A bonded warehouse is a building maintained by the state or a private enterprise to benefit the importers/exporters who have imported/exported goods from another country but are not in a position to pay the duty, with the motive to not impose a burden on such importers. The government has introduced the system of such warehouse where the importers can keep their good for the time being and can release the same after paying the prescribed amount of import duty after the prescribed time.
However, it is to be noted that at the time of storing goods in such a warehouse, the importer has to submit a bond with the government, which shall be three times the amount of duty leviable on imported goods. The bond so executed is canceled upon the below-mentioned conditions being fulfilled.
- Where the goods are exported or deemed to be exported;
- Where goods are withdrawn for supplies to a vessel or aircraft in international traffic;
- Where goods are destroyed under Customs supervision; or
- Where goods are withdrawn for consumption domestically after payment of duty.
Classes of bonded warehouse:-
Different types of goods require different storage environments considering this CBP has introduced various classes of the bonded warehouse as defined hereunder: –
Class 1: – Goods that have been seized or are under examination or pending final release by U.S. Customs and Border Protection (CBP) are stored in such warehouses.
Class 2: – Warehouse used to store heavy or bulky goods such as large tanks of liquid etc.
Class 3:- Public bonded warehouse used to store all the imported goods
Class 4: – Warehouse used for storage of grains, where such gains may be stored in a tank or any part of the building
Class 5: – warehouse where certain cleaning and packaging can be made in goods. However, no alteration can be made in such goods by manufacturing or any other process
Class 6: – Warehouse owned by the importer, where only those goods stored, which belong to the importer.
Class 7: – Warehouses for smelting and refining imported metal-bearing materials.
Class 8: – There are certain raw materials imported from a country outside India, and such raw material is used to make a finished good, that is to be exported. So, in such a class of warehouses manufacturing of goods to be exported is done.
Class 9: – Warehouse which stores goods that are meant for storage of General Order (G.O.) merchandise. These are items that remain unclaimed for at least 15 days after arrival at their final U.S. destination.
Class 10: – Warehouses, also known as duty-free stores, are the ones that are used for storing and selling goods outside the Customs territory, such goods are delivered up to the exit point such as the airport, etc
The difference between a non-bonded warehouse and Bonded warehouse
|Non-bonded Warehouse||Bonded Warehouse|
|Generally, domestically produced goods are stored||Both domestic and international produced goods are stored|
|Duties and taxes need to be paid upfront||Payment of duties and taxes may be deferred until the goods are removed from the warehouse|
|Not connected with U.S. Customs||Connected with U.S. Customs|
|In case of any error in documentation or delay in payment of duties or taxes the goods stored in the warehouse may be seized or destroyed||No seizure without proper authorization that too in rare circumstances|
period of storing goods in a custom warehouse
Any good stored in a bonded warehouse can be kept in the warehouse for a maximum period of 5 years without paying the import duty. Also, during this time the importer, if finds suitable can make necessary changes in the goods to make them ready for distribution, such changes may include packaging of goods, adding labels to the goods, and even in some cases, the importer continues to store the goods in a warehouse until the demand of the goods is increased.
Responsibility for goods when kept in a warehouse.
Bonded warehouses provide specialized storage services for different types of goods to avoid any damage to goods during their storage in the warehouse, such as for edible goods freezer services are provided, and for goods that are required to be kept with extra safety special storage houses are provided, also the warehouse keeper provides coordination with the transporter for easy transportation of good.
Where the goods are kept in the warehouse, they are under the supervision of the customs authority, and any damage so incurred shall be borne by the authority only.
Location of Bonded warehouse
The concept of bonded warehouse generally comes into the picture in the case of import of goods. Therefore, they are found near the ports, and the busier the port more likely there is to be a variety of warehouses.
Bonded warehouses were introduced with the purpose to provide an advantage to the importers to defer the payment of duty unless the goods are removed from the warehouse. The introduction has bonded warehouses has helped the various business avoid insolvency, especially during the coronavirus pandemic, as it serves the purpose to store goods in a safe and secure environment and defer custom duties.
1. Which agency regulates the system of the bonded warehouse?
U.S. Customs and Border Protection Agency, commonly known as the CBP.
2. When the goods are kept in the warehouse is the customs duty payable on such goods canceled?
No, when the goods are kept in the warehouse the custom duty payable on such goods is not canceled it is only deferred.
3. Is bonded warehouse and a non-bonded warehouse the same thing?
No, bonded warehouse differs from a non-bonded warehouse mainly for the reason that in bonded warehouse the duty can be deferred unless the goods are removed from the warehouse.
4. Where are the bound warehouses located?
Generally, bonded warehouses are located near the port.
5. Who owns the responsibility for goods stored in the bonded warehouses?
Custom authority is responsible for all the goods stored in a warehouse.
6. What is the maximum time period for which goods can be stored in a customs warehouse?
Maximum 5 years.