Bonded Warehouse

• 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

1. Goods will be bounded in the warehouse until the duty is paid.
2. Goods can be re-exported when still in the warehouse.
3. Storage costs are charged on all the goods stored in the warehouse.
4. Goods can still be sold when they are under bond.
5. 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 by 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.