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Comprehensive Guide to Bonded Warehouses

January 31, 2024

Comprehensive Guide to Bonded Warehouses

See how bonded warehousing and streamlined domestic transportation can assist your import and export of goods.

See how bonded warehousing and streamlined domestic transportation can assist your import and export of goods.

Bonded Warehouses are an essential resource for importers and exporters navigating the complex landscape of global trade, Covenant offers an invaluable solution with customs bonded warehouses, designed to streamline your cash flow and optimize import/export processes.

Understanding Bonded Warehouses

A bonded warehouse is a type of warehouse that serves as a secure haven for imported or exported goods awaiting their journey to the destination country or clearance from customs to enter the domestic market.

These warehouse facilities, typically privately owned, operate under the stringent authorization and regulation of the U.S. Customs Department, also known as CBP.

The unique advantage of bonded warehouses lies in their ability to simplify cross-border transactions, deferring tax and duty payments until the cargo is released to its intended market.

Operational Mechanism of a Bonded Warehouse

As per the U.S. Customs And Border Protection (CBP) agency, a customs bonded warehouse is a secured facility that allows storage of dutiable imported/exported merchandise for up to 5 years without immediate duty payment.

Inventory in a Bonded Warehouse

While in storage, bonded items are permitted to undergo cleaning, sorting, repacking, or alterations that do not fall within manufacturing parameters (with some exceptions). Following this, goods are either exported or withdrawn domestically after duties have been paid on the current state of the goods.

Upon arrival at the bonded warehouse, the owner accepts liability under a warehouse bond. The liability of the bonded warehouse proprietor ceases when items depart from the warehouse under specific circumstances:

  1. The cargo is exported to its destination country or deemed to be exported.
  2. Products are withdrawn for U.S. consumption, post-payment of duties.
  3. Supplies or equipment are loaded onto a vessel or aircraft for international transit.
  4. Items are destroyed under CBP supervision due to reasons such as illegal activities like smuggling or theft, import refusals (e.g., a shipment is in violation of FDA laws or other regulations), abandonment or destruction of merchandise, or unmarked goods.

In some instances, CBP may choose to export or sell merchandise instead of destroying it. Regardless, customs duties are typically refunded or waived entirely. However, the owner may be liable for any procedural expenses incurred by the state.

Given the complexity and variety of bonded cargo, warehouse management solutions can simplify processes for warehouse and cargo owners.

Avoiding Duties: Is It Possible?

Yes, under specific conditions, it is possible to avoid paying duties completely:

  1. The end buyer pays customs duties for stored bonded goods intended for export or bonded imports that are not sold domestically and are re-exported.
  2. Items fall under preferential agreements, such as FTA (Free Trade Agreements) between trade country partners. These are usually stored in FTZ (Free Trading Zone) facilities.
  3. Goods are destroyed or deemed abandoned or worthless by CBP.
  4. Products are part of a duty-free sales scheme.

The Strategic Advantages of Bonded Warehouses by Covenant

Enhanced Cashflow: Bonded warehouses offer numerous benefits, particularly for businesses dealing with high volume and high duty imports.

Streamlined International Shipping: Many businesses incorporate bonded warehousing into their international logistics strategy. Whether they're storing inventory overseas orholding restricted goods until permits are granted.

Robust Storage Security: Bonded warehouses must adhere to stringent security measures and are subject to regular inspections by customs authorities. With 24-hour surveillance, rigorous employee checks, and detailed records of cargo transportation, packaging, and discrepancies.

Pre-Tax Value-Added Services: With duties for bonded items only determined upon withdrawal, businesses can test products before paying import tariffs. Furthermore, goods can be packaged before entering the market, especially beneficial when raw materials carry higher duties than the finished product.

Efficient Port and Drayage Operations: Storing cargo at the port of entry in a bonded warehouse allows for quicker transportation to the next port or final distribution center. Covenant's efficient port and drayage operations not only reduce costs but also minimize carbon emissions.

What are the Different Types of Bonded Warehouse

There are 11 types of bonded warehouses, according to CBP:

  1. Government-Owned - Ideal for cargounder seizure or pending final release from CBP custody.
  2. Privately-Owned - Suitable for storing bonded goods owned or consigned to the warehouse proprietor.
  3. Public Bonded Warehouses - Designed exclusively for imported items.
  4. Bonded Yards or Sheds - Perfect for bulky cargo, animals, and liquid cargo in tanks.
  5. Bonded Bins - Best for grain storage.
  6. Manufacturing Bonded Areas - Allow certain types of manufacture in bond.
  7. Smelting and Refining Facilities -Ideal for bonded metal-bearing materials.
  8. Modification Bonded Warehouses -Permit basic modifications like cleaning and packaging under CBP supervision.
  9. Duty-Free Stores - For merchandise owned or sold by the proprietor and delivered directly to an exit point.
  10. Bonded Storage Areas - Ideal for items sold duty-free aboard aircraft.
  11. General Order (G.O.) - For G.O. merchandise not claimed orentered for 15 days after arrival in the U.S.

Optimize Domestic Logistics For Your Global Ventures

At Covenant, we're committed to optimizing your domestic logistics for global ventures. Whether you're navigating seasonal peaks or managing ongoing processes, our flexible port and drayage services and dedicated fleet schemes provide innovative solutions that meet the unique needs of the import/export industry.

See how you can use Covenant’s expertise and infrastructure to streamline your operations. Contact us.