Bonded warehouse: Its advantages and tool for expansion
Sooner or later, fast-growing online stores will start looking for foreign expansion. No wonder. Entering foreign markets brings with it a great number of opportunities, but also challenges. One important prerequisite for these companies is to set up the most optimal financial flow.
In logistics, the establishment of a bonded warehouse can make a significant contribution to this. How can a bonded warehouse help you grow your business? How does it work in practice and what benefits does it bring?
What is a bonded warehouse
A bonded warehouse is a facility, or a defined space within a facility, where goods are stored prior to customs clearance. It is intended for the storage and further handling of products from so-called third countries, i.e. countries outside the European Union.
In this case, such goods are not subject to import duties or VAT until the goods are taken from the bonded warehouse for free circulation – to end customers, bricks-and-mortar stores or trading partners. If the goods are exported to third countries, no duty or VAT is payable at all.
The bonded warehouse must be approved by the customs authorities, who continue to supervise compliance with the prescribed conditions. Goods may be placed in a customs warehouse for an indefinite period, regardless of quantity, origin and destination. Goods in a customs warehouse may be traded, re-exported or transferred from owner to owner, including changes to invoicing documents.
There are several types of bonded warehouses, whether in the public or private sector.
Public and private bonded warehouse
Any person may use a public bonded warehouse, which may be operated, for example, by the country. On the other hand, a private bonded warehouse is a space operated by an authorised person (warehousekeeper) who is further responsible for proper storage under customs supervision. This person is also bound by the customs declaration on the storage of the goods (depositor). Neither the warehousekeeper nor the depositor need be the owner of the goods.
We believe that at first sight the previous paragraph may confuse you. Let us therefore illustrate the definition and operation of a private customs warehouse on example.
Operation of a private bonded warehouse under the management of a fulfillment provider
A fulfillment specialist can also be a private bonded warehouse provider, offering this option to their clients to facilitate their business and expansion. Therefore, choose a logistics partner with this option from the start.
Have you established cooperation with such a partner? Congratulations. Functioning and cooperation can look like this.
Your fulfillment partner has the role of both warehouseman and depositor. This means that they are authorised to operate a bonded warehouse, responsible for the way goods are stored and the subsequent proper storage under customs supervision. In other words, he takes care of the operation of the bonded warehouse from A to Z, including the associated administration and ongoing customs inspections.
Example of operation in classic and bonded warehouse
Your manufacturer or supplier is from a third country. In the classical mode, the handling would take place along the axis:
1. transport of the goods to the EU border;
2. payment of import duties and VAT on all imported goods;
3. intra-EU transport of the goods to a distribution center without a bonded warehouse;
4. receipt and storage of the goods in warehouses for an indefinite period;
5. ordering of goods by your customer or business partner;
6. dispatching of the shipment.
In contrast, when using a bonded warehouse, the process, and in particular the payment of customs duties or VAT, is different:
1. transporting the goods to a distribution center with a bonded warehouse possibility;
2. receipt and storage of the goods in the warehouse for an indefinite period;
3. the ordering of the goods by your customer or business partner;
4. payment of duty and VAT only for goods going to the EU;
5. dispatching of the shipment.
Benefits of using a bonded warehouse
As you can already guess from the comparison between a classic warehouse and a bonded warehouse, using a bonded warehouse brings several advantages.
More efficient delivery of goods from a third country supplier
Goods that are transported to a bonded warehouse and come from third countries are not subject to customs duties, VAT and other charges when they cross the EU border. This often makes the delivery process to your warehouse much easier and faster administratively. In this way, you also gain a time margin for ordering goods from your supplier.
Reducing the risk of out of stock
By having your goods from third countries in bonded warehouses faster, you are able to respond more flexibly to the demand of your customers. Especially when you sell products from your safety stocks and be at risk of selling out, which is associated with an unwanted reduction in revenue.
TIP: Are you looking for the ideal way to order your goods or wondering about the optimal amount of products to order – especially in these times when we are witnessing high inflation? Read our other articles on re-order point or re-order quantity.
Cash-flow optimization
By storing goods in a bonded warehouse, you eliminate the obligation to make a single high import duty payment. You only clear your products when they are part of the shipment out of your warehouse. This payment method is much more economical for your company’s cash flow and financial functioning. You will especially appreciate a bonded warehouse when ordering large quantities of goods, when you have to add customs duty, VAT and other related fees to the purchase and shipping costs.
Possibility to reduce charges for unsaleable goods
What if an order from your supplier contains goods that are damaged or missing from the shipment? Because of the way customs duties are paid in the bonded warehouse, you can achieve a significant reduction in costs. In other words, don’t pay for products that you are unable to sell.
Reducing customs administration
Today and every day there are situations where you import your goods from a third country and then re-ship them to the same / another third country. For a classic warehouse, this means paying import fees and then paying export fees. In a bonded warehouse, you do not have to do this.
Unlimited handling of goods
As with a classic warehouse, there is the possibility to further manipulate the goods in a bonded warehouse. With the approval of the customs office, virtually any industrial, manufacturing or commercial activity can be carried out in a bonded warehouse and servicing can be provided, goods can be (de)assembled, repackaged or assembled according to the needs of the client or customer. All this without any time limit on the storage period.
“We manufacture our goods outside the EU and then ship them to 49 countries around the world. Thanks to Skladon, we have been able to use their bonded warehouse for several seasons now, with all the benefits,” Pavel Kovar, Logistics Manager at Kilpi.
Bonded warehouse limit
There may be a delay in the dispatch of uncleared goods for orders already received at the time of using the bonded warehouse. This is also the case if the order includes a combination of both goods to be cleared and goods already cleared.
If your provider has good technology and system integrations, the customs clearance process should not exceed 2 hours. This limit can also be avoided by pre-clearance in batches (e.g. clearing 100 units of a specific product, which are then fully available for possible shipment) or by pre-order clearance.
Skladon: Fulfillment partner offering bonded warehouse
Working with a bonded warehouse provider will provide you with all of the above benefits. However, their service offering is usually basic compared to a fulfilment provider. A basic service level does not ensure keeping up with ever increasing logistics standards, reliability, consistency or create an exceptional experience for your customers. It does not contribute to the overall impression of your brand.
On the contrary, a dedicated fulfillment partner, providing your clients with enhanced options including bonded warehouse capabilities, is a value-added guarantee and an helper for your expansion. On your growth path, for example, it is able to offer you:
1. Flexibility – in warehouse space, equipment or staff. In other words, it can provide sufficient warehouse capacity, the required equipment or the required number of trained logistics operators to meet your current needs.
2. Savings – where you only pay for the space, staff and warehouse operations that needed to be provided in the month being invoiced. With a fulfillment specialist, you turn your fixed costs into variable costs, saving on necessary logistics investments and transport.
3. Efficiency – in processes, accuracy and speed of shipments handled. These standards are constantly shifting, accelerating and optimizing. Fulfillment expert uses its know-how to offer a logistics competitive advantage in your industry.
4. Software – to help you manage your inventory or forecast demand for your products. It offers a total overview of your inventory, orders, returns, etc., in real time and 24/7. It also allows easy integrations to a wide range of e-commerce platforms, marketplaces, comparison platforms, etc.
5. Personalization – whether in cases of mutual setup and agreement of the goods receipt process, warehousing, picking, packing or returns logistics. A logistics partner is always open to your wishes and those of your customers.
6. A personal approach – from your onboarding to the customer care itself. You always have a dedicated personal employee at your disposal, whether for your questions, wishes or operational issues. An employee who will help you improve the customer experience in the eyes of your customers.
“With Skladon, we only pay for the warehouse space and staff that we actually use. If you have a good warehouse management and keep an eye on the turnover of goods, you can save tens of thousands Czech crowns per month,” Lucie Konecna, COO nanoSPACE.
Expand with Skladon
We know from our experience that many e-commerce companies postpone their international expansion due to potential complications, risks, ignorance or high costs.
We can help you with your expansion! Get in us a stable partner who has many years of experience with the logistics expansion of their clients. A partner who will help you keep your finances in good shape and show you the responsible way into the e-commerce world.
“At the beginning of our cooperation, we were looking for a logistics partner who would be reasonable in price, deliver shipments to 100% of our customers’ countries, check the quality of the goods delivered from the factory and be able to complete or customize orders according to our requirements. With Skladon, everything works perfectly,” Michaela Steinhauser, Co-Founder & COO Skinners.
