What is a bonded warehouse?

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If you’re importing goods into the UK you might be interested in using a bonded warehouse to help defer the payment of duty and VAT on imports, until your products are sold. This can be a good way to free up cash flow, improve the service you provide to your customers, and ensure you don’t need to pay duty twice on items you ultimately intend to export again.

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What is a bonded warehouse?

A bonded warehouse can be used by an importer, to hold goods after they enter the UK, but before they reach their final destination. While your goods are in the bonded warehouse, customs duties and import VAT are suspended, making these warehouses a little like duty-free zones.

Bonded warehouses are regulated in the UK by HMRC, with stringent rules and regular checks to make sure they’re used properly. Importers might put their goods into a bonded warehouse if they’re not sure where their final destination might be - for example if they are to be shipped immediately back out of the UK for a customer elsewhere. They could also hold products in bonded warehousing while waiting for completion of customs procedures or clearance processes.¹

A bonded warehouse is also known as a customs warehouse - they’re the same thing.

Types of warehouse

You may hear of both wet bonded warehouses and dry bonded warehouses. Wet warehouses are the only ones which can hold alcohol and tobacco - all other goods are more likely to head to a dry bonded warehouse.

Why use a bonded warehouse?

Bonded warehousing offers importers a few advantages - mainly because it delays the need to pay customs duties and tax, if you’re not sure when or where you may finally sell your imported goods. This can free up valuable cash flow for businesses.

Here are a few reasons you might choose to use a bonded warehouse for your business:

  • If you plan to re-export goods outside of the EU, you can avoid paying UK import duty for goods which will never enter free circulation
  • If you don’t yet know where your goods will finally be sent, you can hold off paying UK customs charges until you’re sure - effectively avoiding the need to pay customs duties until your products have already been sold
  • If you’re waiting on your goods having full UK customs clearance, you can use a bonded warehouse as a storage facility
  • You may simply want to use a customs warehouse because they’re are often in convenient locations near major points of import, such as docks - by holding your products nearby, you reduce transport costs to alternative warehousing facilities, and cut handling costs, as well as the chance of breakages

UK customs charges

The exact cost of importing goods into the UK will vary a lot depending on what you’re importing. You can find more information on the UK government website, or choose to work with a third party such as a customs broker or freight forwarder who can help you to navigate the import process, and payment of duty. They’ll also help with any other processes needed such as paying VAT, or completing export declarations for goods which will be moved immediately on, outside of the European Union.

Here are some of the UK customs charges and related import costs you need to think about²:

Cost How it’s calculated
UK Customs duty Customs duty is charged on imports from outside of the EU, with rates set according to the commodity type³. Use our import duty calculator to calculate the expected duty that might accure when bringing goods into the UK.
VAT VAT is charged on imports from the EU and the rest of the world. The standard VAT rate for most goods is 20%⁴
Warehousing costs Warehousing costs are calculated based on the type of goods, and the amount of space taken. You can get an estimate of the costs using an online calculator and comparison tool
Freight forwarder or customs broker costs There are many third party services which can help you with the import processes - the fee you pay will depend on the services you need

Advantages of a bonded warehouse

Still not sure if a bonded warehouse will be useful for your import business? Here are a few of the advantages you should know about.

Duty deferment

Using a bonded warehouse means you can hold your goods without paying UK customs duty and taxes, until you have sold them. By deferring duty like this, you free up valuable cash flow for your business.

Avoid paying double duty on exports

A customs warehouse is useful if you expect to export the goods after they have entered the UK. Let’s say you import goods from China, and intend to later send them on to the US. By holding them in a bonded warehousing, you don’t need to pay UK duties, for goods which will not enter free circulation here.

Improve customer service

Using a bonded warehouse is a good way of making sure you’ll always have a supply of goods you need to meet customer demand. For highly seasonal goods, this means you can import a large supply prior to the season beginning, and only remove them from the customs warehouse - and pay the tax and duty necessary - when the demand goes up.

Get help with customs processes

Some bonded warehouses can offer significant amounts of help for importers, with completing the necessary customs and tax documentation. This can make life much easier if you’re new to importing, or simply don’t have the time to deal with the documentation yourself.¹

Rules and Regulations

The rules and regulations regarding bonded warehouses are set and enforced by HMRC in the UK. It’s helpful to know that these rules will differ between countries, although the practise of offering a bonded warehousing option is quite a common globally.

In the UK customs warehouses must fulfil the following rules - for the full rundown of the regulations, go to the UK government website¹:

  • Warehouse keepers must be HMRC authorised and allow inspection as demanded, they have to check goods as they enter and maintain proper records
  • Goods held must be from outside the EU, from inside the EU under duty suspension, or eligible for EU common storage arrangements
  • Goods may also be held if their end destination is unknown, or if the customs processes have not been completed yet
  • Importers are responsible for properly declaring goods deposited, as well as ensuring their products are taken directly to the warehouse from the point of import

If you’re importing goods into the UK, or are planning on starting an import business, a bonded warehouse could be a useful way to manage your stock through the necessary customs processes. By deferring duty payments, and avoiding the need to pay UK duty on products destined for export, you’ll free up cash flow and could even save yourself money. Don’t forget to look at other ways to cut unnecessary costs, such as using Wise to pay your overseas suppliers with low cost, fast and convenient international transfers.

Sources:

1.https://www.gov.uk/guidance/customs-warehousing Customs Warehousing
2.https://www.gov.uk/goods-sent-from-abroad Tax and customs for goods sent from abroad
3.https://www.gov.uk/starting-to-import/importing-from-noneu-countries Moving goods from EU countries
4.https://www.gov.uk/starting-to-import/moving-goods-from-eu-countries Importing from non-EU countries

Sources checked on 10 June 2019


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