or manufacturing while inside the facility. This can add value to products before they are subject to customs duties, potentially increasing profitability.
  • Risk Mitigation: Bonded warehouses are subject to customs oversight and security measures, reducing the risk of theft or unauthorized access to stored goods.

 

Are there any Drawbacks or Limitations to Using a Bonded Warehouse?

Yes, there are several drawbacks and limitations associated with using a bonded warehouse. It’s crucial to consider these factors when deciding whether to utilize such facilities:

  • Time Limits: Bonded warehouses impose a maximum storage period of five years for goods without customs clearance. If these time limits are exceeded, the goods may become subject to additional charges or face penalties.
  • Operational Costs: While bonded warehouses offer cost-saving advantages, they are not entirely free. Users typically incur storage and handling fees, security costs, and other expenses associated with maintaining goods in the facility.
  • Limited Access: Bonded warehouses are often subject to customs control and supervision, which can limit access to the stored goods. This can be challenging when businesses require quick access to their inventory.

 

Do I Need to Have a Customs Bond to Use a Bonded Warehouse?

Yes, in most cases, you must have a customs bond to use a bonded warehouse. A customs bond is a financial guarantee required by customs authorities to ensure compliance with customs regulations and to cover any potential duties, taxes, or fees owed to the government. When you store goods in a bonded warehouse, you essentially defer the import duties and tax payments. The customs bond guarantees the government that these obligations will be met when the goods are eventually released from the warehouse for domestic consumption or export.

 

How Do Bonded Warehouses Contribute to Customs Compliance?

Bonded warehouses contribute to customs compliance by ensuring that the goods adhere to legal standards and facilitating duty deferrals. Regular inspections and robust security measures prevent unauthorized activities, while permitted processing under customs oversight ensures regulatory compliance. These facilities streamline customs processes, with operators guiding businesses on compliance, thereby ensuring the legal and efficient international movement of goods.

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