Bonded Warehouse: The Ultimate FAQ Guide

Bonded Warehouse

I know you’re probably wondering what a bonded warehouse is.

Or, you’d like to learn more about bonded warehouse.

Whichever the case, this guide has all information you’re looking for about bonded warehouse.

Let’s dive right in.

What is a Bonded Warehouse?

A bonded warehouse is a building set aside for storage purposes for goods in particular imports and exports.

The goods enjoy a free import duty and taxes as they await to be transported to designated location.

In other words, your goods are considered to have not yet arrived.

However, there are costs that are accountable to both the importer and warehouse owner settled in bond terms.

 bonded warehouse

bonded warehouse

How do Bonded Warehouses Operate?

Goods are stored in a warehouse where a payment schedule enacts upon removal of the goods.

Thus all import duty and tax fees on your goods are applicable when the goods are out of the warehouse.

 warehouse operations

 warehouse operation

 Moreover, just like any other warehouse, there are a number of activities that incorporate the operations of a warehouse.

They include:

Receiving

This activity involves getting hold of your shipment from the port.

Afterwards the goods go through a system confirmation just for assurance purposes.

Put-away

After the goods are put into the warehouse system, the staff is ready to make transportation to the warehouse.

Through the system, your get is fit into their space.

Nonetheless, manual assignment of storage pace can as well be arranged.

Picking

There are two main types of picking, the primary and secondary picking.

Primary picking ends up to a final process of picking.

Thus there is no other picking needs to be done.

Secondary picking involves a second time of picking.

It is more convenient to companies with voluminous sales.

The goods are released on the basis of real time and waves.

For the real time, goods are received once downloaded.

For waves, goods accumulate for specific times then later transported.

As a result, the picking may be discrete, in clusters or in batches.

Moreover, companies can put in place the following apparatus to help deal with goods of large volumes:

  • put walls
  • put-to-light systems,
  • goods-to-person systems
  • cross-belt sortation systems

Packing

Here goods undergo a preparation procedure ready for dispatch.

Dispatch

Being the last activity to be carried out, the Warehouse management ensure the goods are loaded in time.

Transportation means is organized to deliver the goods in the specific location.

What is the Purpose of a Bonded Warehouse?

Just like any other warehouse, a bonded warehouse carries out the following functions;

 solution of bonded warehouse

 warehouse solutions

Storage Functions

Basically that is what most warehouses are meant to do.

Provide spaces to store goods for imports and exports.

Grading and Parking

In the event you are ready to remove your goods, the management will be ready to offer packing services.

The bond warehouses are flexible enough to cater for your packing and grading preferences.

Provide Transportation Means

You do not have to worry about the transportation of your merchandise.

From small to bulky goods, the warehouse serves to cater for this need.

For Price Stabilization Purposes

A bonded warehouse offers the chance to exploit the time utility for your goods.

Hence once you get your goods for use in the market, the prices are manageable and maybe in your favor.

Promote Risk Aversive Conditions

The warehouse bears a structure that can reduce the risks of theft, fire, damage, exploration as well as deterioration.

How can I Purchase a Bonded Warehouse?

You can opt to purchase one from an owner who is auctioning one.

In this case you will just need to be in agreement with the owner on the price.

Thereafter as the buyer, you should seek to ensure you have all the legal requirements as per by the authority.

Moreover, it is also important to double check with the authorities about the warehouse you are purchasing.

Ensure that the location is well laid out. The necessary transfer documents from your seller to you should also be carefully executed.

How Many Types of Bonded Warehouses are Available in the Market Today?

Bonded warehouse offer a number of packages to their clients to choose from.

Hence this results to the establishment of the different types of bonded warehouses.

There are two main types bonded warehouses, that is;

Private Bonded Warehouse

From the name, these warehouses are privately owned by either a firm or an individual.

Public Bonded Warehouse

These type of bond warehouses are state owned.

They are under the control of the government in which the warehouse resides in.

They are further subdivided into the following sub types;

Temporary Storage Areas

Fit space areas for your goods as they await documentation and further approvals for them to move to next destination.

Public Bonded Warehouses

In the event you wish to have customs control for your goods, these bonded warehouses are available.

They are usually under the control of the local port authority or the government.

Private Bonded Warehouses Type 1

These type of bonded warehouse is under the control of the owner.

The goods in the warehouse mostly belong to the owner.

However, the owner is free to extend the services to other clients.

Private Bonded Warehouses Type 2

This type differs from the first type in that, it strictly houses goods that belong to the owner of the warehouse only.

Free Warehouses

Anybody can access storage services from this type of warehouses.

The premises are under lock and key and are under the authority of customs officials.

Bonded logistics Parks

These are more of a location than a building set aside for warehousing.

They have expanded to incorporate logistics on top of their warehousing services.

They are also known as special economic zones.

 types of warehouses

 types of warehouses

What is the Difference Between Custom Bond and Non-Bond Warehouses?

A custom bond warehouse requires custom officials to help oversee the imports and exports.

Duty fee and tax fees are not payable in this case.

Anon-bonded warehouse offers storage services for import and export goods.

However, the concerned parties are liable to pay duty and tax fees.

What are the Rules and Regulations Governing Custom Bond Warehouses?

Below is a list of rules and regulations to adhere to when working with or in a custom bonded warehouse;

  • A bonded warehouse should refrain from housing goods restricted by the customs authority. Clearance should be sought before then.
  • The establishment should fully fulfill the requirements from the customs authority. Necessary approvals should be adhered to.
  • All documents required from an importer for the bonded warehouses services should be filled appropriately.
  • A well-defined management structure should follow suit. A custom official should be incorporated for regular checkups purposes.
  • A custom bonded warehouse is liable to penalty rates in the event of averting from the custom authority requirements.

 bounded and non bonded warehouse

bonded and non bonded warehouse

How Much do I Need to Purchase a Bonded Warehouse?

It all depends with the auction price and the condition of the warehouse.

However, purchasing bonded warehouses can be costly.

However, if you are looking for an investment, bonded warehousing proves to be quite profitable.

Renting the storage spaces can prove to be profitable hence easily get back your capital.

Provided you adhere to all requirements and all the fees required by the authorities and custom officials are paid.

Is it Safe to Store Goods with Bonded Warehouses?

If you are in the shipping business, bonded warehouses are a safe haven for your goods.

Setting up a bonded warehouse requires one to have passed all the security protocol requirements by authority in charge.

Security is keenly taken into consideration.

Furthermore, most of this bonded warehouses have insurances.

Your goods are more than safe when it comes to a bonded warehouse.

How Can Someone Benefit from Bond Warehouses Services?

Below are some of the benefits you can enjoy from bond warehouse services;

  • You can hold your goods for a long time, thus save you the stock holding cost.
  • You will also be able to optimize your cash flow since you will evade the import duty and tax fees.
  • In case you have illegal merchandise, the warehouse gives you enough time for the government to legalize.
  • Bonded warehouse guarantee no theft for your goods. Safety is paramount for a bonded warehouse.
  • Your goods are in the best care as the warehouse is customized to maintain the quality of your goods.
  • You can sort for a ready market for your goods without incurring a lot of storage costs.
  • You can sell your goods while still in the warehouse. Hence transferring the costs to the buyer.
  • The warehouse offers you ample time to sought for payment ways in the event you want to remove the goods. No costs attached.

What are the Disadvantages of Bonded Warehouses?

Below are a number of demerits you are like to encounter when working with a bonded warehouse;

  • This usually extends to the warehouse owner, under customs authority, thus a private bonded warehouse.

No other goods can be allowed in the warehouse even in the presence of space.

  • Some goods usually end up staying for long. The warehousing and insurance charges accrue to an extend of the owner abandoning the goods.

By this time the warehouse auctions the goods at a price not equal to the debt. Hence incur losses.

  • As much as you can evade the duty charges, once the goods are out of the warehouse, as the importer all duty and tax fees will be payable.
  • As an importer, your goods will not receive storage facilities in a bonded warehouse if your goods are not taxable.

Hence your goods must be liable to taxes. Making it harder for a business person to easily move the cargo due to costs.

  • Also as an importer, due to time lapse, you are required need to remove your goods from the warehouse.

This might work against you in the event that the value of your goods has extensively diminished, hence offering you no profits.

  • The processes involved in bonded warehouses both during entry and exit is somewhat long for some clients.

As a result, clients get discouraged to seek bonded warehouse services.

  • Running a bonded warehouse is tedious especially with custom officials involved. Custom officials expect all requirements are followed to the latter.

What is an FTZ?

The initials in full are Free Trading Zones.

This is a type of warehouse usually near the ports.

A customs authority is not mandated to control the activities in a free trade zone.

An FTZ provides a flexible timeline for easier operation of these goods without paying duty fees Hence no defined maximum timeline.

 free trade zone

free trade zone

How is FTZ Different from Bonded Warehouses?

An FTZ differs from a common bonded warehouse in the following ways;

FTZ vs bonded warehouse

FTZ vs bonded warehose

An FTZ completely barres their clients from being liable to tax and duty fees.

Even in the event that their goods reach a point of leaving the warehouse.

As the owner of the goods, you can decide to resell the goods internationally, thus export without incurring these expenses.

However, a bonded warehouse expects the client to be accountable for duty and import fee once the goods leave the premises.

An FTZ offers a 24-hour watch and control of your goods.

A bonded warehouse can go as far as offering you the primary safety precaution for your goods.

A bonded warehouse come with restrictions.

Goods can only be moved in and out within the stipulated working hours.

In the case of FTZs, anytime is efficient.

Goods can easily move in and out of FTZs of course under a supervision.

FTZs allow for all non-prohibited goods, while this is different for a bonded warehouse.

For goods to be acceptable in a bonded warehouse they must be dutiable.

 How Can You Choose Between FTZ and Bonded Warehouse?

It all comes down to the client’s preference.

As much as others enjoy the privileges of a bonded warehouse, others would go for an FTZ.

Simply because an FTZ efficiently supports their business endeavors compared to a bonded ware house.

If you wish to have more control on your cargo and enjoy flexibility during transfers, an FTZ would best suit you.

An FTZ also gives you geographical flexibility advantages.

This is majorly because they are free from the countries custom regulations.

 FTZ vs bonded warehouse

FTZ vs bonded warehouse

What are the Benefits of Sorting for FTZ Services?

Free trade zones come with a number of benefits to exporters and importers.

Some of them include;

FTZs allow their clients to defer from complying to import duty fee completely.

With FTZs, clients can easily eliminate such fees.

FTZs are quite advantageous to business persons who engage in international trading.

They can easily sell their goods with being held back by duty fees.

FTZs also allow you to manipulate your goods however you wish.

After all, it is part of the services a warehouse should comfortably extend to its clients.

However, a customs official should be present.

benefits of FTZ

 benefits of FTZ

What are the Documents Required when Applying for a Bonded Warehouse?

The following documents are mandatory for every client seeking warehouse services to be in possession with.

An application form

It is designed to give more information about the client.

It is mostly designed by the warehouse management to highlight the requirements needed from you.

The client’s identity and the type of goods to be stored are as well specified.

Additionally, the client should provide information on the person in charge.

As a client, you should also provide information on business registration of your enterprise.

Clients in possession of prohibited goods are expected to present consent forms from the rightful authorities.

Any other additional documents will be outlined by the bonded warehouse management.

What are the Requirements for Operating a Private Bonded Warehouse?

  • First of all, the interested party must make an application to own a private bonded warehouse to liable authorities.
  • Afterwards, the location should meet satisfactory conditions by the customs authorities. Once your application is approved, as the new owner, you should ensure:
  • Your house provides ultimate security to the goods to be entrusted in the warehouse.
  • The locks to your warehouse guarantee a level of security as well.
  • Ensure that you keep records and receipts of the goods to be kept in your warehouse.
  • Ensure that the goods or cargo you admit to your warehouse are securely packaged to avoid damage.
  • Ensure you do not admit illegal goods to your warehouse.
  • Ensure you have an insurance.
  • Adhere to the rules and regulations outlined by the customs in charge.

What are the Type of Goods that Can Be Stored in a Bonded Warehouse?

The following goods can be stored in a bonded warehouse;
1. General goods.
2. Materials and cabin goods used in transport vehicles for international trade.
3. Fuels for transport vehicles in international trade.
4. Materials and equipment for repairing ships or airplanes.
5. Mineral oils.
6. Hazardous goods under an approval.
7. Goods for inspection, test, sorting, classification, segmentation, assembly, or reloading.
8. Materials for repairing containers or pallets.
9. Exhibition goods.
10. Goods for sale in duty-free shops or offshore Islands Duty-free shops.
11. Other goods approved for storage by the Customs.

How Does a Bonded Warehouse Owner Earn Profit?

Mostly as a warehouse owner, the most probable way of earning profits is through renting out the spaces.

The more you rent, the higher your return on investment.

You also need to ensure that your client satisfactory is at a high level to attract more investors to invest in your businesses.

What Other Businesses can a Bond Warehouse Serve?

Here is a list of businesses you can set up for your warehouse space other than storage services;

  • A furniture store
  • Electronic store
  • Pet store
  • Subscription box business
  • Food truck business
  • Clothing manufacturing business
  • Beverage company
  • Personalized gift store
  • A gym
  • A recording studio
  • Construction equipment rentals company
  • A rental party venue
  • Dry cleaner business

A warehouse can offer you enough space to help you even venture into other profitable businesses.

This is most preferable especially if you are not able to meet up with a warehouse logistics.

What are the Rates for Storage in a Bonded Warehouse?

As a bonded warehouse client, you ought to prepare yourself to incur the following costs;

  • The storage area for your goods. It all depends on the amount of space your goods will occupy.
  • Also custom duty of handling your cargo.
  • Also the type of accommodation you choose also accounts for the costs. The accommodation might be open or covered.

All these factors contribute to the way bonded warehouses rent out their spaces.

Different bonded warehouses have different costs.

It is important to ensure that you consult with the warehouse management for their prices.

What are the Entry Procedures for a Bonded Warehouse?

Entry procedures are important because they help for easier picking of your cargo to the warehouse from the port.

As a result, as the importer;

  1. Ensure you prepare an invoice for your cargo. Also, any other relevant documents from the warehouse.
  2. The Customs Inventory Audit Unit then confirms the legibility of the documents. Upon acceptance, a signature and a stamp are put on the documents.
  3. The warehouse then accompanies the documents to the port for the shipment to be released to the staff.
  4. A customs office accompanies the owner of the warehouse to where the goods are to be stored. An account is taken, examination and tallying procedures as well.
  5. Later, the packages are assigned their identification rotation numbers, ready for storage

In addition, the importer should specify the purpose for which the goods are in the warehouse.

This might be in either of the following;

  • Delivering for local consumption.
  • Delivering for Export.
  • Transfer from one Warehouse to another.

Are there Special Procedures in Service Providence for Bonded Warehouses?

Yes, there are special procedures that bonded warehouses offer on how a client wishes to manipulate their goods.

These are;

Inward Processing (IPR)

The warehouse offers the client enough space and time for manipulation of the cargo.

The client enjoys a free import duty, taxes that could be levied on the imports, and commercial policy measures.

With Inward processing, you are allowed to alter your goods to standard forms of preserving your goods.

You can also change your goods to allow them to be ready for marketing.

Afterwards, you can choose to re-export or distribute your goods to the market.

Once your goods are out of the warehouse, then and only then will you be liable to pay taxes and import duties.

Outward Processing

It’s the opposite of inward processing.

Your goods can be processed from outside.

Hence they can just go through storage procedures as they await to be released to the market for consumption.

How Long can you Store your Goods in a Custom Bonded Warehouse and a Bonded Warehouse?

The two types of bonded warehouses on average can store your cargo for up to five years.

In other instances, some custom bonded warehouses do not have a definite timeline.

The only difference comes in with the costs.

The non-bonded warehouse will require you to oblige to the tax and import duty fees.

A custom bonded warehouse gives you the privilege to defer these payments.

Your goods will still be given space.

What are the Advantages of a Custom Bonded Warehouse Over Non-Bond Warehouse?

There are certain privileges you will be able to enjoy when you choose a custom bonded warehouse.

They include;

Long-Term Storage Services.

A custom bonded warehouse allows you to store your goods for up to five years.

In fact, other custom bonded warehouses have indefinite timelines.

Hence you can keep your goods for as long as you want.

Saves you Money

Working with a customs bonded warehouse is the most financially efficient way of storing your goods.

Here your goods will not be able to pay for import and tax fees.

They payments are applicable only when the goods leave the warehouse.

Non-bonded warehouses will require you to account for all import duties.

They can Store Restricted Goods

Unlike non-bonded warehouses, a custom bonded warehouse gives room for your restricted goods.

As much as countries have put restrictions on the type of goods not to import, there is always a certain in some of the goods.

But they are acceptable upon meeting certain clearance procedures.

A custom bonded warehouse will be able to grant space as you seek for necessary clearance for your goods.

Nonetheless, sometimes there is revision on restricted goods.

You can as well keep your goods here until they are legal.

Facilitates International Shipping

A custom bonded warehouse allows one to conduct international shipping easily.

As a business owner, you don’t have to incur costs of paying duty fee for each stop over you make.

With custom bonded warehouses available, you evade such costs ship your cargo across different countries duty free.

The importer can decide on one of the two routes:

For your imports, you can store them until there is an increase on demand of the goods.

After which, you will pay import duty fee once your goods are ready to be delivered to preferred destination.

As for your exports, you can wait until your goods consolidate to assets.

You are not liable to pay duty fee since your goods are under surveillance of customs.

Hence evading double taxation.

Something that is unavoidable in the case of non-bonded warehouses.

Less Stressful Event

Arranging for a space that will ensure that your goods are in perfect shape before serving their purpose is easy now.

With custom bonded warehouses being accommodative, you are in no rush to do your paperwork.

You have space, you don’t incur duty and tax fees and most of all your cargo is safe and sound awaiting your next move.

What are Some of the Goods Restricted in a Bonded Warehouse?

A bonded warehouse is not allowed to store the following goods;

  • Narcotics and all forms of controlled drugs.
    Firearms, weapon &armaments, ammunition and explosives
  • Parts and components of used vehicles, scrap iron, scrap metal, hazardous industrial wastes, medical wastes and other wastes.
  • Animals, plants or their products that fail to pass the quarantine inspection.
  • All other goods under the imports control of a country.

Additionally, here is a list of goods that can be allowed with the correct legal documentation. Ensure you have permits and certifications from the customs authority for these goods:
(1) Controlled chemicals, such as  hydro chlorofluorocarbon (HCFCs ).
(2) Radioactive substances.
(3) Strategic high-tech commodities destinating to export control areas.
(4) Goods that are likely to produce a public hazard or environmental pollution during the period of storage.
(5) Protected wildlife or their products.
(6) Rough diamonds.
(7) Other goods requiring prior approval, as announced by relevant competent authorities.
Also goods announced by the Ministry of Finance as unsuitable for being stored in bonded warehouses.

What is a Bonded Carrier?

A bonded carrier helps to transport bonded goods through ports without being charged import duties or any taxes.

They have been given the mandate to do so on behalf of bonded warehouses.

bonded carrier

bonded carrier

How Effective Are Bonded Carriers?

Bonded carriers are the only ones allowed to move freight goods in and out of a bonded warehouse without charge.

They come in handy for most bonded warehouses clients to help evade such duties in the event transportation is needed.

What is the Difference Between a Bonded Carrier and a Non-Bonded Carrier?

A non-bonded carrier must have the cargo released at the first point of arrival.

A bonded carrier transports the goods to a customs office in order for the goods to be officially released.

You can easily apply to be a non-bonded carrier provided you poses the necessary documents.

To be a bonded courier, it might take a longer process due to the nature of service providence.

Afterwards, barcodes are given to each courier to enable each carrier to obtain the goods from the port.

 bonded vs non bonded

 bonded vs non bounded

Can Couriers Be Bonded?

Yes, couriers can be bonded. They are referred to as bonded couriers.

However, the concerned party must apply for the bond.

It helps to insure the goods in the courier in case of any unavoidable damaging circumstances.

The bond covers the cost of the item in the courier.

It also covers late delivery fees.

Bonded couriers are very efficient when it comes to time.

Compared to other shipping agencies, bonded couriers are convenient if you are looking forward to beat a deadline.

Moreover, and individualized pick up can be quickly arranged.

Now, in case you have any additional questions or inquiry, BanSar team is here to help – contact us now.

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