What Is a Bonded Warehouse, and What Are Its Benefits?

Bonded warehouses, also known as customs bonded warehouses, are popular among exporters and importers due to their unique benefits. 

If your organization has international trading partners, integrating bonded warehouses into your logistics management strategy can be a savvy, cost-saving move. They provide an excellent opportunity to optimize your supply chain. 

Learn more about bonded warehouses, how they work, and the various types your organization can use to support its supply chain. 

What is a bonded warehouse?

A bonded warehouse is a storage facility authorized to store dutiable goods, such as restricted items, imports, or exports, without paying excise taxes or customs duties. Bonded warehouses are regulated by the U.S. Customs and Border Protection (CBP) and may be government-run or privately owned. 

Customs bonded warehouses are typically located in a foreign nation and serve as temporary storage facilities. Your goods will remain at a facility until you complete the requisite paperwork and pay duties or taxes. Think of the bonded warehouse as a duty-free zone for imported or restricted goods.

While your goods are at the facility, you can manipulate them or perform additional manufacturing operations, including assembly or kitting. However, you can only remove or withdraw the goods from the warehouse once CBP authorizes you to do so.

A bonded warehouse also provides secure storage, as the facility is supervised by customs.

What are bonded goods?

Bonded goods are imported items for which the owner hasn’t yet paid taxes, duties, or other customs charges. The goods are no longer bonded once you complete the requisite paperwork and pay your duties.

Common examples of bonded goods typically found at a customs bonded warehouse include the following:

• Alcohol
• Gourmet chocolates
• Tobacco products 
• Antiques
• Artwork
• Coffee
• Handbags
• Perfume and cosmetics
• Electronics
• Watches
• Luxury clothing

A company importing goods into a bonded warehouse doesn’t need to pay customs charges until the items leave the warehouse for sale within the country. This allows the company to avoid paying to import items until they sell. 

How does a bonded warehouse work?

The basic function of a bonded warehouse is quite simple. These facilities store restricted imported goods until duties are paid and requisite paperwork is submitted to customs. Using them is equally simple and involves the following four steps:

1. Importing

You must obtain approval from CBP to import restricted goods to a bonded warehouse. Once approved, your importer delivers the goods to the appropriate facility. Warehouse personnel then take responsibility for the shipment. 

2. Storing

The warehouse provider monitors the goods to ensure they are secure. Many bonded warehouses offer specialized storage services, such as refrigerated storage facilities. 

During storage, the warehouse ensures all goods are properly tracked and documented. It retains the goods for the duration specified in the import agreement. 

3. Forwarding

When the goods are ready to leave, the warehouse turns them over to the carrier. Before releasing them, the customs bonded warehouse ensures you have followed relevant guidelines and paid your taxes and duties. It also assists with customs clearance. The carrier then forwards the goods to their next destination. 

4. Making payment

Finally, you must deliver payment to the bonded warehouse. It will provide an itemized invoice that breaks down the amount owed, including storage fees, duties, and taxes. 

If you use a modern warehouse management system that employs electronic data interchange (EDI) communication, the warehouse may send this invoice electronically to expedite its receipt and payment. 

This illustrates a primary benefit of robust warehouse management tools. In addition to simplifying your warehouse management processes, modern solutions integrate with 3PL providers, trading partners, and bonded warehouses to maximize your supply chain’s visibility. 

Types of bonded warehouses

When storing bonded goods, you will encounter the following types of bonded warehouses:

• Private bonded warehouse: A private bonded warehouse is operated by a private entity, such as a warehouse proprietor or a 3PL. 
• Public bonded warehouse: The host nation’s government owns public bonded warehouses.

The warehouse you can use will vary based on what type of goods you are importing, where you plan on selling them, and how long you need to store them. 

Bonded warehouse benefits

A customs bonded warehouse provides several significant advantages, including the following:

• Improved access to technology: Many bonded warehouses leverage the latest inventory management and warehouse automation solutions.
• Advanced logistics techniques: Bonded warehouses provide various shipping, storage, and distribution services, including cross-docking, cold storage, and more. 
• Deferred customs duties: You can defer the payment of customs duties for the duration of the storage agreement, which protects your cash flow and allows you to spread out expenses. 
• Long-term storage: Bonded warehouses provide long-term storage options and can hold your goods for up to five years from the import date.
• Quality control and security: Your goods are kept safe in a tightly regulated and closely monitored facility.

Using a bonded warehouse, you can save money, access dynamic technologies, and enjoy peace of mind knowing your goods are secure.

Bonded vs. non-bonded warehouses

The critical difference between bonded and non-bonded warehouses relates to when you must pay duties and taxes.

A non-bonded warehouse requires you to immediately arrange a customs inspection and pay all taxes owed on your goods. If you use a bonded warehouse, you can defer payment and hold off on any inspections until you are ready to withdraw your goods. 

Should you use a bonded warehouse?

A bonded warehouse is most beneficial if you anticipate extended customs storage periods or want imported inventory readily available in case demand suddenly spikes. 

An alternative to contracting a bonded warehouse involves partnering with third-party logistics providers (3PLs). Both options allow you to defer customs fees, but the 3PL provides more comprehensive logistics support.

Use a bonded warehouse if you are only dealing with a few restricted import goods and have a fairly linear supply chain. But if you need scalable logistics support, use a 3PL.

Streamline warehouse management with Orderful

If you're engaged in international shipping, you need a way to streamline communications between you and your shipping partners. That’s where EDI comes in handy.

Orderful will simplify the EDI implementation process and tear down communication barriers across your supply chain. Streamline your inventory and warehouse management systems, accelerate the exchange of information, and gain unmatched supply chain visibility. 

To learn more about Orderful and its benefits, set up a meeting with one of our EDI experts today.