Blog Warehouse What is a bonded warehouse? And how they work
22 February, 2024

What is a bonded warehouse? And how they work

A bonded warehouse is a secured area where imported goods can be stored for up to five years without paying any duties, taxes, or other fees. They are managed by either the state or a private enterprise.

We all know the feeling of eagerly tracking a package, watching as it leaves its origin country and then lands in the United States to await processing. Now imagine if a business had to do that for every single order they received. It would make for a challenging inventory management process, with a lot of waiting, a lot of procedures, and a lot of duty and other fees paid. That’s where a bonded warehouse comes in. 

So, what is a bonded warehouse? A bonded warehouse is where imported goods are stored before being shipped to their final destination or consumed. They’re a popular choice among e-commerce and other import businesses, as they allow the deferment of duty payment for up to five years while the item is in the facility. 

In this post, we’ll explain how bonded warehouses work and how they can benefit small businesses so you can decide if they’re right for you.

What are customs bonded warehouses?

A customs bonded, or bonded, warehouse, is a secured building where imported goods are stored before being shipped to their final destination, consumed, or destroyed. The goods stored in customs bonded warehouses are imported goods that require the importer to pay a duty. However, the goods can be stored in the customs bonded warehouse for up to five years without duty, taxes, or other fees. 

Either a government or private enterprise can run custom bonded warehouses. When the goods arrive at the warehouse, they become the warehouse management’s responsibility under a liability bond. The liability only ends when the goods are exported, used, destroyed, or brought into the country for consumption after the duty is paid. 

What are bonded goods?

Bonded goods are goods that have been imported into the country and are being held in a customs bonded warehouse until duty and other fees have been paid. This can include both finished goods as well as materials for manufacturing. 

Finished bondable goods include retail inventory such as:

  • Alcohol
  • Tobacco products
  • Gourmet chocolate
  • Cosmetics
  • Antiques
  • Coffee
  • Luxury clothing
  • Electronics

Bonded warehouse vs. 3PL

An alternative to a bonded warehouse is a 3PL. A 3PL, or a third-party logistics provider, provides a wide range of e-commerce fulfillment services, such as transportation, distribution, sourcing, and supply chain management. For this reason, some organizations may prefer the more robust service offerings of a 3PL.

Bonded warehouse vs. non-bonded warehouse

When goods are stored in a non-bonded warehouse, all duties and fees must be paid immediately rather than deferred for up to five years. Using a bonded warehouse can help sellers save money on duties, as they can store items until they are sold, only paying duties as needed rather than all at once.

How does bonded warehousing work?

To run a bonded warehouse, certain approvals must be obtained by the local customs authorities. For example, if a private company decided to start its own bonded warehouse to streamline international shipping, it would need to first find a warehouse location and get approval from its local customs authority before shipping and storing goods. 

Managing any warehouse can be difficult, particularly a bonded warehouse that also deals with customs and duties. It’s important to understand the specifics of the type of bonded warehouse, such as the application and storage requirements, and have a warehouse management system in place to ensure all processes run smoothly. 

Here is an overview of how bonded warehousing works.

1. Apply for and acquire the bond

To acquire the bond and operate a bonded warehouse, submit an application to the local Customs and Border Protection (CBP) port director. The application must detail the premises, its location, and the class of warehouse. 

The application must also describe:

  • Intended use: Identify what the warehouse will be used for specifically, such as solely storage or processing merchandise.
  • Public or private access: Include information about whether the warehouse will be used for its own storage purposes or if it will be used publicly.
  • Types of goods on premises: For private bonded warehouses, the application must detail what goods will be stored there and the estimated amount of duties and other fees.
  • Liability: The application should also include insurance information, a fire safety certificate, and blueprints detailing the space.

2. Import goods

Once the application is approved, the warehouse proprietor can begin goods procurement and import merchandise to their warehouse, which can take anywhere from 24 hours to weeks or even months.

3. Store and control goods

Once the goods have arrived, they are then stored in the warehouse. This includes organizing and storing them appropriately, depending on the type of goods. Bonded warehouses may also process some goods under the supervision of the customs authorities if the items require processing or manufacturing.

4. Fulfill and ship orders

For bonded warehouses whose main purpose is to fulfill e-commerce orders, their biggest responsibility will be organizing and shipping orders. If the warehouse is also a fulfillment center, staff will pick, pack, and ship orders to their next destination, ensuring the order reaches the end recipient.

5. Pay import duties and taxes

Once orders are set to ship, duties and other fees must be paid in order for the goods to leave the bonded warehouse. Depending on the type of bonded warehouse, either the warehouse proprietor or the importer is responsible for ensuring that the fees are paid for all goods leaving the warehouse. 

graphic showing the benefits of bonded warehouses

Benefits of bonded warehouses

Bonded warehouses have many benefits. They’re an affordable and secure way to ship and store goods internationally while also offering the benefit of in-house fulfillment, restricted goods flexibility, and long-term storage.

Payment control

The ability to defer duty and other fee payments until the items leave the warehouse is a major advantage of bonded warehouses. Proprietors can choose to hold items for longer until they are able to pay the fees. This enables businesses to order items in large quantities without paying duties on them until they sell and leave the warehouse.

Cost savings

Because bonded warehouses allow payment control, they can also provide overall cost savings. Rather than consistently paying duties, taxes, and other fees on imported items, storing them in a bonded warehouse means that the fees are only paid when goods are removed from the warehouse. In e-commerce, this means that the fees are only paid when the item actually sells and ships out, improving overall cash flow.

In-house fulfillment

Many bonded warehouses will fulfill orders in-house, meaning they handle importing, storing, picking, packaging, and then shipping items to their final destination. This all-inclusive service is a major advantage of bonded warehouses.

Long-term storage

In the United States, imported items can be stored in a bonded warehouse for up to five years without paying any duty or other fees, making bonded warehouses a great option for long-term storage. This is especially useful for high-value but slow-moving merchandise.

Restricted goods flexibility

Restricted products such as alcohol and other consumables like dairy and meat can be complicated to import. They require extra paperwork and special authorization from the appropriate government department. A bonded warehouse acts as an intermediary, allowing extra time to acquire the mandatory paperwork.

International shipping

Using a bonded warehouse makes international shipping easy. Because bonded warehouses usually include order fulfillment, everything is handled in one place. The ability to defer duty payments for up to five years also simplifies international shipping and storage.

24/7 access

Bonded warehouses provide 24/7 access to stored goods, allowing the importer to organize and ship goods around the clock.

Increased security

Bonded warehouses are monitored by customs officials for increased security. Officials will regularly inspect goods, ensuring products stay properly stored and secured. Bonded warehouses are required to have 24/7 security on the premises and will also likely have security systems in place, such as cameras and barcode systems, for safe storage.

Graphic showing the 11 types of bonded warehouses

Bonded warehouses: 11 types and classes

There are many types of bonded warehouses, depending on specific storage needs. One of the biggest variances is public versus private bonded warehouses, but there are also differences depending on the types of stored goods and storage duration. Here are 11 types of bonded warehouses:

  1. Temporary storage premises (RTO): Temporary storage premises are used in the EU and U.K. to temporarily store imported goods before they go through customs or are re-exported. 
  2. Free warehouse: A free warehouse is a public bonded warehouse where anyone can store imported goods. 
  3. Bonded logistics parks: Similar to bonded warehouses, goods are brought into logistics parks and can be stored without paying duty or other fees. A bonded logistics park is larger and covers a specific area, such as a port. 
  4. Aircraft and ship stores: Aircraft and ship stores are where dutiable goods are purchased and stored onboard an aircraft or ship.
  5. Bonded bins: Bonded bins are the areas of a bonded warehouse that are used specifically for storing grains. 
  6. General Order (GO) warehouses: A GO warehouse is a bonded warehouse where imported goods are held temporarily without paying duty. They will then either be shipped to their final destination or moved to a bonded warehouse for up to five years. 
  7. Modification warehouses: These warehouses will modify imported goods, not including manufacturing processes. 
  8. Type B customs warehouse: A type B customs warehouse is a publicly bonded warehouse where the proprietor may allow anyone to store goods. 
  9. Type C customs warehouse: This type of bonded warehouse is private, where only the operator may store goods and is responsible for all duties and fees. 
  10. Type D customs warehouse: A type D warehouse is a privately bonded warehouse where the proprietor will have access to their goods even without a customs authority present. 
  11. Type E customs warehouse: A type E customs warehouse is when an applicant is approved to store imported goods, but not necessarily in a specific location. 


Optimize goods and storage management with Cin7

So, what is a bonded warehouse? It’s an ideal solution for shipping and storing goods internationally. Once the application is approved, importers can begin to receive, store, and ship goods easily. 

Looking for a way to manage your third-party logistics better? Get real-time information for all of your inventory needs with Cin7.


What is the purpose of a bonded warehouse?

Bonded warehouses are secure areas used to store imported items without paying duty or other taxes and fees. Items can be stored in a bonded warehouse for up to five years without paying duty.

What is the difference between a bonded warehouse and a non-bonded warehouse?

Goods imported to a non-bonded warehouse must have their duty, taxes, and other fees paid immediately. But with a bonded warehouse, the duty is waived for up to five years or until the item is moved, destroyed, or consumed.

What is the difference between a bonded warehouse and a public warehouse?

Bonded warehouses can be used privately or by the public. Anyone can store goods in a public bonded warehouse without paying duties. Non-bonded public warehouses allow anyone to store goods, but require that duty and other fees be paid before storing.

What are the benefits of a bonded warehouse?

Bonded warehouses can minimize the costs associated with paying duties and other fees in bulk. They’re also a great solution for long-term storage and provide flexibility when shipping restricted goods.

What are the disadvantages of a bonded warehouse?

One of the biggest disadvantages of a bonded warehouse is the costs associated with managing it. From upkeep to security, the costs of running a bonded warehouse can be quite high. Additionally, using one for storing and shipping goods is often associated with a lower level of service than some other storage options, such as a 3PL.

Who operates bonded warehouses?

Bonded warehouses are operated either by the state or a private enterprise.

How do I get my warehouse bonded?

In order to get a warehouse bonded, you must submit an application to your local CBP port director, including details about the warehouse, the goods, and proof of insurance. 

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