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A growing business needs a properly managed warehouse to store the goods. But what is a bonded warehouse? If you are running a successful business and are looking to ship to other countries too, then you must have come across options like using a bonded warehouse.
What is a Bonded Warehouse?
By definition, as per Wikipedia, it is “a building or a custom-controlled warehouse where goods are kept for processing before delivery“. You can find two kinds of warehouses, government-owned and private-owned ones by large enterprises. The major difference between a bonded warehouse and a normal warehouse is that a bonded warehouse is used to store or keep the items until the customer pays the duty of the shipment.
The bonded shipments are kept here in the warehouse only for a while until the customs duty is paid. The items are held at the bonded warehouse only for a definite period. Once the duty and taxes are cleared, the items are dispatched to the customer. Otherwise, the item is confiscated and dealt with according to the laws of that country. Most of the time they dispose of the shipment.
Benefits of using a bonded warehouse
A bonded warehouse is one of the best options to legally and safely deliver shipments to your customers. The bonded warehouse is the secure and safest option that comes under government-directed customs laws to keep your shipments until the duties are cleared. The bonded goods are safely kept and documented. Most of the exporters prefer a bonded warehouse, for the extra security they receive on their goods.
Here are some other benefits of a bonded warehouse:
- No duty should be paid until they release the item for delivery to the buyer, providing full control of payment to the importer. If the goods remain unsold and are sent back to the vendor, you need not pay duty at all. This is because the VAT is paid only for products that are sold and not for re-exported goods.
- Restricted items are allowed to be stored at the bonded warehouse.
- The warehouse facility is well-equipped to handle all kinds of storage requirements. They can store perishable items as they have freezers, temperature-controlled rooms, etc., to provide flexible storage options depending on the goods.
- Your items will receive a bond that ensures that you are not at a loss when the items are released once the taxes are paid.
- You also get to have access to complete logistics solutions as they have affiliations with other freight forwarding companies, which will help you handle your deliveries and distribution.
Alternatives to a bonded warehouse
Though bonded warehouses have their advantages, like offering safe space for your shipments, other formalities make the bonded warehouse the last choice for vendors. It is majorly because of the country-based restrictions imposed when using the bonded warehouse. For example, they may not have a reliable postal service or access to the reputed shipping services to ship the item.
In such situations, you need to rely on a free port warehouse as the only option to depend on. An excellent example of a free port warehouse is the one in Hong Kong, which is one of the best warehouse facilities and one of the top shipping centers in the world. Here are some features of the Hong Kong free port warehouse that make it a better choice than a bonded warehouse in certain instances.
- Save on duties and taxes as it is trade friendly and does not apply import and sales taxes. Moreover, if you are shipping to Hong Kong from the US, the Hong Kong Policy Act states that no import duty can be charged on your products/shipments unless their value is over $800.
- Shipping globally becomes easy. For example, if you are a manufacturer in China and you want to sell your goods to various locations, you can easily get it done via Hong Kong because almost 100 plus flights ply from Hong Kong to other locations which makes the order fulfillment go easy.
- The warehouses are well connected and established, which means overhead is less and the shipping costs are comparatively lesser compared to other bonded warehouse locations.
Is Custom Bonded Warehouse or a Free Port Warehouse Right for You?
It completely depends on your business type and how much control you want to establish in customs and duties when you are shipping.
You can always go for various other fulfillment options when you are shipping internationally. Or else, you can go for shipping with popular shipping carriers like UPS, USPS, and FedEx, etc., who can help you manage the order fulfillment ensuring that you are adhering to the customs clearance processes.
It is ideal to go for a custom bonded warehouse when you are shipping to international locations to ensure that your items are not stuck at the customs.
Even though there are restrictions imposed on custom bonded warehouses, it is secure and safe for cross-border shipping. These bonded warehouses come in handy when you are dealing with certain delays in your order reaching your customer. You can always look for ways to help your shipment go through customs clearance with little delay. Choosing the right options for eCommerce shipping is essential for maintaining business ties.