Bonded warehouse
Encyclopedia
A Bonded warehouse is a building or other secured area in which dutiable goods may be stored, manipulated, or undergo manufacturing operations without payment of duty
. It may be managed by the state
or by private enterprise. In the latter case a customs
bond
must be posted with the government. This system exists in all developed countries of the world.
Upon entry of goods into the warehouse, the importer and warehouse proprietor incur liability under a bond. This liability is generally cancelled when the goods are:
While the goods are in the bonded warehouse, they may, under supervision by the customs authority, be manipulated by cleaning, sorting, repacking, or otherwise changing their condition by processes that do not amount to manufacturing. After manipulation, and within the warehousing period, the goods may be exported without the payment of duty, or they may be withdrawn for consumption upon payment of duty at the rate applicable to the goods in their manipulated condition at the time of withdrawal. In the United States, goods may remain in the bonded warehouse up to five years from the date of importation. Bonded warehouses provide specialized storage services such as deep freeze or bulk liquid storage, commodity
processing, and coordination with transportation, and are an integral part of the global supply chain
.
the payment of duties on imported goods
had to be made at the time of importation, or a bond
with security for future payment given to the revenue authorities. The inconveniences of this system were many:
To obviate these difficulties and to put a check upon frauds on the revenue, Sir Robert Walpole
proposed in his "excise scheme" of 1733, the system of warehousing for tobacco
and wine
. The proposal was unpopular, and it was not till 1803 that the system was actually adopted. By an act of that year imported goods were to be placed in warehouses approved by the customs authorities, and importers were to give bonds for payment of duties when the goods were removed.
The Customs Consolidation Act 1853 dispensed with the giving of bonds, and laid down various provisions for securing the payment of customs duties on goods warehoused. These provisions are contained in the Customs Consolidation Act 1876, and the amending statutes, the Customs and Inland Revenue Act 1880, and the Revenue Act
1883. The warehouses are known as "king's warehouses," and by s. 284 of the act of 1876 are defined as "any place provided by the crown or approved by the commissioners of customs, for the deposit of goods for security thereof, and the duties due thereon."
By s. 12 of the same act the treasury may appoint warehousing ports or places, and the commissioners of customs may from time to time approve and appoint warehouses in such ports or places where goods may be warehoused or kept, and fix the amount of rent payable in respect of the goods. The proprietor or occupier of every warehouse so approved (except existing warehouses of special security in respect of which security by bond has hitherto been dispensed with), or some one on his behalf, must, before any goods be warehoused therein, give security by bond, or such other security as the commissioners may approve of, for the payment of the full duties chargeable on any goods warehoused therein, or for the due exportation thereof (s. 13).
All goods deposited in a warehouse, without payment of duty on the first importation, upon
being entered for home consumption, are chargeable with existing duties on like goods under any customs acts in force at the time of passing such entry (s. 19). The act also prescribes various rules for the unshipping, landing, examination, warehousing and custody of goods, and the penalties on breach. The system of warehousing has proved of great advantage both to importers and purchasers, as the payment of duty is deferred
until the goods are required, while the title-deeds, or warrants, are transferable by endorsement.
While the goods are in the warehouse ("in bond") the owner may subject them to various processes necessary to fit them for the market, such as the repacking and mixing of tea, the racking, vatting, mixing and bottling of wines and spirits, the roasting of coffee, the manufacture of certain kinds of tobacco, &c., and certain specific allowances are made in respect of waste arising from such processes or from leakage, evaporation and the like.
Duty
Duty is a term that conveys a sense of moral commitment to someone or something. The moral commitment is the sort that results in action and it is not a matter of passive feeling or mere recognition...
. It may be managed by the state
Government
Government refers to the legislators, administrators, and arbitrators in the administrative bureaucracy who control a state at a given time, and to the system of government by which they are organized...
or by private enterprise. In the latter case a customs
Customs
Customs is an authority or agency in a country responsible for collecting and safeguarding customs duties and for controlling the flow of goods including animals, transports, personal effects and hazardous items in and out of a country...
bond
Bond (finance)
In finance, a bond is a debt security, in which the authorized issuer owes the holders a debt and, depending on the terms of the bond, is obliged to pay interest to use and/or to repay the principal at a later date, termed maturity...
must be posted with the government. This system exists in all developed countries of the world.
Upon entry of goods into the warehouse, the importer and warehouse proprietor incur liability under a bond. This liability is generally cancelled when the goods are:
- Exported; or deemed exported;
- Withdrawn for supplies to a vessel or aircraft in international traffic;
- Destroyed under Customs supervision; or
- Withdrawn for consumption domestically after payment of duty.
While the goods are in the bonded warehouse, they may, under supervision by the customs authority, be manipulated by cleaning, sorting, repacking, or otherwise changing their condition by processes that do not amount to manufacturing. After manipulation, and within the warehousing period, the goods may be exported without the payment of duty, or they may be withdrawn for consumption upon payment of duty at the rate applicable to the goods in their manipulated condition at the time of withdrawal. In the United States, goods may remain in the bonded warehouse up to five years from the date of importation. Bonded warehouses provide specialized storage services such as deep freeze or bulk liquid storage, commodity
Commodity
In economics, a commodity is the generic term for any marketable item produced to satisfy wants or needs. Economic commodities comprise goods and services....
processing, and coordination with transportation, and are an integral part of the global supply chain
Supply chain
A supply chain is a system of organizations, people, technology, activities, information and resources involved in moving a product or service from supplier to customer. Supply chain activities transform natural resources, raw materials and components into a finished product that is delivered to...
.
History
Previous to the establishment of bonded warehouses in EnglandEngland
England is a country that is part of the United Kingdom. It shares land borders with Scotland to the north and Wales to the west; the Irish Sea is to the north west, the Celtic Sea to the south west, with the North Sea to the east and the English Channel to the south separating it from continental...
the payment of duties on imported goods
Import
The term import is derived from the conceptual meaning as to bring in the goods and services into the port of a country. The buyer of such goods and services is referred to an "importer" who is based in the country of import whereas the overseas based seller is referred to as an "exporter". Thus...
had to be made at the time of importation, or a bond
Bond (finance)
In finance, a bond is a debt security, in which the authorized issuer owes the holders a debt and, depending on the terms of the bond, is obliged to pay interest to use and/or to repay the principal at a later date, termed maturity...
with security for future payment given to the revenue authorities. The inconveniences of this system were many:
- it was not always possible for the importer to find sureties, and he had often to make an immediate sale of the goods, in order to raise the dutyDuty (economics)In economics, a duty is a kind of tax, often associated with customs, a payment due to the revenue of a state, levied by force of law. It is a tax on certain items purchased abroad...
, frequently selling when the market was depressed and prices low; - the duty, having to be paid in a lump sum, raised the price of the goods by the amount of the interest on the capital required to pay the duty;
- competition was stifled from the fact that large capital was required for the importation of the more heavily taxed articles;
To obviate these difficulties and to put a check upon frauds on the revenue, Sir Robert Walpole
Robert Walpole
Robert Walpole, 1st Earl of Orford, KG, KB, PC , known before 1742 as Sir Robert Walpole, was a British statesman who is generally regarded as having been the first Prime Minister of Great Britain....
proposed in his "excise scheme" of 1733, the system of warehousing for tobacco
Tobacco
Tobacco is an agricultural product processed from the leaves of plants in the genus Nicotiana. It can be consumed, used as a pesticide and, in the form of nicotine tartrate, used in some medicines...
and wine
Wine
Wine is an alcoholic beverage, made of fermented fruit juice, usually from grapes. The natural chemical balance of grapes lets them ferment without the addition of sugars, acids, enzymes, or other nutrients. Grape wine is produced by fermenting crushed grapes using various types of yeast. Yeast...
. The proposal was unpopular, and it was not till 1803 that the system was actually adopted. By an act of that year imported goods were to be placed in warehouses approved by the customs authorities, and importers were to give bonds for payment of duties when the goods were removed.
The Customs Consolidation Act 1853 dispensed with the giving of bonds, and laid down various provisions for securing the payment of customs duties on goods warehoused. These provisions are contained in the Customs Consolidation Act 1876, and the amending statutes, the Customs and Inland Revenue Act 1880, and the Revenue Act
Revenue Act
-British Empire:*Revenue Act of 1764, popularly known as the Sugar Act*Revenue Act of 1766*Revenue Act of 1767 , one of the Townshend Acts-United States:* Revenue Act of 1861* Revenue Act of 1862...
1883. The warehouses are known as "king's warehouses," and by s. 284 of the act of 1876 are defined as "any place provided by the crown or approved by the commissioners of customs, for the deposit of goods for security thereof, and the duties due thereon."
By s. 12 of the same act the treasury may appoint warehousing ports or places, and the commissioners of customs may from time to time approve and appoint warehouses in such ports or places where goods may be warehoused or kept, and fix the amount of rent payable in respect of the goods. The proprietor or occupier of every warehouse so approved (except existing warehouses of special security in respect of which security by bond has hitherto been dispensed with), or some one on his behalf, must, before any goods be warehoused therein, give security by bond, or such other security as the commissioners may approve of, for the payment of the full duties chargeable on any goods warehoused therein, or for the due exportation thereof (s. 13).
All goods deposited in a warehouse, without payment of duty on the first importation, upon
being entered for home consumption, are chargeable with existing duties on like goods under any customs acts in force at the time of passing such entry (s. 19). The act also prescribes various rules for the unshipping, landing, examination, warehousing and custody of goods, and the penalties on breach. The system of warehousing has proved of great advantage both to importers and purchasers, as the payment of duty is deferred
until the goods are required, while the title-deeds, or warrants, are transferable by endorsement.
While the goods are in the warehouse ("in bond") the owner may subject them to various processes necessary to fit them for the market, such as the repacking and mixing of tea, the racking, vatting, mixing and bottling of wines and spirits, the roasting of coffee, the manufacture of certain kinds of tobacco, &c., and certain specific allowances are made in respect of waste arising from such processes or from leakage, evaporation and the like.
See also
- Government warehouse
- Customs valuationCustoms valuationCustoms Valuation is the process where customs authorities assign a monetary value to a good or service for the purposes of import or export. Generally, authorities engage in this process as a means of protecting tariff concessions, collecting revenue for the governing authority, implementing...
- LogisticsLogisticsLogistics is the management of the flow of goods between the point of origin and the point of destination in order to meet the requirements of customers or corporations. Logistics involves the integration of information, transportation, inventory, warehousing, material handling, and packaging, and...
- ImportImportThe term import is derived from the conceptual meaning as to bring in the goods and services into the port of a country. The buyer of such goods and services is referred to an "importer" who is based in the country of import whereas the overseas based seller is referred to as an "exporter". Thus...
- ExportExportThe term export is derived from the conceptual meaning as to ship the goods and services out of the port of a country. The seller of such goods and services is referred to as an "exporter" who is based in the country of export whereas the overseas based buyer is referred to as an "importer"...