What is bonded warehousing and how can it help your business?

Discover more about the advantages of a bonded warehouse.

Any importer will tell you that goods being imported are often subject to taxes known as tariffs or duty and are immediately payable by the importer, despite the goods not having been sold yet.

But what if we tell you there is a way in which businesses can delay the payment of such taxes? This is where Bonded Warehousing can be beneficial.

Bonded warehouses are widely used by importers and exporters, as they create efficiencies in both supply chain management and cashflow.

What is a Bonded Warehouse?

A bonded warehouse is a warehouse operated by a private company or the government and tightly regulated by customs. It allows for imported or exported goods to be stored in the country without actually entering it under the regulatory supervision of that country’s customs authority.

In Zimbabwe bonded warehouses are managed under the Customs Excise Act Chapter (23:02) as read with the Customs and Excise General Regulations Act. Section 68 of the C&E Act a.r.w section 71 of the C & E regulations.

In simple terms a bonded warehouse is a duty-free zone; a place of storage for imported goods (also known as bonded goods) that have yet to be processed by customs.

Its main advantage is to defer the payment of customs duties. Like a standard warehouse, bonded warehouses let businesses store their goods closer to foreign customers for faster delivery, with the advantage of pushing out the payment of custom duties until the goods are released from the bonded warehouse.

These warehouses are located at ports, boarder posts, large railway stations and big cities.

What are bonded goods?

Bonded goods are imported goods upon which duties, taxes and any other customs charges are still owed. These goods are typically kept in a customs bonded warehouse, an area of a warehouse controlled by customs authorities.

Which goods are stored in the bonded warehouse?

• Motor vehicles and vehicle spares
• Excisable goods- such as tobacco and cigarettes
• Raw materials
• Any other finished goods as approved by the commissioner of customs.

What are the advantages ?

The main advantage of bonded warehouses is that they create efficiencies in both supply chain management and cashflow.

a. Operational efficiencies

Using bonded warehouses means goods can be shifted closer to their final destination, and the payment of duties can be postponed until the product is moved.

This system provides significant benefits for business trading across different jurisdictions. For an organisation that imports and exports goods, the use of bonded warehouses can be used to cancel out the need to pay duties, creating further efficiencies that can include.

• No duty needs to be paid until the item is released for delivery to the buyer, giving full control of payment to the importer
• Customs and excise duties and taxes payment is differed to the time goods are required.
• Increased customer satisfaction as goods is locally and readily available once duties have been paid
• Allows for benefiting from trade and quantity discounts
• Reduction on logistical costs as large quantities can be imported without payment of duties.
• Increased liquidity and cash flows as duty payments are deferred
• Goods can be ordered in advance of anticipated demand and stored, ready to be called on when needed, meaning you can offer your customers a better experience.

 b. Onsite modifications

Goods stored in a bonded warehouse can be modified onsite for the local market. These modifications can include:

• Labelling
• Marking
• Testing
• Packaging
• Dilution
• Grading
• Service and maintenance

Inspection of the goods can also be performed in the bonded warehouse.

c. Specialised Storage facilities

Bonded warehouses provide specialized storage services such as deep freeze or bulk liquid storage, commodity processing, and coordination with transportation, and are an integral part of the global supply chain.

There are basically two types of bonded warehouses namely wet and dry. Wet bonded warehouses are the only ones in which alcohol and tobacco may be stored. Dry storage is for any other goods as approved by the Commissioner.

d. Proximity to ports

The majority of bonded warehouses are located close to major ports or airports, allowing companies to store their goods at the port of entry until they are ready for distribution. This creates cost savings across the entire supply chain as it reduces lead times and the potential for damage, while cutting the cost of transport and carbon emissions.

e. Additional logistics services

Most warehouses are affiliated with or owned by freight forwarders like FAMS Group, who can offer a complete integrated logistics solution to keep companies’ supply chains moving and save them the hassle of dealing with multiple suppliers.

f. Benefits for the Government

If owned by the Government a bonded warehouse  can be a source of revenue to the government. In addition, it offers the following benefits to a government:

• The ability to control entry of harmful products and illegal goods.
• The ability to check the quality and quantity of the of the goods imported.
• The ability to verify documents for goods in transit.
• The government gets revenue levying duty on the goods
• The government is able to control the entry of harmful goods
• The government is able to verify the documents for goods in transit
• The government is able to check on the quantity, quality and the nature/type of goods imported.
• The government is able to check on illegal goods entering the country.

What are the disadvantages of bonded warehouse?

The main disadvantage would be the risk of duty on a certain product being increased while the goods are in the warehouse.

The following conditions apply:

• The duty rate applicable at the time of withdrawal is the rate in force at that time and not the rate that was applicable at the time of warehousing. In other words, if the duty is increased by Government during the time the goods are warehoused then the increase will apply. By the same token, if the duty is reduced, the lower rate will apply.
• Only dutiable goods may be warehoused however both duty and VAT is then deferred while in the warehouse. Goods on which VAT only is payable may not be placed in a Bonded Warehouse.
• If, while in the warehouse, duty is totally removed by Government from a certain product, then the goods must be removed immediately from the warehouse and the VAT applicable must be paid.
• All goods must be removed, and duty paid after the two-year period is expired.
• No goods may be removed from the bonded warehouse WITHOUT PROPER CLEARANCE AND PAYMENT OF DUTIES AND VAT HAVING TAKEN PLACE.

Find a Trustworthy Warehousing Partner

At FAMS, our recently renovated warehouse offers you customs bonded transportation and warehousing for imported goods. We ensure your goods are inspected and delivered properly and quickly. We meet all the criteria to be an approved Customs bonded warehouse, and all of our employees are TSA certified. All of our facilities are equipped with 24/7 CCTV surveillance, advanced security systems, and patrolled yards so you can be sure that your goods are in a safe and secure space.

With approximately 600m2 of bonded space available to store 256 bonded pallet positions and additional bonded floor space now available in Zimbabwe, how can you go wrong?

There aren’t many things we can’t store, so please don’t hesitate to get in touch today to discuss your requirements.