An often overlooked aspect of international trade is warehousing. Along its journey from the point of origin (the seller) to the final destination (the buyer), goods usually need to be held or stored for a while before they enter the stream of commerce.
Using a customs-bonded warehouse over a non-bonded warehouse can offer distinct financial and logistical advantages under the right circumstances. Keep reading to learn what these are and how businesses benefit from bonded warehousing.
What Is Bonded Warehousing?
Bonded warehousing refers to the practice of holding or storing international goods in specialized warehouses required by local customs authorities (wherever the warehouse is situated) to abide by specific rules and local regulations.
A bonded warehouse is a facility operated by a governmental agency or a private party that posts a bond of no less than $25,000 for each designated building or area and agrees to comply with strict customs regulations.
Bonded facilities are either staffed by customs personnel or allow unrestricted access to local authorities to ensure full compliance with applicable rules and procedures.
Bonded vs. Non-Bonded Warehouses: What’s the Difference?
Any goods that arrive from a foreign country are subject to local customs regulations. These laws typically dictate what types of goods can enter, how they must get handled, inspection protocols, and the amount of duties owed.
The main difference between bonded and non-bonded warehouses is how the goods stored in these facilities are affected by local customs regulations. Here are a few highlights of how this works:
- Foreign goods stored in non-bonded warehouses may be immediately subject to inspection by customs authorities, depending on the type or class.
- If the foreign goods in question are dutiable, then payment of customs duties is immediately due when non-bonded warehouses are used.
- Failure to comply with either of these requirements could subject the goods to seizure by customs, and if the noncompliance goes unresolved, they could get destroyed.
In contrast, foreign goods held in bonded warehouses are afforded much greater latitude. While they are still subject to customs regulations (and covered by a customs bond), goods in bonded warehousing enjoy much greater freedom concerning inspection and handling.
Most importantly, payment of duties for goods in bonded storage can be deferred until they are removed from the facility. In the U.S., the maximum period that goods can be stored in a bonded warehouse is five years, and in certain countries, they can be held in a bonded facility for an indefinite amount of time.
What Are the Benefits of a Bonded Warehouse?
In a nutshell, the main advantages of using a customs-bonded warehouse are extra time and greater flexibility. Under certain circumstances, businesses involved in trading international goods should consider these potential benefits for their operations:
- Deferred customs duties – foreign goods that would otherwise be subject to the immediate remittance of customs duties are afforded additional time for payment. Customs duties are not due until goods in bonded storage are removed from the facility, and this can provide tremendous financial relief to the importer.
- Flexibility – another benefit of bonded warehousing is the additional time provided to the transacting parties to decide on the disposition of the goods. Unforeseen circumstances can make it advantageous to wait out unfavorable economic conditions before moving merchandise or re-exporting it if necessary.
- Access – while goods or materials get held in a bonded warehouse, they may still be accessed by the consignee or importer and, in some circumstances, even reworked so long as customs regulations get followed.
- Security – customs bonded warehouses offer unparalleled security for the items stored there with 24/7 surveillance and enhanced safeguarding measures.
- Restricted goods – importation of goods in restricted categories can involve lengthy processing times for required paperwork and costly storage in specialized facilities. Customs-bonded warehouses are exempt from many restrictions placed on non-bonded facilities and provide additional time to get things in order.
While there are significant benefits of bonded warehousing, they are only advantageous under certain circumstances, namely the need for flexibility in paying duties or releasing the goods.
Final Thoughts on Bonded Warehousing
Bonded warehousing is the best option for parties importing foreign goods when circumstances necessitate additional time to pay customs duties or to wait for favorable conditions before introducing the merchandise into the stream of commerce.
But for most international transactions, warehousing in a customs-bonded facility is unnecessary. Non-bonded warehouses with proper insurance coverage and compliance with applicable regulations are more than sufficient for holding foreign goods temporarily. To learn more, you can also visit our page about Insured versus Bonded versus FTZ warehousing.