Comment: bonded warehouses a way around Brexit red tape, but do your sums

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Our exit from the European Union and the Covid pandemic have fuelled a surge in demand for warehouse space among retailers and logistics providers. More and more importers are considering bonded or customs warehousing as a solution to the extra duties and red tape thrown up by Brexit.

Bonded warehousing allows you to delay paying customs charges and VAT on goods imported from outside the EU until they are removed and sold. This offers significant cashflow benefits to businesses and owners who can avoid the double duty on goods that are imported into the UK and then exported to non-EU countries.

My word is my bond

But firms need to be sure they are working with warehousing and logistics partners who understand the rules and regulations governing these duty-free zones. And logistics firms expanding into bonded warehousing for the first time to meet growing demand need a clear understanding of their reporting and compliance obligations.

You have to fulfil certain requirements when applying to HMRC for a licence to operate a customs warehouse, such as having have an economic operators registration and identification (EORI) number. You’ll also need to have a good customs compliance record and demonstrate you have a real business need for your bonded warehouse.

Bear in mind that you will also have to provide a financial guarantee to cover potential import duty and VAT liabilities. It takes about eight weeks to process an application, so it’s advisable to plan well in advance.

Do your sums

It’s essential that you work out whether the amount of duty you are likely to save with a bonded warehouse justifies the investment in time and money. Also, ask yourself whether you have the necessary infrastructure to operate such a facility.

If you’re a logistics operator, you’ll need to satisfy potential clients that you have a robust IT system in place for tracking goods going in and out. This means being able to provide a clear audit trail to demonstrate your compliance with HMRC’s stringent reporting requirements.

Handle with care

Remember that goods stored in bonded warehouses are subject to strict rules and regular checks from customs officials. These govern what type of products can be stored and what you can and can’t do with them.

Bonded goods can only be handled in certain ways: to preserve them in storage, improve their presentation and to prepare them for distribution or resale.

Operating a customs warehouse certainly offers attractive benefits to both importers and the third-party logistics providers who operate them. But there are both costs and time-consuming reporting requirements that need to be considered before opening such a facility.

Ultimately, importers need to be confident that they are working with logistics partners who really understand the rules and regulations governing bonded warehouses.

This is a guest post by Arne Mielken, a leading global trade expert in the UK and the EU and founder of customs and training consultancy Customs Manager. Arne supports businesses to reach their international customers faster, by cutting costs, red tape and paperwork. He assists and trains companies to de-risk their supply chain and stay compliant, enabling them to grow globally.

For more information visit https://www.customsmanager.org