Bonded warehouse

Bonded warehouses offer flexibility, security, and convenience when importing goods or materials by providing temporary tax- and duty-free storage. This warehousing option benefits ecommerce companies looking to enter international markets or scale up international operations.

What is a bonded warehouse?

Bonded warehouses are secure facilities where imported goods are stored before being processed by customs. Duties and taxes do not need to be paid on these goods until they leave the bonded warehouse. 

Bonded warehouses can store any type of product, but are often used to store restricted goods and assemble raw materials into finished products. They provide both short- and long-term storage—in the United States, inventory can be held in a bonded warehouse for up to five years. 

Bonded warehouses may be run by the government or by private companies with arrangements with the local customs service. Some are used for the private use of the proprietor, while others can be used for public storage. 

By deferring the customs process, bonded warehouses simplify international imports and can help businesses save money on international shipping costs.


How bonded warehouses work

Imported goods are received at the bonded warehouse when they arrive in the country. Liability for the goods is shared between the business that imported the products and the warehouse owner under a warehouse bond. Customs authorities defer the required duties, taxes, and fees until the goods leave the warehouse.

Some bonded warehouses offer an array of specialized services, like temperature control, deep freezing, or liquid storage. While they are held in the customs bonded warehouse, the goods can be repacked, cleaned, sorted, and manipulated. In some cases, raw materials can be assembled into a finished product while in the bonded warehouse, allowing the business to pay duties on the finished product, rather than the various materials. All of these processes must take place in the bonded warehouse with the oversight of customs authorities.

Before the inventory leaves the warehouse, it must be inspected and the importer will need to pay all the applicable duties, taxes, and fees. 

In some cases, the bonded warehouse also functions as a fulfillment center, sending individual orders as they are purchased. The business can then decide to incur all the duties and taxes at once on a single freight shipment, or on a per-order basis.


It’s important to note that the fulfillment services offered through bonded warehouses are often quite basic, and may not meet the standards that you’ve already set for your business. International fulfillment providers with warehouses in multiple countries can lower international shipping costs while maintaining a high level of service and competitive SLAs.

Types of bonded warehouses

There are several types of bonded warehouses. The main differences are in ownership, services, and the kind of goods they are allowed to store. 

Government-owned bonded warehouses

Government-owned bonded warehouses are run by the federal government of the importing country. They are used for three primary purposes: as temporary holding sites for goods that are awaiting further customs processing, for public storage by importing companies, and for the storage of goods that have been seized or abandoned. 

Warehouses that the government uses to hold inventory while it undergoes customs clearance are sometimes called RTO warehouses. Government-owned bonded warehouses that are open to public use are sometimes called free warehouses.

Private bonded warehouses

Private bonded warehouses are owned and operated by entities other than the government but are still exempt from customs duties. These warehouses may be authorized to receive and store goods from other companies, or may only hold their own inventory.

Special economic zones or bonded logistics parks

These are run by the local government authority. Rather than being enclosed in one building like a warehouse, these logistics parks can include manufacturing centers, logistics operations, and expansive zones designed to handle re-exports and a high volume of international trade.

Wet and dry bonded warehouses

Warehouses may be specialized for handling certain types of goods. Ecommerce businesses dealing in regulated or restricted products, like alcohol or tobacco, may require a specialized bonded warehouse. Wet bonded warehouses store alcohol and tobacco, while dry warehouses can store most other goods.


Benefits of using a bonded warehouse

Bonded warehouses offer several key benefits to ecommerce businesses that manage regular imports and exports. By deferring the customs process, importers can better plan and budget for duties, taxes, and fees. And for companies dealing in regulated goods like alcohol, tobacco, and batteries, bonded warehouses can allow additional time to complete the extensive paperwork and complex requirements required during import. 

Deferred duties and taxes

Customs duties are expensive—especially when importing a large volume of inventory. Carefully budgeting for such expenses is critical, and bonded warehouses offer an opportunity to delay such payments until the business is prepared to make the payment. Oftentimes, the importer can choose to release inventory in batches, stretching the expense out over a period of time, which can be enormously helpful when using manufacturers with high minimum order quantities.

Deferring these fees can also come in handy with the unpredictable nature of international freight. Large shipments across national borders are subject to unexpected delays that can make it difficult to predict exactly when an import will arrive at its destination. By using bonded warehouses, importers can more accurately predict when they’ll have to pay duties and taxes.

Reduced import fees

Bonded warehouses can help companies save on the cost of importing raw materials. Rather than paying the import fees on each shipment of materials, the company can store them in a bonded warehouse that will complete the assembly or production process. By the time the goods are released and duties are paid, the company will only be responsible for the fees levied against the finished product.

Lower operating costs

Bonded warehouses provide tax-free storage, and those that offer fulfillment services allow importers to pay import fees on bulk shipments or on a per-order basis. If the company is passing the cost of import off to the customer (DDU), shipping directly from the bonded warehouse allows the company to avoid taking on the upfront expense of bringing the inventory into the country. 

Strategic international fulfillment

Bonded warehouses offer storage for international shipments along their journey from manufacturer to fulfillment center, which may allow importers to ship inventory at the optimal time. For example: cargo may be shipped to an international hub, then held in a bonded warehouse, duty-free, until shipping costs fall or certain markets become more favorable. The inventory can then be moved to its final destination.

Improved customs clearance and compliance

Certain restricted goods are subject to heightened scrutiny by customs authorities. Products like alcohol, tobacco, and certain hazardous materials—like lithium ion batteries—require extensive documentation. Bonded warehouses allow the importer more time to prepare the necessary paperwork before the goods are sent through customs.

Better supply chain management

Because bonded warehouses can offer longer-term storage, they can also improve management along the supply chain in handling the flow of goods and materials.


Choosing between bonded warehousing and a 3PL

Bonded warehousing is primarily intended to manage re-export or entry into a country, particularly in terms of customs compliance, clearance, and duties. On the other hand, third-party logistics providers (3PLs) provide a comprehensive logistics and fulfillment solution that includes preparing orders as they’re placed and shipping those orders to the end customer.

3PLs offer greater flexibility and control over inventory, and a global 3PL will handle the international logistics for your ecommerce business. In some cases, this may involve using a bonded warehouse to manage customs clearance; but this aspect of the import process may be handled by the 3PL or through freight forwarding

For ecommerce businesses selling into international markets, bonded warehouses can be leveraged to lower import fees; but they’re often not a holistic solution for order fulfillment. The fulfillment processes offered by bonded warehouses are often basic, and may not live up to the standards those businesses have set with customers. International 3PLs can lower shipping costs by fulfilling international orders from local warehouses, all while meeting competitive SLAs and providing the level of service customers expect. 

Working with an international 3PL also makes for easier logistics management, because inventory levels, order statuses, and KPIs can be tracked across warehouse locations from a single dashboard. 

By examining your own business needs and international trade flows, you can determine whether a bonded warehouse or 3PL—or a combination of both—may be most useful to you.


Keeping costs low when selling internationally with bonded warehouses

Bonded warehouses charge fees for storage, insurance bonds, and security. Like any warehouse, the amount of space needed and the length of time the warehouse will hold the goods affect this overall cost.

By using logistics software to determine optimal order levels, you can avoid storing excess inventory in a bonded warehouse for a lengthy period of time. You can also work with a logistics provider, like Airhouse, to manage your customs brokerage experience.

For businesses with larger importing needs, you can use a bonded warehouse to manage your payment of taxes, duties, and fees by releasing only a certain amount of goods at a particular time. Depending on the amount of space being used and the cost of duties, this can help to manage cash flow and improve profitability while keeping the cost of importing goods spread throughout the year.


Factors to consider when selecting a bonded warehouse for your ecommerce business

When selecting a bonded warehouse for your e-commerce business, you’ll need to consider several factors, including:

  • Location: Determine how convenient the bonded warehouse is to both its port of arrival and the inventory’s end destination.
  • Security: Make sure that the warehouse has proper security to manage your goods, especially if they are valuable or high-end merchandise that may be targeted for theft.
  • Capacity: Ensure the warehouse can guarantee enough space to store your goods, especially if you tend to deal in large shipments.
  • Fulfillment services: If you are relying on the bonded warehouse for overseas fulfillment, choose one with a good customer service reputation and be sure to carefully vet its SLAs.
  • Customs compliance: Don’t assume that any bonded warehouse is customs compliant. Double-check that the warehouse you’re considering is fully compliant with local customs laws.

As with any provider, you can negotiate terms with a bonded warehouse owner. For example, you may be able to negotiate a discount for storing in bulk, or for storing goods for an exceptionally long or short period of time.


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