Customs Warehouse in the Global Supply Chain

The Customs Warehouse: Smoothing the Global Supply Chain

Customs warehouses provide valuable services to companies managing global supply chains, adding flexibility and capacity and they can help ensure compliance with complex and ever-changing import and export regulations.

The U.N. Trade Statistics website defines customs warehousing as “the customs procedure under which imported goods are stored under customs control in a designated place (a customs warehouse) without payment of import duties and taxes.” In a customs warehouse, your product can be further processed as long as it doesn’t affect the nature of the goods. For example:

“Warehoused goods…[are] allowed to undergo usual forms of handling to improve their packaging or marketable quality or to prepare them for shipment, such as breaking bulk, grouping of packages, sorting and grading and repacking.”  (U.N. Trade Statistics)

Why Use a Customs Warehouse?

Customs warehouses enable companies to store imported goods under customs control without payment of import duties and taxes. Goods that are once imported and then exported can also be stored in the warehouse. Your goods may have gone through another customs procedure in another port, and when they are stored in the warehouse it is still up to the local customs authorities to give you clearance before you can take them out of the facility. There are certain import duties and taxes that may have to be paid locally.

A customs warehouse allows you to sort and pack the goods in the way you like - breaking bulk and grouping packages, sorting, grading and repacking - no problem. Click To Tweet

Customs warehouses are also known as bonded warehouses. In the United States, you can store goods for up to 5 years in such facilities. These warehouses play a major role in global supply chain management. At customs warehouses, your cargo is allowed to undergo usual forms of handling. You can work on improving the packaging or prepare it for further shipment. Often, containers have goods that are not sorted. A customs warehouse allows you to sort and pack the goods in the way you like.  Breaking bulk and grouping packages, sorting, grading and repacking, can all can be taken care of at the customs warehouse.

Additional Warehousing Services

When you rent space, the warehouse will often provide additional resources and staff that can help you manage and process your goods. You can even process your cargo for further shipment, provided you don’t change the essential character of the goods.

Many companies offer a trucking service along with a warehousing service. To reduce transportation costs and for maximum convenience, the customs warehouse should be close to the port and with easy access to rail service, should you need it. If you are a startup and want to save on the cost of operations, you can simply outsource all the fulfillment work to the warehousing company. They have the trained staff that will prepare your cargo for onward delivery.

Most customs warehouses use inventory management software to help manage your inventory. You can share a list of your buyers and they will prepare the package according to your specifications.

Types of Customs Warehouses

There are basically five types of customs bonded warehouses:

Private Warehouse

This type of warehouse is owned and operated by a corporation that stores its imported or manufactured goods in it. Goods from the port are received here and then distributed, for example, to various stores in the retail chain.

Public Warehouse

This is where all can store their goods for import, export, manufacturing, and distribution. Businesses use these facilities to solve their short-term distribution needs. When there is no more space in a retailer’s warehouse the extra goods can be stored in a public warehouse.

Automated Warehouse

Due to advancements in computers and robotics, many warehouses have modernized. They use the latest technology to operate faster and more efficiently. The level of mechanization can range from a small conveyor belt that transports goods from one area to another to a fully automated warehouse. Automation reduces the cost of labor and the costs of operation. It also streamlines functions so the warehouse operates faster, smoother, and often with fewer errors.

Temperature -Controlled Warehouse

Many products require special handling; these include products such as computer equipment, sensitive electronics parts, frozen foods, produce and flowers. To keep these goods in their ideal state, make sure your warehouse provides air conditioned and humidity-controlled space within your specifications.

Distribution Center

This type of warehouse helps distribution companies that receive products from various suppliers and then ship them to their customers. The emphasis here is not on storage but on regrouping and movement. Shipments coming into the distribution center can be broken down, aggregated, or resorted, ready for shipment to stores or customers.

Selecting a Customs Warehouse

It pays to do your due diligence when choosing a warehouse. Careful selection will more likely lead to a long and mutually beneficial partnership. Here are the four most important factors to consider.

Security

When selecting a customs warehouse, check the security precautions that are in place. All warehousing space should be monitored by security cameras to reduce the risk of pilferage. There should be strict access control so that no unauthorized people can enter the warehouse area.

Storage Conditions

Be sure that the warehouse you choose provides the proper conditions and has experience in storing and handling your type of product. For example, if you need to store perishables, you need adequately chilled space, to protect your product and maintain its quality before it reaches the end buyer.

Size, Location, Equipment

The warehouse you select should be conveniently located near a port to reduce transportation costs to the facility. It should have plenty of availability in storage areas in the size you need. It should also have associated resources to operate and manage the facility. In particular, consider their ability and history of handling your type of products. Make sure that they will be able to process and move your product in a timely fashion. Their ability to meet your needs promptly will depend on factors such as: material handling equipment (e.g. forklifts), their manpower, and the warehouse management software they use.

Discounts and Extras

Before you sign, find out about any discounts or additional services that are included. If you contract for one year you can often negotiate a discounted rate. A longer term contract can be helpful in other ways, as you can build a better understanding and relationship.

If the warehouse company also has a fleet of trucks, you can always use their logistics services to eliminate business risk. They will take full responsibility for your goods while in their care, and they are liable to pay you for damages to goods while in their custody. (But, as always, do your due diligence and check your contract!)

Being too cost-conscious in choosing a customs warehouse can be expensive! - Ryan Brandon Click To Tweet

Be aware that focusing on costs upfront can be expensive in the long run. Some companies try to save on costs by hiring smaller trucking companies and storing goods in an uninsured warehouse. That may work out, but it can be extremely risk.

Less experienced companies may use incorrect customs classification, wrong customs tariff number and incorrect certificates of origin, which can result in high tariffs and fines. A multi-country customs management software solution helps with customs compliance and security regulations globally. By dealing with a larger more experienced warehousing company, importers and exporters can remain compliant even when requirements change.

Partnering with a Customs Warehouse

There are many reasons to consider using a customs warehouse, but some of the biggest benefits are:

  • Reduce storage costs
  • Reduce operational expense
  • Store goods for a long-term
  • Store restricted goods
  • Save on customs duty

In short, there is a customs warehouse to suit almost every type of business, and it can help smooth the flow of goods through your global supply chain, provide additional services, and reduce costs. It’s an option well worth considering.


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Ryan Brandon

Ryan has been embedded in the transportation and warehousing industries in Michigan for many years. He is in his element discussing supply chain and milling around trucks and 18 wheelers.

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