In a bonded warehouse, customs duty and VAT are not paid until the goods are withdrawn. While in the warehouse the goods are not treated as being in free circulation; the duty liability arises when the import declaration is filed.
This is not an exemption but a deferral: the duty does not disappear, the moment of payment is pushed back until the goods are sold or enter production.
The effect on working capital
When duty is paid up front, that money stays outside the business until the goods are sold. On a consignment that waits three months, that means three months of financing cost.
A bonded warehouse removes that burden. What you pay in return is the storage charge; the decision is made by comparing those two figures.
How to do the arithmetic
A simple comparison is enough:
- Deferred duty amount × expected waiting period × cost of financing
- Against: storage + handling + paperwork charges
- If the first is larger, the warehouse produces a net gain
For products with a heavy duty burden, such as high-tonnage steel, the first figure usually exceeds the second comfortably. For low-value, fast-moving goods the gap closes.
Combined with partial withdrawal
Deferral is powerful on its own; combined with partial withdrawal it becomes stronger still. You pay duty only on the quantity you process that month.
Duty payment is thereby tied to the pace of sales — the most practical solution to the problem of financing stock.
Points to watch
- Deferral is not an exemption; the duty arises in full on withdrawal
- Exchange-rate risk stays with you during the waiting period
- The storage charge rises in direct proportion to the time
- A 30-day period starts to run once the declaration is registered