(a) What is a bonded warehouse? (b)State four ways in which a bonded warehouse may be useful in international trade.

Answer Details

(a) What is a bonded warehouse?

A bonded warehouse is a special warehouse, licensed and controlled by the customs authorities, in which imported goods that are liable to import duty are stored under bond until the duty on them is paid or the goods are re-exported. The owner cannot remove the goods until he has settled the duty, and the warehouse is kept under customs supervision.

(b) Four ways a bonded warehouse is useful in international trade

• Deferment of duty: the importer can store goods and pay import duty only when he removes them for sale, so he does not tie up all his money in duty at once.
• Re-export without paying duty: goods meant for re-export (entrepot trade) can be kept and shipped out again without duty being paid, encouraging international trade.
• Safe storage and gradual clearing: it provides secure storage so the importer can clear and sell the goods gradually as he finds buyers or funds.
• Permitted operations on the goods: certain acts such as grading, blending, packing, bottling or labelling may be carried out on the goods in bond before duty is paid.

(It also helps government to collect the correct duty and to control smuggling.)