Bonded Warehouse

The global economy is made up of importing and exporting goods from one country to the next. The management of these goods from point A to point B is known as logistics. Logistics deals with everything from shipment arrangements to customs to storage. In many industries that deal in imports and exports, putting your materials in a bonded warehouse is common practice.

What Is A Bonded Warehouse?

A bonded warehouse is a typical warehouse like any other but the goods which normally have a duty on them has been unpaid. These goods are stored at the bonded warehouse under joint custody of the importer and the customs officers. Bonded warehouses are usually third party institues and are paid a separate fee for the storage of the unpaid products. Some warehouses are run by individual companies while others are government warehouses. This system exists in all developed countries of the world.

Bonded warehouses exist in countries all over the world. They specialize in products such as frozen goods, large quantities of liquids, agricultural goods, commodities, and transportation. Bonded warehouses also store construction materials before they are used on construction projects and sites. This is often the case when there is too much material to store directly at the job site.

Bonded warehouses are subject to specific laws which vary from country to country and state to state. These laws cover who can use bonded warehouses and what kind of goods can be stored there. Specific ports may also have their own set of regulations that bonded warehouse operators need to abide by. This may include proof of insurance, adequate security systems, safety measures for fire prevention.

History of Bonded Warehouses


Bonded warehouses have not always been around. Before they became common practice in England, anything that was imported had to pay their import duties and fees at the time the shipment was imported. If this was impractical for a company, then a secured bond could be given to authorities as a promise for future payment.

One of the problems with doing business this way was that if you did not have the money to pay the fees, you had to immediately sell your goods to raise th emoney. This often resulted in loss of profits due to low markets.

Another problem was that businesses would increase the price of their goods to pay the high duty fees. By doing this, they became less competetive on the market.

In 1733, Sir Robert Walpole tried a solution to the import problem when he came up with his system to place tobacco and wine in designated warehyouses. His system was adopted in 1803 and according to it, imported products were placed in warehouses and importers were given bonds for payment of duties after the products were removed.

Years later, The Customs Consolidation Act of 1853 did away with the bonds and set up a means of securing duty fees.  These provisions were also included in the Customs Consolidation Act of 1876, the Customs and Inland Revenue Act of 1880, and the Revenue Act of 1883. According to the Act of 1876, these warehouses were referred to as ‘the king’s warehouses’ and were approved by the crown.

According to the various acts, before any goods can be warehoused, the importer had to give a security by bond or other means that were approved by customs officials for the full payment of the duties. The acts also set up rules that governed the shipping, unloading, inspection, and warehousing of imported goods.

Finally, while the imported products were held under bond, the importer could prepare the goods for market. This included mixing, packaging, bottling of liquids such as wine and liquor, and and manufacturing of raw masterials.

Types of Bonded Warehouses

Bonded warehouses are owned and operated by either a government agency or a private company. Private companies generally contract out their warehouse space. These private companies will sometimes cover the cost of the duties and fees for the importer.

Individual companies must file the correct paperwork with the government and customs officials where the warehouse is to be located. The paperwork can be long and complicated. Companies that are unfamiliar with the procedures can hire a lawyer who has experience dealing with the detailed forms.

Other than government or third parties, bonded warehouses may be maintained by a large import or export company. By having their own warehouses, it is more convenient for companies and helps to speed up the import/export process. Company-owned warehouses that are bonded are a good idea if the company does a large amount of importing or exporting.

Advantages of Using Bonded Warehouses

The common practice of storing goods in bonded warehouses has several advantages. First of all, and most important, the importer can store their goods without having to pay the immediate duties on them. Plus, if the importer sells the products for re-export, they do not have to pay any duties at all.

By placing the goods in a bonded warehouse that has adequate insurance, the value of the goods will be covered should they get damaged or destroyed while in storage. This covers such events as fires, flooding, or other means. If the products are damaged or destroyed, then the importer does not have to pay custom duties.

Custom duties are not cheap, especially on imported shipments of large quantities. By having bonded warehouses, it frees up cash flow for importers. They can also take their time to market their good properly to get the best price possible.