Bonded warehouse: requirements, costs, and benefits in the UK

Bonded warehousing is a strategic choice for businesses or individuals who are looking for a cost-effective solution to store their goods closer to their customers and thus be able to respond to global demands more flexibly, without immediately incurring customs duty and taxes. In this article we will explore everything you need to know about customs bonded warehouses in the UK.

What is a bonded warehouse and what is it used for?

A bonded warehouse, commonly referred to as a customs warehouse or duty-free zone, is a warehouse where imported or exported goods are stored. It is managed by a private company in a foreign country under the supervision of the local customs agency. The advantage of having a bonded warehouse is that imported goods can be stored or manipulated without being subject to import duties and taxes until they are sold and go into free circulation, also meaning that deliveries to clients are much faster.

Moreover, bonded warehouses are also useful when goods reach the UK and: 

• Goods must be re-exported
• You are uncertain about the final destination of the goods 
• Your import licences or paperwork have been delayed or you are waiting for a duty-relief quota
• You need further customs procedure such as Inward Processing for non-excise goods
• You wish to store your goods together with goods subject to another customs procedure with economic impact (e.g., Processing under Customs Control, Inward Processing) or with goods that are already in free circulation.

Bonded warehouse requirements in the UK

If you want to apply to operate a bonded warehouse to store your goods when importing to the UK, you must be licensed as a warehouse keeper by HM Revenue & Customs (HMRC), or store goods as a depositor. To be approved as a warehouse keeper you need:

• To be established in the UK

• Have an EORI number

• Be financially solvent

• Have a good compliance record in dealing with customs

• Prove you have a business need for the warehouse

• Make declarations or employ an agent to do them

• Keep stock records and run the warehouse to health and safety standards

• Provide a guarantee if needed for Customs Duty and VAT unless you’re an Authorised Economic Operator or can meet Authorised Economic Operator conditions

Important: In the UK, customs warehousing allows only for certain types of processing, known as usual forms of handling, such as preserving goods, improving their presentation or marketable quality, and preparing merchandise for distribution or resale. If you require more extensive processing, goods must be declared to inward processing. 

Types of bonded warehouse

Public warehouse

This warehouse is operated by a business who will store goods on your behalf. This makes them the warehouse keeper and you the depositor.

Private warehouse

You operate your own warehouse to store your goods, making you both the warehouse keeper and the depositor.

Bonded warehouse costs in the UK

Bonded warehousing costs vary between providers and, more in general, there are different costs associated with UK customs charges and import.

UK customs duty

Customs duty is charged on imports from outside of the EU, with tariffs set in accordance with the commodity type and bond.

VAT

The standard VAT rate for most goods is 20% and is charged on imports from foreign customs, namely the EU and the rest of the world.

Warehousing

Warehousing costs differ based on the type of goods, location and the amount of space required.

Advantages of a bonded warehouse

Bonded warehousing allows importers and businesses to have greater flexibility in inventory control and stock management, thus accommodating global market demand more easily. Here are some of the main advantages connected to this solution:

Duty deferment and cash flow improvement

Using a bonded warehouse means deferring UK customs duty and taxes until goods are sold or leave the warehouse. Since no initial payment is required, businesses can free up valuable cash flow that would otherwise be tied to duty payments and thus have better control over it.

Avoid paying double duty on exports

If goods need to be exported again after they reach the UK, keeping them in a bonded warehouse means that duties have to be paid only in the country of destination, precisely because these goods won’t enter free circulation in the UK. This enables businesses to leverage international trade opportunities and respond to global market demands more flexibly.

Improve customer service with supply on demand

Meeting customer demand is the number one requirement of a successful ecommerce business. It requires a combination of strategic warehouse management and integrating automation to deliver orders timely and efficiently.

In the context of bonded warehousing, these advancements become even more significant. In fact, thanks to this specialised warehousing solution that allows storage without time constraints, businesses can strategically import merchandise in advance of peak seasons and withdraw for consumption only when needed. Ultimately, this flexibility enables optimization of supply chain management and retailers are therefore able respond to market demand or specific sales patterns more quickly, avoiding logistical challenges, as well as costs associated with transport to different storage locations.

Assistance in complying with customs requirements

Some bonded warehouses offer valuable support for importers, especially regarding customs tax documentation, tariff classifications, certificates of origin and international trade regulations. By facilitating interaction with customs authorities, bonded warehousing can become a real asset for your business, especially since customs requirements can be complex and handling goods in accordance with these is fundamental to avoid delays, penalties, or additional charges for customers.

Cost saving solution

Using a bonded warehouse means you have more flexibility in accommodating fluctuations in demand without paying duty if goods remain unsold. Moreover, as mentioned before, this solution is also useful to avoid paying double duty if you plan to export your goods again after they enter the UK.

Conclusion

Whether you are a growing business looking to expand your market reach or desire to optimise customs costs in the UK, bonded warehousing can be a strategic solution to navigate the complexities of international trade while offering your customers the flexibility and responsiveness they expect. 

Bonded warehouse FAQs

What is a bonded warehouse?

A bonded warehouse is a warehouse managed under the supervision of the local customs agency, where imported or exported goods can be stored, re-exported, or manipulated without being subject to import duties and taxes until they go into free circulation.

What are the requirements for establishing a bonded warehouse in the UK?

To be approved as a warehouse keeper you need to be based in the UK, have an EORI number, be compliant, prove you have a business need for the warehouse, and be financially solvent

Are there any restrictions on the types of goods that can be stored in a bonded warehouse?

In the UK, only dutiable goods can be stored in a bonded warehouse but both duty and VAT are deferred while in the warehouse. Goods on which VAT only is payable are not allowed to be placed in this type of facility.

If you import goods that are considered a health hazard or require to be stored in a specific way you will need facilities that are specially equipped. This can apply to:

• meat that needs to be frozen or chilled
• goods that might spoil
• products covered by the UK Agricultural Policy
• chemicals