Another type of warehouse that is becoming increasingly popular, especially for businesses involved in importing goods from abroad or exporting goods to other countries, is the bonded warehouse. This bonded warehouse provides benefits to operators involved in import and export regarding the storage of goods and the postponement or exemption of tax payments. This can significantly reduce costs and save expenses related to taxes for operators. In this article, we have compiled details about this topic.
1. What is a Bonded Warehouse?
A bonded warehouse, also known as a tax-deferral warehouse, is a facility used for storing imported goods without having to pay import and export duties. This is permitted under customs laws. This area allows for the storage of goods for up to 2 years or more, provided that a request is submitted to the Customs Department. Duties will only be paid when goods are removed from the bonded warehouse, which differentiates it from the standard process where goods imported from abroad must be collected from the port warehouse and duties must be paid within a maximum of 2 months and 15 days. This increases various trade opportunities, making the bonded warehouse a means to facilitate and save costs related to taxation for operators.
2. What types of goods can be stored in a Bonded Warehouse?
The types of goods that can be stored in a bonded warehouse are divided into 3 categories:
2.1 Import finished goods
2.2 Import semi-finished goods
2.3 Import raw materials Normally, these imported goods must pay duties as prescribed by law. However, when stored in a bonded warehouse, duty payments are deferred until the goods are released from the bonded warehouse. Such regulations are extremely beneficial for operators needing to import goods.
3. Types of Bonded Warehouses / Tax-Deferral Warehouses
3.1 Exemption from import and export duties In general, importing or exporting goods requires duty payments as prescribed by law. However, when using bonded warehousing services, import duties are exempted, and goods can be stored in the warehouse for 2 years. Moreover, if the imported goods are destined for export to other countries, it means that operators do not need to take the goods out of the warehouse for sale in their stores but can keep them in a bonded warehouse waiting for export, thus avoiding duties.
3.2 Reduced limitations on large batch imports Large batch imports are generally cheaper than small, incremental imports, leading to reduced overall costs compared to smaller quantities. However, the drawback is the larger duties that must also be paid. Operators with insufficient cash flow are directly impacted as they must pay substantial duties to remove goods from the port warehouse. Storing goods in a bonded warehouse alleviates this issue, allowing large batch imports without the need to immediately pay all duties at once. The goods can be kept in a bonded warehouse, then removed gradually for sale, since warehouses can store goods for up to 2 years.
3.3 Extended time to find customers For bulk imports where customer acquisition is still lacking, storing goods in a bonded warehouse provides a full 2 years to find customers without having to pay duties upfront. After that, the goods can be removed from the bonded warehouse and duties paid based on the quantities ordered by your customers to sell in batches, avoiding the need to remove them all at once while incurring high duties. This significantly extends the time available to find customers. All of this is critical knowledge about bonded warehouses for operators in the import and export business.
Bonded warehouses are also classified into 3 types:
3.1 Bonded warehouses for goods storage
3.2 Bonded warehouses for display and sale of stored goods
3.3 Bonded warehouses for production, mixing, assembly, packaging, or other operations with stored goods
4. Why use Bonded Warehouse services?
4.1 Exemption from import and export duties In general, importing or exporting goods requires duty payments as prescribed by law. However, when using bonded warehouse services, import duties are exempt, and goods can be stored for 2 years. If the imported goods are to be exported, the operators do not need to take goods out of the warehouse for their shops. The goods can remain in the bonded warehouse while waiting for shipment, thus avoiding duty payments.
4.2 Large batch imports are cheaper than smaller shipments, significantly reducing overall costs. The issue arises because duties increase correspondingly. Operators with limited cash flow are directly impacted since they must settle large duties to remove goods from the port warehouse. Using bonded warehouses helps alleviate this burden as it allows handling of large batch imports without immediate duty payments. They can first store products in a bonded warehouse, then gradually release them for sale as needed, as the warehouse can hold goods for 2 years.
4.3 Extension of time to find customers For those importing large quantities or big batches but lacking sufficient customers, storing in a bonded warehouse allows for a full 2 years to search for customers without having to pay duties upfront. Proper management allows for the import of goods from the bonded warehouse later, paying duties only when customers place orders, selling to each customer in batches rather than all at once with heavy duty fees. Thus, it effectively extends the time for customer search. All of this is critical information regarding bonded warehouses, particularly for operators engaged in import and export activities.
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