What is Bonded Warehousing?
As the Brexit debate has highlighted, goods being imported into a country are frequently subject to taxes, often called ‘Tariffs’ or ‘Duty’. In normal practise, these taxes are immediately payable by the importer even if the goods have not yet been sold.
In addition, products such as alcohol and tobacco are subject to ‘Excise’ tax which is levied at the time of manufacture, rather than when they are sold.
In simple terms, Customs Duties are levied on goods that become taxable as they enter the border, while Excise Duties are levied on certain goods as they are produced on home soil.
So, how can businesses avoid or delay such taxes?
A ‘Bonded Warehouse’ or ‘Bond’ is a warehouse in which goods that would normally be subject to import or excise tariffs may be stored, manipulated or undergo further manufacturing, without the payment of duty. These taxes only become due once the products are distributed or sold.
If it is managed by a private company (like Johnston Logistics UK) it is variously referred to as a ‘Custom Bond’, a ‘Customs Bonded Warehouse’, ‘Customs & Excise Bonded Warehousing’ or simply ‘Bonded Warehousing’.
How Can Bonded Warehousing Help Your Business?
Being able to defer import and excise duty payments gives businesses the time and flexibility to store, repackage or plan the distribution of their goods, without incurring a tax bill.
Using a customs & excise bonded warehouse reduces the risk your business is exposed to. It allows businesses to import goods in high quantities and avoid paying a large tax bill until enough sales have been generated to cover the costs of duty and VAT.
When manufacturing alcohol, it allows wine, beer and spirits to be stored without being subject to a tax bill until they are distributed or sold.
Bonded warehousing can be of particular benefit if imported goods are themselves to be re-exported to a third country, as it avoids costly taxation whilst they are simply in transit. The tax is deferred and once they are exported the liability is cancelled.
If you know you can take advantage of storage without having to pay customs and excise duty straight away, your business may also be better placed to capitalise on fluctuations in exchange rates and other price-determining factors.
Perhaps the greatest benefit of customs & excise bonded warehousing is to cash flow, as it avoids having to pay out taxation costs until sales revenue is received or assured.
Other Benefits of Bonded Warehousing
- Long Term Storage
Goods may be stored in a UK bonded warehouses indefinitely. On some occasions, manipulation of the goods is required to satisfy import licensing requirements, so there may be a time limit.
- Improved Customer Service
Bonded warehousing is a significant advantage to end customers as it allows goods (such as wine and beer popular at Christmas) to be ordered and stored in advance of anticipated demand, ready to be dispatched when needed.
- Quality Preservation
Due to the nature of what is stored, bonded warehouse facilities such as our own are typically maintained at a higher standard to preserve the integrity of the goods. In particular, alcohol requires careful handling which a bonded warehouse like Johnston Logistics UK is more experienced in delivering.
- Safety and Security
Again, due to nature and value of the goods stored, bonded warehouses typically have higher levels of both security and safety to protect both the goods and those handling them. The HMRC approval process to establish a customs warehouse is subject to careful assessment and regular auditing to ensure standards are maintained.
- Proximity to Ports and Airports
As with Johnston Logistics UK, most bonded warehouses are situated close to major ports and airports to make it easier to receive (and export) goods. Situated on the A11, we are close to Felixstowe, Stansted and other hubs.
- Additional Logistics Services
As bonded warehousing is a specialism, operators can often provide a higher level of service. This is very true at Johnston Logistics UK, where we provide not only warehousing but full third-party logistics (3PL), contract packing, pick & pack and ecommerce fulfilment services.
The History and Types of Bonded Warehouse
Bonded warehouses began in Britain in 1803 with the adoption of a system first proposed by Prime Minister Robert Walpole in 1733.
Prior to this, duties were due on goods as soon as they entered Britain. To reduce fraud from undeclared imports and ease commerce, Walpole’s ‘Excise Scheme’ allowed tobacco and wine to be stored with taxes deferred they were sold. Legislation has subsequently evolved but remained true to the original spirit.
The status of bonded warehousing is applied to the warehouse operator, not the warehouse. It is therefore not possible to ‘buy’ a customs bonded warehouse which is why so many turn to providers like Johnston Logistics UK.
- Temporary Storage Premises
As the name suggests, a Temporary Storage Premises is used for the short-term storage of goods entering the EU whilst they await further customs-approved use or treatment.
- Type B Customs Warehouse
Here at Johnston Logistics UK, we provide Type B Customs Warehousing.
A Type B Customs Warehouse is a public customs warehouse, allowing the owner and operator to make it available to any businesses or importer with a need. In the UK, Type B Warehouses are licensed by HMRC to allow the operator to act as custodian to store goods until duty is paid by the importer or alcohol producer.
- Type C Customs Warehouse
A Type C Customs Warehouse is a private customs warehouse. Whilst goods belonging to third-parties can be stored within it, the owner/administer retains absolute responsibility.
- Type D and E Customs Warehouses
Type D and E Customs Warehouses are private customs warehouses, which means that only the administrator is allowed to store their own goods. They are typically operated by larger companies who import or manufacture high volumes of goods or alcohol.
- Free Warehouse
A Public Bonded Warehouse is a building operated and secured by official Customs staff themselves, in which anyone can store goods.
- Special Economic Zone or Free Zone
A Special Economic Zone is not a building but a geographic location, such as a port or airport, in which goods can be received and stored under bond.
What’s the Difference Between Wet Bonded Warehousing and Dry Bonded Warehousing?
There are two broad types of bonded warehouses, both of which need to be approved by HM Revenue & Customs:
- Wet Bonded Warehouses
As the name suggests, Wet Bonded Warehouses can store alcohol as well as tobacco and other excise goods.
Here at Johnston Logistics UK, we provide Wet Bonded Warehousing.
- Dry Bonded Warehouses
Dry Bonded Warehouses are more restrictive as they cannot store alcohol. As such, they are predominantly used for other imported goods subject to tariffs and VAT.
Customs Bonded Warehousing at Johnston Logistics UK
Here at Johnston Logistics, we provide type B, wet bonded, customs and excise bonded warehousing.
At our 640,000 square feet site, we process over 1,000,000 individual stock movements each year. We deliver warehousing, logistics and fulfilment services for businesses throughout the UK including leading supermarkets, high street brands and growing businesses.
As a HMRC customs and excise bonded warehouse, we receive imported goods from across the world and handle over 20,000 pallets of alcohol each year, including 50% of all Asda supermarkets’ wine.
If you need help receiving, storing and distributing imports and alcohol, please call on 01953 883381 or explore our services