International Trade

2. Bonded Warehouse for Ocean Freight Shipment: When and Why to Use One? Registering profits in international trade businesses requires strategizing and management of every step involved. Import and export of goods demand documental preparation followed by stringent procedures. Manufacturing, transporting, warehousing, and delivering across the globe is no easy game. These costs are usually cut down by opting for more economical modes of transport such as ocean freight shipment. It is economical because of the ability to transport large-size shipments at one go and has multiple options of shipping containers that suit your needs. Add to it the advantage of using a bonded warehouse and you are sure to save money on international trade. Bonded warehouses are popular amongst importers and exporters. Let’s understand everything about them.

3. What is a Bonded Warehouse? A building or area used to store goods that are liable to duty is called a bonded warehouse. Transportation of freight by ocean need not be liable to customs duties till they are stored in a bonded warehouse. The duties need to be paid only when these goods are transported to their final destination in a local market. They may be managed by the customs or by private enterprises, after signing a custom bond with the government. Why Use a Bonded Warehouse? In the process of ocean freight shipment, when goods enter the ports of the destination country, they are liable to customs clearances to be allowed to move out of the port for business. Customs clearance requires immediate payment of duties and taxes liable on imported products. Bonded warehouses do not need this upfront payment on the arrival of goods. The importer can store their goods in these shipping warehouses without paying customs duties. These duties need not be paid until the goods need to move domestically. This makes bonded warehouses much more cost-efficient than non-bonded ones.

4. When to use a Bonded Warehouse? Customs duty cannot be deferred at all times, but the facility of bonded warehousing for freight shipment can defer it for some time, while other resources can be managed. Hence, it is meant to encourage business growth. Apart from saving on upfront payment of customs duty using a bonded warehouse has a host of benefits: • To provide Quicker deliveries- Warehousing at the destination port allows goods to reach closer to the final destination facilitating quick delivery to the end customer. • Time to develop Local Strategy- The goods can be kept in the warehouse as long as required, without paying duties and taxes, while allowing time to develop a local market strategy. • To Avoid Damage- Storing goods in warehouses can be a challenge when it comes to quality maintenance.

5. In bonded warehouses, the goods are manipulated to maintain quality. Special facilities like refrigerators and insulators are available in the warehouse that preserves the quality of the goods. • Multiple Imports Not Required- Large quantities of goods or raw materials can be imported at once and stored in the warehouse until required further. No need to import goods frequently and pay taxes every time separately. • Exporting is not payable- Transporting goods to another location internationally does not require payments of customs duties. This allows moving goods to be transported to far-off locations and can be used to cut down transportation costs. What are the benefits of Bonded Warehousing? Using bonded freight storage warehouses is a great way to: • Increase cash-flow • Long term storage • Proximity to ports • Safety and Security

6. Quality preservation • Restricted goods can be stored What are the disadvantages of Using a Bonded Warehouse? There are a few disadvantages of bonded warehousing too, which include: • Goods can be stored from one year to maximum 5 YearsWhile it is an advantage to be able to store goods for the long term, sometimes some goods take time to find the right market and this time limit may encourage a business to sell the goods at a loss. • Only Taxable goods can be warehousedLocal markets do not need to pay taxes for any transport domestically, hence such goods cannot be warehoused. Only goods that are imported and liable to pay taxes for entering the local market are allowed to be stored in bonded warehouses.

7. Long clearance processThe customs clearance process is a long one and no goods are allowed to go out of the warehouse without paying these taxes. This makes it a tiring process to get all clearances to release goods from bonded warehouses and ends up discouraging businesses. • Accumulation of chargesWhen goods are stored for long periods, the payable amount keeps accumulating. Failing to pay this in the stipulated time results in the goods being auctioned by the customs authorities. Using bonded warehouses is a great option for sea freight forwarding for import-export traders. It encourages businesses to explore new markets around the world. Strategic planning of warehousing, transporting, and marketing results in smooth functioning and better profitability from the entire supply chain.

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