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What are Bonded Warehouses?

Mary McMahon
Updated May 17, 2024
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Bonded warehouses are warehouses in which dutiable goods may be stored without paying the duties on them. For importers, there are a number of advantages to using this type of storage, which makes them a popular option in many ports all over the world. Different governments have different laws about how such warehouses can be administered and who can use or operate one.

Also known as a customs warehouse, a bonded warehouse acts sort of like a no man's land where goods can be deposited without an importer or an agent needing to pay duties on them. If the importer decides to sell the goods for re-export, duties will not be incurred. Likewise, if the goods are destroyed, the obligation to pay duties will also be resolved. If the imported goods are released for sale, however, customs duties will come due.

Importers often appreciate the flexibility of such warehouses, as if they can't get a good price for goods domestically or can't sell them at all, they can sell them for re-export without having to worry about the duties that might already have been paid. Paying duties on arrival can also be expensive, and using a bonded warehouse allows importers to access funds from the sale to pay the duties, rather than having to pay duties in advance. Customs officials also use them to store impounded or confiscated goods while working out what is going to happen to them, thereby ensuring that people don't pay duties on goods they cannot use.

Some warehouses are operated by a government, while others are run by third parties that contract out their warehouse space. In some cases, they may take on the responsibility for paying duties, while in other instances, the importer or agent who arranges for the storage is responsible. Import/export companies may maintain their own storage space for the convenience of themselves and their clients, especially if they do a great deal of business.

Individuals who want to open bonded warehouses generally need to file applications with the customs agency in the nations where they intend to operate warehouses. The application process can be complex and lengthy, and some people choose to contract it out to a lawyer who is experienced in such issues. In addition to meeting customs requirements, operators may also need to meet requirements set by the port where they operate, including providing evidence of insurance, installation of security systems, and measures to prevent loss due to fire or contamination.

AboutMechanics is dedicated to providing accurate and trustworthy information. We carefully select reputable sources and employ a rigorous fact-checking process to maintain the highest standards. To learn more about our commitment to accuracy, read our editorial process.
Mary McMahon
By Mary McMahon

Ever since she began contributing to the site several years ago, Mary has embraced the exciting challenge of being a AboutMechanics researcher and writer. Mary has a liberal arts degree from Goddard College and spends her free time reading, cooking, and exploring the great outdoors.

Discussion Comments

By anon957887 — On Jun 23, 2014

It's funny you say that winslo2004. There's a case in the UK, where a gang of four owned one and took 50mil off the government.

By winslo2004 — On Jul 27, 2011

There must be an amazing amount of smuggling that happens in these places. I remember reading that even with all of the trouble in the world these days, only a small percentage of cargo coming in or out is inspected.

With third-party storage sites, especially, there have to be people getting into and out of some of them, some without the owner knowing and some with, I would imagine.

I would be interested to see what security measures are in place and how effective they are. Of course, if they told people that it would just be that much easier to get around them.

By MaPa — On Jul 26, 2011

@parkthekarma - That is exactly the case. While you can charge more to store things in a bonded warehouse, the number of agencies you have to deal with can be staggering. ICE, Border Patrol, DEA, Homeland Security, local law enforcement.

This is on top of the usual suspects any business deals with, such as OSHA, the fire marshal, tax authorities, it just goes on and on.

Be that as it may, this is a vital service and there is money to be made. We are a country that buys a massive amount of imported goods, and exports a lot too (even though the percentage isn't as high, the amount is high because we are such a large country).

By parkthekarma — On Jul 25, 2011

I can see where this would be a good business for someone who already owned storage warehouses, because you could charge higher (and more) fees for keeping things there.

It would seem like a paperwork nightmare to keep up with a place like this, though, especially in recent years with all of the terrorism and smuggling controls in place now. With the right staff, it could be worth it.

Mary McMahon

Mary McMahon

Ever since she began contributing to the site several years ago, Mary has embraced the exciting challenge of being a...

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