As the world continues to see a more volatile global trade environment, businesses are heading into unchartered territory – facing growing challenges in an increasingly complex trading landscape.

Cross-border trade involves significant documentation which varies by market. Simply understanding this regulation provides a challenge to most businesses, let alone full compliance, certain product categories, such as alcohol, food, cosmetics and electronics, are more heavily regulated than others and their restriction/prohibition into certain markets needs to be checked before remaining legal documentation is completed.

Custom duties and taxes also pose challenges specially when consumer demand patterns are seasonal or unpredictable and may result blocking cash flows and operational dynamics.

Bonded warehousing is a secure structure or a vault of opportunity where imported commodities can be separated, stored, cleaned, packed, or processed without paying charges offering businesses a powerful tool to navigate complexities of international trade overcoming related challenges. In this post, we’ll explain how bonded warehouses work and how they can benefit businesses so you can decide if they’re right for you

What is Bonded Warehouse?

A custom bonded, or bonded, warehouse, is a secured building sanctioned by customs authorities where imported goods are stored before being shipped to their final destination for consumption. These strategic vaults allow import of goods without immediate burden of import duties or taxes so as businesses can propel its products into the market with greater financial agility.

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.

How does bonded warehousing work?

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 awarehouse management systemin place to ensure all processes run smoothly.

Overview of how bonded warehouse works.

1. Apply for and acquire bond: To acquire the bond and operate a bonded warehouse, submit an application to the local customs. The application must detail the premises, its location, and the class of warehouse including  What the warehouse will be used for specifically, such as solely storage or processing merchandise  Include information about whether the warehouse will be used for its own storage purposes or if it will be used publicly.  For private bonded warehouses, the application must detail what goods will be stored there and the estimated amount of duties and other fees  The application should also include insurance information, a fire safety certificate, and blueprints detailing the space
2. Import of goods: The goods enter a crucial verification phase upon arrival at the bonded warehouse. The initial documentation check is the first line of defence in ensuring compliance withcustoms clearance.
   This step involves scrutinising the Bill of Lading, Import License, and other relevant documents accompanying the goods.
3. Storage and control of goods: 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
4. Order processing and payment of import duties and taxes: For bonded warehouses whose main purpose is to fulfill sales orders, their biggest responsibility will be organizing and shipping orders. If the warehouse is also a fulfillment centre, staff will pick, pack, perform value added functions such as repackaging, labelling 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.

Types of Customs Bonded Warehouses

1. Government/Public Bonded Warehouses: These facilities, owned and overseen by government authorities, serve as storage spaces where rigorous oversight is applied to ensure compliance with regulations and the security of stored goods.
2. Private Warehouses: Private bonded warehouses are owned and operated by private entities and are often tailored to meet the specific needs of individual clients.They offer higher control over inventory management and are preferred by companies seeking personalised services, including specialised storage conditions, enhanced security measures, or specific handling protocols.

Why Should Businesses Choose Bonded Warehouses

For businesses that frequently engage in international trading, utilising a bonded warehouse brings notable advantages. It offers you the convenience of importing and storing products until needed.

Bonded warehouse provides strategic choices related to:

• Importing: : If there’s a significant demand dip, you can store products in the bonded warehouse. This allows you to defer paying tariffs until they are transported to their final destination within your country. Notably, you are only obligated to import some goods simultaneously.
• Exporting: On the flip side, you can use the warehouse to hold products, facilitating the consolidation of assets before exporting them. The essential benefit here is that duty fees need only be paid once the consolidated products are placed under the supervision of Customs. This smart approach effectively steers clear of any potential for double taxation.



Other benefits include:

• Deferred Duties:You pay duties only when goods are taken out for use or sale, allowing you to retain funds until needed.
• Convenient International Shipping:Store goods until demand increases, paying duty upon local delivery. If local demand is low, exporting becomes cost-effective.
• Storage of Restricted Items:Bonded warehouses store regulated goods without time restrictions, offering up to five years for paperwork.
• Security: Experience stress-free storage with 24/7 surveillance. Store without concerns about inspections, demand changes, or complex paperwork.
• Boosted Cash Flow: By deferring customs duties, you free up short-term cash for other investments or operational expenses.
• Quality Control:Enables inspection and testing of stored goods, ensuring they meet quality standards before shipping.
• Improved Customer Service:Quick access to conveniently located warehouses ensures faster delivery times, enhancing customer service.
• Anticipate Supply and Demand: Facilitates better anticipation of customer demand, allowing you to adjust inventory levels efficiently.

Conclusions

Bonded warehouses are vital for international trade, providing secure storage and various benefits. They enhance customer service, defer customs duties, and connect with reliable logistics. Proximity to ports, airports, and your primary customer base is crucial when choosing a warehouse.

Recognising the purposes of bonded and non-bonded warehouses is critical. Bonded ones offer temporary storage with customs privileges, supporting international trade. Non-bonded warehouses cater to domestic distribution under standard regulations.

Express 3PL: Providing Comprehensive Bonded Warehousing Services

With more than 75+ years of experience of custom handling in India, Express 3PL provide comprehensive custom bonded warehousing solutions to business enterprise involved in international trade.

We understand all the complexities related with custom bonded requirement, handling entire end to end operations scrutinizing Bill of Lading, Import License, and other relevant documents accompanying the goods.

Our rich experience in dealing with customs and excise officials proactively ensures filing of ex-bond bill of entries, storage of official documents, maintenance of licenses and statutory compliances. Right tools and technology ensure efficient logistics operations and manage increased inventory and delivery volumes.

Contact with us and utilize our strategic custom bonded spaces powered by valuable range of tools, technology, and resources to manage your global trading business the right way.