European Logistics & Distribution
Bonded Warehousing

Only applicable to type C-bac, D, & E, not to C-sum & C-spec

When goods are shipped to the European Union (EU) they normally need to be customs cleared.  This results in paying import duties and VAT.  It is possible to store the goods in a bonded warehouse for an unlimited period.  During this period no duties and VAT are due.  Duties and VAT need to be paid when the goods are sold to the EU client.  In case the client is located in a non-EU country the goods can be kept in transit.  This means that the goods are transported in bond from the bonded warehouse whereas only the duties and VAT are paid in the country of destination.

Below is a matrix that shows the procedure in case of a bonded warehouse with monthly consolidated clearance.

1. Goods arrive at the port or the airport.
2. Goods are transferred to the EDC in bond.
3. Goods are kept in the EDC under bond.  During the time the goods stay in the bonded warehouse no duties or VAT need to be paid.  On January 1, the inventory is 100.
4. During the month of January, three shipments are shipped out.  Two shipments destined EU (U.K., France) and one destined Non-EU (Norway).  Shipments can be picked, packed and shipped without customs interference.
5. In the first week of the next month (February 3-10) all the shipments of January are customs cleared at once.  The clearance will be carried out via EDI or diskette.  The logistics service provider will act as fiscal representative.  At the time of customs clearance the logistics service provider pays the duties.
6. The shipment to Norway is kept in transit.
7. Duties need to be paid for the UK and France shipments.
8. Depending on the payment terms with the logistics service provider the duties need to be paid between February 10 and March 10.

The majority of the bonded warehouses are administratively controlled.  This means that because of the intensive administrative control the number of physical checks is reduced dramatically.  Customs clearance takes place in the first week of the next month so if orders are sent to the logistics service provider the goods can be picked, packed and shipped without customs interference.  Since a logistics service provider does not need to obtain permission from customs to ship out goods, it is possible to operate the European Distribution Center 24 hours a day, 7 days a week and 365 days a year.

This flexibility is allowed by customs but the requirements with regard to the administrative system of the logistics service provider are very tight.  Many details need to be registered such as:  value, tariff code, weight and origin.  The customs clearance can be carried out via EDI or via a diskette.  Supplying customs with information this way allows customs to do more detailed checks on the clearances as well as the mutations of the inventory.  Physical checks are carried out at random and basically each logistics service provider is checked extensively once every three years.  It is possible for foreign companies to apply for a bonded warehouse but in practice many companies outsource their bonded warehouse to a logistics service provider.

If the bonded warehouse is combined with a license "Inward processing" it is possible to execute value added activities like assembly, configuration, localizing.  Strict rules and regulations are applicable which are too detailed to discuss in this fact sheet.

Benefits of Bonded Warehousing:

• Unlimited storage period
• No duty/VAT for goods stored in the bonded warehouse
• Duty payment when the goods are sold
• Goods to Non-EU destinations are kept in transit (no double duties)
• Interest savings on duty payments (cash flow advantage)
• No import duty risks on obsolete stock
• Less customs interference