A bonded warehouse is a secured area where imported goods can be stored for up to five years without paying any duties, taxes, or other fees. They are managed by either the state or a private enterprise.
We all know the feeling of eagerly tracking a package, watching as it leaves its origin country and then lands in the United States to await processing. Now imagine if a business had to do that for every single order they received. It would make for a challenging inventory management process, with a lot of waiting, a lot of procedures, and a lot of duty and other fees paid. That’s where a bonded warehouse comes in.
So, what is a bonded warehouse? A bonded warehouse is where imported goods are stored before being shipped to their final destination or consumed. They’re a popular choice among e-commerce and other import businesses, as they allow the deferment of duty payment for up to five years while the item is in the facility.
In this post, we’ll explain how bonded warehouses work and how they can benefit small businesses so you can decide if they’re right for you.
A customs bonded, or bonded, warehouse, is a secured building where imported goods are stored before being shipped to their final destination, consumed, or destroyed. The goods stored in customs bonded warehouses are imported goods that require the importer to pay a duty. However, the goods can be stored in the customs bonded warehouse for up to five years without duty, taxes, or other fees.
Either a government or private enterprise can run custom bonded warehouses. When the goods arrive at the warehouse, they become the warehouse management’s responsibility under a liability bond. The liability only ends when the goods are exported, used, destroyed, or brought into the country for consumption after the duty is paid.
Bonded goods are goods that have been imported into the country and are being held in a customs bonded warehouse until duty and other fees have been paid. This can include both finished goods as well as materials for manufacturing.
Finished bondable goods include retail inventory such as:
An alternative to a bonded warehouse is a 3PL. A 3PL, or a third-party logistics provider, provides a wide range of e-commerce fulfillment services, such as transportation, distribution, sourcing, and supply chain management. For this reason, some organizations may prefer the more robust service offerings of a 3PL.
When goods are stored in a non-bonded warehouse, all duties and fees must be paid immediately rather than deferred for up to five years. Using a bonded warehouse can help sellers save money on duties, as they can store items until they are sold, only paying duties as needed rather than all at once.
To run a bonded warehouse, certain approvals must be obtained by the local customs authorities. For example, if a private company decided to start its own bonded warehouse to streamline international shipping, it would need to first find a warehouse location and get approval from its local customs authority before shipping and storing goods.
Managing any warehouse can be difficult, particularly a bonded warehouse that also deals with customs and duties. It’s important to understand the specifics of the type of bonded warehouse, such as the application and storage requirements, and have a warehouse management system in place to ensure all processes run smoothly.
Here is an overview of how bonded warehousing works.
To acquire the bond and operate a bonded warehouse, submit an application to the local Customs and Border Protection (CBP) port director. The application must detail the premises, its location, and the class of warehouse.
The application must also describe:
Once the application is approved, the warehouse proprietor can begin goods procurement and import merchandise to their warehouse, which can take anywhere from 24 hours to weeks or even months.
Once the goods have arrived, they are then stored in the warehouse. This includes organizing and storing them appropriately, depending on the type of goods. Bonded warehouses may also process some goods under the supervision of the customs authorities if the items require processing or manufacturing.
For bonded warehouses whose main purpose is to fulfill e-commerce orders, their biggest responsibility will be organizing and shipping orders. If the warehouse is also a fulfillment center, staff will pick, pack, and ship orders to their next destination, ensuring the order reaches the end recipient.
Once orders are set to ship, duties and other fees must be paid in order for the goods to leave the bonded warehouse. Depending on the type of bonded warehouse, either the warehouse proprietor or the importer is responsible for ensuring that the fees are paid for all goods leaving the warehouse.
Bonded warehouses have many benefits. They’re an affordable and secure way to ship and store goods internationally while also offering the benefit of in-house fulfillment, restricted goods flexibility, and long-term storage.
The ability to defer duty and other fee payments until the items leave the warehouse is a major advantage of bonded warehouses. Proprietors can choose to hold items for longer until they are able to pay the fees. This enables businesses to order items in large quantities without paying duties on them until they sell and leave the warehouse.
Because bonded warehouses allow payment control, they can also provide overall cost savings. Rather than consistently paying duties, taxes, and other fees on imported items, storing them in a bonded warehouse means that the fees are only paid when goods are removed from the warehouse. In e-commerce, this means that the fees are only paid when the item actually sells and ships out, improving overall cash flow.
Many bonded warehouses will fulfill orders in-house, meaning they handle importing, storing, picking, packaging, and then shipping items to their final destination. This all-inclusive service is a major advantage of bonded warehouses.
In the United States, imported items can be stored in a bonded warehouse for up to five years without paying any duty or other fees, making bonded warehouses a great option for long-term storage. This is especially useful for high-value but slow-moving merchandise.
Restricted products such as alcohol and other consumables like dairy and meat can be complicated to import. They require extra paperwork and special authorization from the appropriate government department. A bonded warehouse acts as an intermediary, allowing extra time to acquire the mandatory paperwork.
Using a bonded warehouse makes international shipping easy. Because bonded warehouses usually include order fulfillment, everything is handled in one place. The ability to defer duty payments for up to five years also simplifies international shipping and storage.
Bonded warehouses provide 24/7 access to stored goods, allowing the importer to organize and ship goods around the clock.
Bonded warehouses are monitored by customs officials for increased security. Officials will regularly inspect goods, ensuring products stay properly stored and secured. Bonded warehouses are required to have 24/7 security on the premises and will also likely have security systems in place, such as cameras and barcode systems, for safe storage.
There are many types of bonded warehouses, depending on specific storage needs. One of the biggest variances is public versus private bonded warehouses, but there are also differences depending on the types of stored goods and storage duration. Here are 11 types of bonded warehouses:
So, what is a bonded warehouse? It’s an ideal solution for shipping and storing goods internationally. Once the application is approved, importers can begin to receive, store, and ship goods easily.
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Bonded warehouses are secure areas used to store imported items without paying duty or other taxes and fees. Items can be stored in a bonded warehouse for up to five years without paying duty.
Goods imported to a non-bonded warehouse must have their duty, taxes, and other fees paid immediately. But with a bonded warehouse, the duty is waived for up to five years or until the item is moved, destroyed, or consumed.
Bonded warehouses can be used privately or by the public. Anyone can store goods in a public bonded warehouse without paying duties. Non-bonded public warehouses allow anyone to store goods, but require that duty and other fees be paid before storing.
Bonded warehouses can minimize the costs associated with paying duties and other fees in bulk. They’re also a great solution for long-term storage and provide flexibility when shipping restricted goods.
One of the biggest disadvantages of a bonded warehouse is the costs associated with managing it. From upkeep to security, the costs of running a bonded warehouse can be quite high. Additionally, using one for storing and shipping goods is often associated with a lower level of service than some other storage options, such as a 3PL.
Bonded warehouses are operated either by the state or a private enterprise.
In order to get a warehouse bonded, you must submit an application to your local CBP port director, including details about the warehouse, the goods, and proof of insurance.
