What is a bonded warehouse?
A bonded warehouse is a place used to store and process goods imported into new markets. Goods stored in bonded warehouses are not subject to customs duties (a type of tax). Any applicable customs duties shall be paid when the goods are transported to the next destination. Bonded warehouses can be owned by governments or private companies, helping to improve inventory and cash flow efficiency.
Using a bonded warehouse means that goods can be moved closer to their final destination, and payment of duties can be deferred until the product is moved.
The system provides significant benefits for commercial transactions across different jurisdictions. For organizations importing and exporting goods, bonded warehouses can be used to eliminate the need to pay customs duties, further increasing efficiency.
Why use a bonded warehouse?
- Bonded warehouses can be an ideal option for importers and exporters of certain products for a number of reasons. These include:
- Deferred payments for such products mean that no tax is due until the item is sold, which can greatly improve a business's cash flow. In many cases, this can be between 25% and 33% of the upfront cost of imported goods.
- If the goods are set for export, there is no duty to be paid in the UK, but in the destination country. This means double spending will be avoided, resulting in further savings.
- Goods can be imported and stored in bonded warehouses ahead of peak season, which means they can fulfill orders without delay.
- Many times, bonded warehouses have specialized facilities, such as deep freezing vats for storing wine or spirits.
- Entry and exit customs documents are usually provided by bonded warehouse facilities.
If you're not sure whether bonded storage is right for your business, here are three reasons why you should consider it.
1) Improve cash flow
Delaying payment of tariffs before purchasing goods can have a positive effect on cash flow. By storing your goods in a bonded warehouse, you only pay import duties when the goods enter the UK market, so if you have any difficulties moving your goods, you don't have to pay taxes in advance. You can't guarantee the sale will pay for itself. In bonded storage, all shipments are classified as suspended duty, which avoids prepayment of duty on products that may be in stock for several months.
2) If you export the goods, you do not need to pay import tax
If you're importing to exporting to a non-EU country, using a bonded warehouse is a breeze. Storing your goods in a bonded warehouse means you don't have to pay any import duties on exported products, saving you time and money. This means businesses can avoid paying tariffs twice, often saving around 25-30%.
It's also worth noting that if your goods need to be destroyed without selling, you won't have to pay import duty on them.
3) Port-centric logistics
Most bonded warehouses are located at or very close to ports (for example, John Good has a bonded warehouse in the Port of Felixstowe), which means you can store your goods at ports of entry and distribute them when needed. This lowers costs across the supply chain due to shorter lead times, lower potential for damage, significant savings in transportation costs and lower carbon emissions.
