Certification - Bonded Warehouse
- Adam C
- Feb 21, 2015
- 8 min read
Updated: Aug 2
SOLO’s Bonded Certification: All the Benefits of a Bonded Warehouse for Your Supply Chain
At SOLO World Partners, we are committed to providing the best possible solutions for our customers’ supply chain needs. As part of that commitment, we are proud to announce that, through our Foreign Trade Zone (FTZ) certification, SOLO is also certified with all the benefits of a bonded warehouse.
But what exactly does that mean for you? Let’s break it down.
What is a Bonded Warehouse?
A bonded warehouse is a secure facility authorized by U.S. Customs and Border Protection (CBP) where imported goods can be stored without immediate payment of duties or taxes. Duties are only paid when the goods are withdrawn for domestic consumption, and if they are re-exported, no duties are due at all.
Bonded warehouses offer critical advantages, including:
✅ Duty Deferral – Importers can store goods duty-free until they are sold or distributed, improving cash flow.
✅ Duty Elimination for Exports – If goods are exported directly from a bonded warehouse, no duties or taxes are paid in the U.S.
✅ Long-Term Storage – Imported goods can be stored in a bonded warehouse for up to five years without penalties or interest.
✅ Improved Inventory Control – Businesses can consolidate shipments, manage inventory more efficiently, and avoid unnecessary customs fees.
✅ Better Supply Chain Flexibility – Companies can hold inventory closer to customers while deferring duties, allowing for more strategic distribution.
SOLO’s FTZ Certification: Maximizing Your Supply Chain Benefits
As an FTZ-certified operator, SOLO provides all of these same advantages, with even greater flexibility. FTZs function similarly to bonded warehouses but offer additional benefits, such as:
🔹 No Time Limits – Unlike bonded warehouses, goods stored in an FTZ can remain indefinitely, eliminating concerns about expiration periods.
🔹 Lower Customs Fees – FTZs allow businesses to avoid duties on waste, scrap, or re-exported goods while also reducing fees through consolidated weekly entries.
🔹 Production Benefits – Unlike bonded warehouses, FTZs allow for manufacturing and assembly operations, meaning businesses can add value to goods before duties are assessed.
🔹 Increased Security & Compliance – FTZs operate under strict CBP oversight, ensuring the highest standards of security and compliance while streamlining customs procedures.
How This Helps SOLO’s Customers
By leveraging our FTZ certification, SOLO offers all the cost-saving and operational advantages of a bonded warehouse, plus additional FTZ benefits that enhance supply chain efficiency. This means:
✔ Lower landed costs and improved cash flow for importers
✔ More strategic inventory management for businesses with international suppliers
✔ Simplified customs procedures, reducing delays and administrative burdens
✔ A competitive edge in global trade by minimizing duty exposure
If you’re looking to optimize your import/export operations, reduce costs, and streamline your supply chain, SOLO is your ideal partner.
Get in touch with us today to learn how our FTZ-certified solutions can give your business a powerful advantage in the global marketplace!
FAQ - Bondeded Warehouse
What is a Foreign Trade Zone (FTZ) and how does it differ from U.S. Customs territory?
A Foreign Trade Zone (FTZ) is a designated, secure area within the United States that, for customs purposes, is considered outside U.S. Customs territory. This means that foreign and domestic merchandise can be imported, stored, manipulated, manufactured, or re-exported within an FTZ without immediately being subject to U.S. customs duties or other ad valorem taxes. Duties are only paid if and when the goods are transferred out of the FTZ and into U.S. commerce. If merchandise is re-exported directly from the FTZ, no duties or taxes are paid at all. The program, established by the Foreign-Trade Zones Act of 1934, aims to enhance U.S. competitiveness in international trade by reducing tariff costs on imported inputs and exported finished products.
What is a Customs Bonded Warehouse and how does it function in international trade?
A Customs Bonded Warehouse is a secure storage facility authorized and regulated by U.S. Customs and Border Protection (CBP) where imported dutiable merchandise can be stored without immediate payment of duties or taxes. The goods remain under customs control, and the warehouse proprietor incurs a liability under a warehouse bond until the merchandise is either exported, destroyed under CBP supervision, or withdrawn for consumption within the United States after duty payment. This system helps businesses manage cash flow by deferring duty payments and can eliminate duties entirely if the goods are re-exported. Bonded warehouses are commonly used for storage, inspection, re-packaging, and labeling, though manufacturing is generally not permitted.
What are the main benefits businesses gain from using Foreign Trade Zones?
Operating within an FTZ offers several significant benefits:
Duty and Tariff Deferral/Elimination: No duties or tariffs are paid on goods while they are in the zone, and none are paid if the goods are re-exported. This significantly improves cash flow by freeing up working capital.
Duty Reduction (Inverted Tariff): For manufacturing operations, if the duty rate on the finished product is lower than that of the imported components, businesses can elect to pay the lower finished product duty rate on the foreign content, even while keeping manufacturing in the U.S.
Merchandise Processing Fee (MPF) Minimization: Companies can often consolidate weekly shipments into one customs entry, leading to substantial reductions in MPF costs, as the fee caps at a maximum amount per entry.
Operational Flexibility: FTZs allow a wide range of activities including storage (indefinitely, unlike bonded warehouses), assembly, testing, repair, packaging, labeling, and manufacturing (with production authority). Both foreign and domestic merchandise can be stored together.
Enhanced Compliance: Strict CBP oversight in FTZs helps businesses maintain high standards of security and compliance, streamlining customs procedures.
Risk Mitigation: Companies can store goods to hedge against unpredictable tariff changes, paying duties at the time of admission (privileged foreign status) to lock in rates if tariffs are expected to rise, or at the time of entry into U.S. commerce if tariffs are expected to decrease (non-privileged foreign status for manufacturing).
What are the primary advantages of utilizing a Customs Bonded Warehouse for businesses?
Bonded warehouses provide several key benefits for importers:
Duty/Tariff Deferral: Duties and taxes are not paid until the merchandise is withdrawn from the warehouse for entry into U.S. commerce, allowing businesses to conserve cash flow and allocate resources more efficiently.
Duty Elimination for Exports: If imported goods are re-exported directly from a bonded warehouse, no duties or taxes are paid in the U.S., which is beneficial if no domestic buyer is found.
Long-Term Storage: Goods can typically be stored for up to five years from the date of importation without incurring duties, providing flexibility for market assessment and distribution.
Security: These facilities operate under strict customs supervision and often feature robust security systems, protecting goods from theft or damage and ensuring compliance with trade regulations.
Strategic Location: Many are located near major ports and airports, which can reduce transportation costs and lead times.
Potential for Reduced Tariffs: If tariff rates decrease while goods are in the warehouse, the lower rate will apply upon withdrawal for consumption.
What are the key distinctions between Foreign Trade Zones and Bonded Warehouses regarding operations and duration?
While both FTZs and bonded warehouses offer duty deferral, they have crucial differences:
Customs Territory: An FTZ is considered outside U.S. Customs territory, whereas a bonded warehouse is within it.
Storage Period: Goods can be held indefinitely in an FTZ, but a bonded warehouse has a five-year storage limit.
Permitted Activities: FTZs allow more extensive activities, including manufacturing and assembly, while bonded warehouses are generally limited to cleaning, sorting, repacking, and other minor manipulations; manufacturing is typically not allowed.
Merchandise Type: FTZs can store both foreign and domestic merchandise, and co-mingle them, whereas bonded warehouses are generally restricted to foreign merchandise.
Duty Rate Calculation: In FTZs, companies can choose to pay duties at the rate in effect at the time of admission (Privileged Foreign status) or at withdrawal (for manufacturing, this can lead to inverted tariff benefits). In bonded warehouses, duties are set at the time of entry into U.S. commerce.
Customs Entry Filing: In an FTZ, customs entry is filed just prior to the removal of goods, and only for the amount removed. In a bonded warehouse, customs entry must be filed before goods enter the warehouse.
How does recent trade policy, particularly regarding tariffs, influence the use of FTZs and Bonded Warehouses?
Recent trade actions and unpredictable tariff increases have significantly boosted the demand for both FTZs and bonded warehouses as tariff mitigation strategies.
FTZs and Rising Tariffs: FTZs are particularly useful for mitigating future tariff increases. By admitting commodities in "Privileged Foreign" status, companies can lock in the current, potentially lower, tariff rates at the time of admission, even if tariffs rise later. This strategy helps companies hedge against volatility, despite some exemptions for certain reciprocal tariff actions.
Bonded Warehouses and Tariff Fluctuation: Bonded warehouses set duty rates at the time of entry into U.S. commerce. This presents a risk if tariffs go higher, but a benefit if tariffs are lowered. Therefore, if a company anticipates tariffs to decrease, a bonded warehouse might be a more suitable choice.
Increased Demand: The uncertainty surrounding tariffs, especially on Chinese imports, has led to a surge in demand for bonded storage. Importers are willing to pay a premium, with bonded warehouse rates quadrupling compared to traditional warehousing, to gain financial and operational flexibility.
What are the compliance and security requirements for bonded facilities, and who oversees them?
Both Foreign Trade Zones and Bonded Warehouses are subject to stringent compliance and security requirements, primarily overseen by U.S. Customs and Border Protection (CBP).
Authorization and Oversight: Facilities must be approved and authorized by CBP. Bonded warehouses operate under the direct control and supervision of CBP, while FTZs are licensed by the Foreign-Trade Zone Board and supervised by CBP.
Security Measures: Proprietors must develop and implement comprehensive security plans. These include physical barriers (fencing, secure buildings), alarm systems, video surveillance, adequate lighting, locking devices, and strict key controls.
Access Control: Access to facilities is controlled through positive identification of all employees, visitors, and vendors. Secured waiting areas for drivers and procedures for challenging unauthorized persons are also mandated.
Record-Keeping and Inventory Tracking: Rigorous documentation and inventory tracking are required for all stored goods to ensure accountability and compliance with customs rules.
Personnel Security: This includes pre-employment verification, background checks, and an employee identification system. Companies must have procedures for issuing, removing, and changing access devices, as well as for handling terminated employees. Training on security awareness, cargo integrity, and internal conspiracies is also crucial.
Manifesting and Reconciliation: Procedures are in place to reconcile arriving and departing cargo against manifests, verifying accuracy of descriptions, weights, labels, and counts.
Conveyance Security: Processes for inspecting vehicles and containers for contraband, refusing non-compliant vehicles, and preventing unauthorized access to conveyances are essential.
Beyond FTZs and Bonded Warehouses, what other duty mitigation strategies are available to businesses in the U.S.?
In addition to FTZs and bonded warehouses, several other programs and strategies can help businesses eliminate, reduce, or recover import duties in the U.S.:
ATA Carnet: An international customs document for temporary, duty-free, and tax-free entry of goods (e.g., for exhibitions, professional equipment) for up to one year, eliminating the need for Temporary Importation Under Bond (TIB).
Tariff Engineering: Legally modifying a product (e.g., by adding a component) to change its Harmonized Tariff Schedule (HTS) classification, allowing it to fall under a lower duty rate.
Special Classification Provisions (Chapter 98 HTS): Utilizing specific HTS codes for goods in certain circumstances (e.g., donated goods, U.S. goods exported and returned) that may have significantly lower or no duties.
Country of Origin: Shifting production or components to a country with a more favorable duty rate, based on "substantial transformation" rules.
Free Trade Agreements (FTAs) and Trade Preference Programs: Leveraging FTAs (e.g., USMCA) or unilateral preference programs (e.g., African Growth and Opportunity Act) for duty-free or reduced duty entry of qualifying goods.
Miscellaneous Tariff Bills (MTBs): Temporary elimination or reduction of duties on specific products not available from U.S. producers.
De Minimis Shipments: Duty-free informal entries for goods valued at $800 or less, though eligibility is changing.
China Exclusions (Section 301 Tariffs): Applying for or utilizing existing exclusions from the additional duties imposed on certain products from China.
First Sale Rule: Assessing duties on the lower price a middleman pays to the manufacturer, rather than the price the importer pays to the middleman, under specific conditions.
Product Valuation Adjustments: Excluding certain costs (e.g., buying commissions, shipping charges, inspection fees) from the declared value of imported goods to reduce the dutiable amount.
Duty Drawback: Requesting a refund of up to 99% of duties paid on imported merchandise if it is later exported or destroyed.
Post-Summary Corrections & Protests: Securing refunds for duty overpayments by correcting entry information before liquidation (post-summary correction) or after (protest).
Reconciliation: Flagging estimated elements on entry summaries and providing corrected information later to potentially obtain refunds for overpaid duties due to preferred classification, lower dutiable value, or FTA eligibility.
Transfer Pricing Adjustments: For multinational companies, downward adjustments in transfer pricing between related entities can lead to lowered import values and duty refunds.
