Customs Warehouse Details

Customs warehouses, also known as bonded warehouses or customs-bonded warehouses, are locations where businesses can store their imported merchandise. It can be a building or any other secured area. In this process, you can keep goods under customs control without paying import duties and taxes. In the United States, you can store goods for up to five years from the date of importation without paying customs duty.

All goods will have to undergo a customs entry assessment, and customs will maintain primary control. They will also determine where, when, and how you can move goods. Although products must stay within the customs warehouse to avoid duty fees, you can manipulate them. You can improve the packaging, sort your products, or prepare the goods for further shipment.

Not having to pay duty or taxes straight away can improve the cash flow of a business. However, within the allowed storage timeframe, you must export goods, withdraw them for supplies to an aircraft or vessel, or transfer them so you can sell them locally. If you do not do this, local authorities will confiscate goods.

Example Of A Customs Warehouse

Customs warehouses are beneficial for businesses that import or export goods from one country to another. For example, if you are an American business that exports goods to Europe, you might have a Paris customs warehouse. You can ship your goods to the Paris warehouse and store them there until an order comes in from a customer. If an order comes in after four months of storage, you would have delayed duty payments for four months.

Using customs warehouses can be beneficial during situations where your product is in low demand. For example, during the current COVID-19 pandemic, many people work from home and socialize less during quarantine. These two things can lead to fewer purchases of goods such as perfumes, work clothes, or party outfits. Businesses that store goods in a customs warehouse during low demand can save some money until demand rises again.

Types Of Customs Warehouse

While there are up to eleven different classes of customs warehouses, there are primarily five types. These are:

  • Private warehouses that a corporation owns to store their goods.
  • Public warehouses, available for all businesses.
  • Automated warehouses with technologies for efficient operations.
  • Temperature-controlled warehouse for products such as sensitive electronics, frozen foods, produce, and flowers.
  • Distribution centers that focus on regrouping and movement.

You can generally define the additional different classes of customs warehouses by the type of goods stored:

  • Bonded grain bins for grain storage.
  • Smelting and refining warehouses for refining metals.
  • Duty-free stores for merchandise that will be used or consumed overseas.
  • Yards or sheds for bulky or heavy items such as tanks for large liquid imports and stables or pens for imported animals.

Benefits Of A Customs Warehouse

A customs warehouse's main benefit is that importers and distributors can have extra funds by not paying duty while goods are stored. As an importer, you can choose to export goods from the warehouse without paying duty if you cannot sell the goods domestically. You can also consider merchandise within a customs warehouse to be in protected custody and immune to economic and geopolitical changes that may disrupt their sale.

For instance, during the current COVID-19 pandemic, many businesses face decreased demands for their goods that result in a build-up of inventory. This situation would make it cost-effective for you to use a customs warehouse. To maintain contracts with suppliers during such a challenging economic crisis, you can also use customs warehouses to save money in the short-term.

Here are other benefits to using a customs warehouse:

  • You can store regulated or restricted goods.
  • Restricted goods are exempt from the time restrictions of keeping them in a regular warehouse.
  • You can choose to hold goods until demand increases, and this can improve cash-flow.
  • Secure and safe facilities.
  • You don't have to be worried about deadlines for completing complex customs paperwork.

Customs-Bonded Warehouse vs. Foreign Trade Zones

Although both a customs-bonded warehouse and a foreign trade zone (FTZ) provides duty and tax exemptions, they are distinctly different. A custom-bonded warehouse is a location within a country used to store goods and are buildings, yards, sheds, or bins. The US Customs and Border Protection (CBP) defines an FTZ as a "secure area located in or near US ports of entry," and they don't consider it a part of US territory. An FTZ is legally outside the customs territory that requires duty assessment and will be located in or near CBP ports of entry.

Similar to a customs warehouse, you can store imported goods in an FTZ, and duties aren't required until you withdraw the goods from the area. You can also manipulate or manufacture goods within an FTZ.

The main differences between a customs warehouse and an FTZ are the types of goods you can store and the storage timeline. You can only store foreign goods in a customs warehouse, although you can eventually choose to export these goods. In an FTZ, you can store domestic or foreign goods, and there is also no five-year limit on keeping them in an FTZ.

Conclusion

Customs warehouses are helpful if you are a business importing goods. It helps improve cash flow by deferring the time duty and taxes must be paid to when your customer makes an order, and you remove the goods from the warehouse. There are many types of customs warehouses depending on the product you are storing.

Although there is a time limit for storage, consider utilizing a customs warehouse for easier management and extra security of your products. A foreign trade zone is an alternative solution in the US if you are looking for unlimited storage time. However, its locations are only in certain designated areas.