Bonded Warehouse - Meaning & Definition

Published by MBA Skool Team in Operations and Supply Chain Terms Last Updated: May 05, 2023Read time:

What is Bonded Warehouse?

A bonded warehouse is a secured building or area that is used to keep imported goods that are awaiting custom clearance. It is generally at a place near a port and is licensed to keep the imported goods until custom duty is paid and clearance is given to them. The bonded warehouses are now present in all developed countries and many developing countries.

There are following benefits of a bonded warehouse:

I. The goods kept in the warehouse are safe and hence importer gets the time to arrange for the customs duty meanwhile.

II. If the goods are not required immediately, they can be kept in bonded warehouse for some time.

III. The importers are allowed to mix, divide, re-label the goods inside the bonded warehouse, hence it allows to make the goods suitable for marketing.

IV. The goods meant for re-export can also be kept in a bonded warehouse without bearing much financial expenditure.

V. Goods kept in the bonded warehouse are accepted as a collateral security by the banks to disburse the loans.

VI. If the importer doesn’t have his own warehouse, he can transfer the title of goods to someone else while the goods still being in bonded warehouse and then buyer can pay the custom duties to get the goods.

When goods enter a bonded warehouse, the importer and the warehouse proprietor incur liability under the bond. This liability that arises when goods enter the warehouse is cancelled when:

• Goods are exported or deemed to be exported

• Goods are withdrawn to be supplied to a vessel or aircraft in international traffic

• Goods are destroyed under a customs supervision

• Goods are withdrawn for consumption within the domestic country after payment of duty

Types of bonded warehouses:

Depending upon the country or region, there are various options for storage of gods in a bonded warehouse. Some of these are-

i. Temporary storage premises- These are used for storing goods that enter the customs premises of the EU and await further approval

ii. Type B customs warehouse- These are public customs warehouse. The administrator has the right to make the warehouse available to anyone who wants to store the goods

iii. Type C customs warehouse- These are private customs warehouses. Only the administrator of the customs warehouse can store goods in such a warehouse. The warehouse keeper can store goods on behalf of others but he shall remain responsible for customs for the goods stored in such warehouses

iv. Type D and E customs warehouse- Only the administrator is allowed to store goods in such warehouses. These are strictly private warehouses

v. Free warehouse- it is a public bonded warehouse under the control of customs. Anyone can store goods in such warehouses

vi. Special economic zone- SEZ or a free zone is not a building but a location. It serves similar purposes as a free warehouse.


Hence, this concludes the definition of Bonded Warehouse along with its overview.

This article has been researched & authored by the Business Concepts Team which comprises of MBA students, management professionals, and industry experts. It has been reviewed & published by the MBA Skool Team. The content on MBA Skool has been created for educational & academic purpose only.

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