What Is Bonded Zone – The Complete Guide

In this comprehensive guide, you will find all the information you need about bonded zones.

Whether you are interested in learning about bonded zones in China, their benefits, or their limitations, you will find all the relevant information right here.

So, keep reading to gain a deeper understanding of bonded zones and their significance.

Meaning Of Bonded Zone

Shipping container in bonded zone

A bonded zone refers to a domestic area with specified boundaries and special trade terms or policies.

For example, goods imported into the country can enter the bonded zone and be exempted from paying duties while remaining in bonded status.

Foreign cargo arriving in the zone can undergo various processes such as storage, processing, development, reworking, mixing, categorization, and re-exportation without customs procedures or duty payments.

Trade and manufacturing activities conducted within the bonded zone are exempted from sales taxes and value-added taxes.

This is made possible through the establishment of bonded warehouses and Free Trade Zones, which facilitate companies’ access to different markets.

Free Trade Zones have been introduced in various cities worldwide, and it is within these zones that bonded warehouses are situated.

Custom Bonded Warehouse Vs Free Trade Warehouse

Custom bonded warehouses were first introduced in the 1800s and are used to store imported goods, which are exempted from duty payment for up to 5 years from the day of importation. The primary purpose of bonded warehouses is to support the competitiveness of small to medium-sized export producers by exempting them from taxes and duties.

Benefits of customs bonded warehouses include:

1. Onsite storage of cargo.
2. Easy movement of goods between other bonded warehouses.
3. Deferred payment of duty and taxes, providing importers greater control over their finances.
4. Timely delivery for manufacturing and general trade.
5. Minimal cash tied up in taxes and duties.
6. Guaranteed safety of goods.
7. Facilitation of international trade transactions.
8. Proximity to major ports or airports, reducing costs.

On the other hand, free trade warehouses offer fewer restrictions than customs bonded warehouses. Non-restricted cargo can be admitted, and goods can be destroyed, manufactured, or manipulated without time limitations from the day of importation.

Benefits of storing goods in a free trade warehouse include:

1. Goods avoid official customs procedures when first stored in the warehouse.
2. Payment of duty can be delayed, reduced, or eliminated.
3. Less strict rules and regulations compared to bonded warehouses.
4. The ability to perform a wider range of activities, including manufacturing and destruction, without limitations found in bonded warehouses.

Bonded Zones In China

Bonded zones

China has had bonded zones since 1990, and currently, there are six customs supervision areas, which include Free Trade Areas, Bonded ports, export processing zones, comprehensive bonded zones, and bonded logistics parks.

Presently, there are at least 11 Free Trade Zones (FTZ) in China, each focusing on a specific industry, offering corresponding incentives to attract foreign investment.

Some of the cities with Free Trade Zones in China are Shanghai, Shaanxi, Guangdong, Zhejiang, Tianjin, Hubei, Hainan, Fujian, Sichuan, Liaoning, and Chongqing. The larger Free Trade Zone areas are located in prominent cities such as Shanghai, Shenzhen, Chongqing, Guangzhou, and Tianjin.

Reasons Why Bonded Warehouse Is Right For Your Business

Bonded warehouses have proven to benefit not only importers, but businesses as well.

If you are unsure whether bonded warehousing is suitable for your business, here are some compelling reasons to consider it:

1. Zero import duty when exporting goods: Storing your cargo in a bonded warehouse can save you time and money when exporting goods. If you are importing goods to later export to non-EU countries, this becomes particularly advantageous as it helps avoid paying duty twice, resulting in savings of around 25-30%.
2. Improved cash flow: By deferring the payment of duty until your cargo is purchased, your business’s cash flow can significantly benefit. Storing goods in a bonded warehouse means that import duty will generally be applicable once the goods enter the market. This avoids upfront tax payments, allowing you to avoid spending money on duties before the goods are sold and generating revenue to cover the costs.
3. Port-centric Logistics: Bonded warehouses are often strategically located in close proximity to ports and airports. Storing your cargo at the port of entry until it is ready for distribution brings several advantages. It reduces costs by minimizing lead times and the likelihood of damage during transportation. Additionally, it results in savings on transportation costs and contributes to lower carbon emissions.

By considering these factors, bonded warehousing can offer significant benefits to both importers and businesses, making it a valuable option to explore for optimizing operations and cost-saving measures.

Disadvantages Of Bonded Warehouse