Pros and Cons of Bonded Warehouse

A bonded warehouse is a building or secured place where dutiable goods are stored, manipulated, undergo manufacturing operations without payment of duty. It is either managed by the state or private enterprises. In private enterprises, custom duty must be posted with the government.

There is no payment of duty until the goods are released for delivery to the buyer. Restricted items are allowed to be stored in this type of warehouses.  The warehouses allow businesses to store their goods closer to their foreign customers for easier delivery of the goods.

Pros and Cons of Bonded Warehouse

Pros of Bonded Warehouses

  1. Goods can be stored tax-free

In a bonded warehouse duty is not paid for the goods until the goods are sold hence the goods can be stored in a bonded warehouse until the business owner finds the market for the goods and they are ready to be sold.

  1. Long-term storage

Goods can stay in a bonded warehouse until the business person finds the targeted market for the goods hence it gives business people time to look for the market of the goods.

  1. Securely located

A bonded warehouse is normally located at a place where all the imported goods can be stored. This avoids smuggling of goods into the country hence all business people have to pay duty to the imported goods hence creating revenue to the government.

  1. Handles restricted goods

Goods that are not allowed in the country are taken and kept in these warehouses which makes it safe for the country. Goods that may heart people’s health are taken and are not released to the public hence bonded warehouses are good.

  1. Takes goods closer to foreign customers

Bonded warehouses are normally situated near the ports. This makes it possible for foreigners to get access to the goods from the warehouse hence increasing the market of the goods.

Cons of Bonded Warehouses

  1. All products should be removed and duty paid for at the end of two years

Some goods take long to find their right market hence when they are removed at the end of two years, it may make the business person sell goods at a loss hence not a very good place to store goods.

  1. Only taxable goods can be warehoused

Once the goods are in this type of warehouse duty and tax should be paid on the goods hence not easy for business people to evade paying duty and tax. Those goods that should not be paid duty are not allowed in this type of warehouse hence disadvantage to those who want to do business locally to use such type of warehouse.

  1. The long process when clearing

No products can be allowed to be out of the warehouse unless the good procedure has been followed to clear the goods. The clearing process is normally long and tiresome hence can make the business people be discouraged from using the bonded warehouse.

  1. Requires a license from the customs authority within that area

A bonded warehouse cannot be started unless the custom authority of that area has allowed it to be constructed hence making it hard for it to be constructed without permission.


A bonded warehouse only serves the business people who are either importing or exporting the goods. It is not really beneficial to the business people who do the business within the country hence it hinders the locally available business people who may need the services of warehousing. On the other hand, they are good in that restricted goods cannot be easily brought to the country.

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