- It is a public warehouse that is used to store dutiable goods (refers to goods on which tax must be paid before they are released)
- The goods may be locally made or imported
- The tax charge on local made goods is called excise duty.
- The tax charged on locally made goods is called customs duty.
- If the goods are sold when there are still in warehouse the new owner of the goods pays both storage charges and the duty’s before clearing the goods from the warehouse.
- When an importer pays the duty to the customs officials, a release warrant document is issued.
- This document enables the trader to have his goods released from the warehouse.
Features of bonded warehouses
- Goods will be bounded in the warehouse until the duty is paid.
- Goods can be re-exported when still in the warehouse.
- Storage costs are charged on all the goods stored in the warehouse.
- Goods can still be sold when they are under bond.
- Goods are released only on production of a release warrant.
Advantages of bonded warehouses
- To trader/importer.
- The warehouse gives the importer time to raise money to pay the duties.
- The importer/trader can still sell the goods when they are in the warehouse therefore he is relieved from paying storage charges and duties.
- Some goods lose weight after sometime therefore the trader pays less duties if it is based on the weight of the goods.
- Goods can still be prepared when they are in the warehouse.
- To the government.
- It is a source of revenue to the government.
- The government is able to control entry of harmful products and illegal goods.
- It is able to check the quality and quantity of the goods imported.
- The government is able to verify documents for goods in transit.
- The government is able to inspect the nature of the goods imported.
Disadvantages of bonded warehouses
- Importers have to meet strict schedules or storage to avoid being fined the customs department
- Goods could be stolen/damaged while in bond.
- Failure to raise duty and storage charges can lead to goods being auctioned.
- Expensive compared to private and public warehouses.
- High charges.
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