Bonded cargo freight refers to imported goods stored by customs control in a bonded warehouse until the applicable duties, taxes, and penalties are paid. The bonded cargo freight system allows importers to defer these payments until the goods are either released for domestic use or re-exported.
Goods may undergo permitted processes like cleaning, sorting, or repackaging under customs supervision while they are in the bonded warehouse. Bonded cargo can be advantageous, but it can also be frustrating as it may hold up your business operations.
Get in touch with our freight forwarding professionals here at Twings Supply. We’ll help you understand, reclaim, or handle your bonded cargo.
What are the Different Types of Bonded Cargo?
The various types of bonded cargo span an impressive spectrum, including raw materials awaiting transformation and finished goods ready for sale to machinery, perishable items, and re-exported goods bypassing domestic markets. Goods stored as bonded cargo also includes temporary imports for events and products destined for testing or certification:
- Raw Materials: Unprocessed commodities awaiting manufacturing or assembly
- Finished Goods: Products ready for sale to consumers or businesses
- Machinery and Equipment: Industrial tools and machines pending duty payment or re-export
- Perishable Goods: Items like food products that need controlled storage conditions
- Re-Exported Goods: Imports intended for export to another country without entering the domestic market
- Temporary Imports: Goods brought in for specific purposes, such as trade shows, with plans to be re-exported
- Goods for Testing or Certification: Products imported for evaluation or compliance checks before final distribution
The Bonded Transport Process
The bonded transport process involves several key steps to make sure the movement of your goods is compliant with customs control.
1. Importing Bonded Cargo
These goods are imported under bond without immediate duty payment. Importers must submit all the necessary paperwork to customs authorities before licensed carriers transport the bonded goods from ports of entry to designated bonded warehouses or storage facilities.
Role of Bonded Carriers
Bonded carriers are authorized to transport goods that haven’t cleared customs. They operate under a customs bond, guaranteeing that all duties, taxes, and fees will be paid. These carriers must meet specific licensing and compliance requirements, including obtaining a carrier code from customs authorities and posting financial security.
Benefits of Bonded Transport
- Flexibility: Allows importers to defer duty payments until goods are needed for domestic use or are re-exported and helps with cash flow management
- Efficiency: Streamlines the shipping and storage process and reduces potential delays with customs clearance
- Security: Makes sure goods are handled by authorized carriers, which minimizes the risk of theft or loss
2. Storage in Bonded Warehouses
Bonded warehouses are secure facilities authorized by customs authorities for storing bonded cargo. Goods remain in these warehouses until the duties are paid, or the items are re-exported. The allowable storage duration varies by country; for example, in the United States, goods can be stored for up to 5 years.
Types of Bonded Warehouses
- Public Bonded Warehouses: Operated by third-party logistics providers, these warehouses are available to any importer or exporter for storing bonded goods
- Private Bonded Warehouses: Owned and operated by individual importers for storing their own goods, these facilities require authorization from customs authorities
3. Bonded Transportation
Moving bonded inventory involves transporting goods under customs control without immediate payment of duties and taxes. This process requires proper authorization and adherence to specific procedures to comply with customs regulations.
Customs Authorization and Bonds
Before moving bonded cargo, importers or carriers must obtain authorization from customs authorities. This involves submitting an in-bond application electronically through a Customs and Border Protection (CBP-approved) Electronic Data Interchange (EDI) system. The application includes details such as the Harmonized Tariff Schedule number, description of merchandise, quantity, container numbers, and destination. Additionally, a custodial bond on CBP Form 301 is required to guarantee compliance with all regulations during transit.
In-Bond Movements
In-bond movements facilitate the transportation of goods under customs control without immediate duty payment. There are three primary types:
- Immediate Transportation (IT, Type 61): Allows goods to be transported from the port of arrival to another U.S. port without duty payment at the arrival port
- Transportation and Exportation (T&E, Type 62): Permits goods to move from the arrival port to another U.S. port for export without duty payment
- Immediate Exportation (IE, Type 63): Enables goods to be exported directly from the arrival port without entering U.S. commerce or paying duties
4. Releasing Bonded Cargo
Releasing bonded cargo involves two primary options: clearing the goods for domestic consumption or re-exporting them without incurring duties.
1. Clearing for Domestic Consumption
To release bonded goods into the domestic market, the importer must:
- Pay Applicable Duties and Taxes: Settle all customs duties, taxes, and fees associated with the goods
- Submit Required Documentation: Provide necessary documents, such as the commercial invoice, bill of lading, and packing list, to customs authorities
Once these obligations are fulfilled, customs will authorize the release of the goods for domestic use.
2. Re-Exporting Without Duty Payment
Alternatively, bonded goods can be re-exported without paying duties. The process includes:
- Obtaining Customs Authorization: Get permission from customs authorities to re-export the goods
- Being Compliant with Regulations: Comply with all relevant regulations, including submitting an in-bond application and making sure the goods remain under customs control during transit
- Provide Proof of Export: After re-exportation, provide evidence, such as shipping documents, to confirm the goods have left the country
What are the Benefits and Risks of Using Bonded Cargo?
We’ve outlined the benefits and risks of using bonded cargo below:
| Benefits | Risks | |
|---|---|---|
| Cost Management | Defers duties, boosting cash flow | Late payments risk goods being destroyed or returned |
| Inventory Control | Strategic storage cuts lead times and costs | Limited storage periods can lead to penalties |
| Quality Assurance | Allows inspections before market entry | Complex processes risk delays and added costs |
| Flexibility | Enables re-export without duties | Strict compliance is required |
| Security | Reduces theft with trusted carriers and warehouses | Relies on licensed providers, limiting flexibility |
| Efficiency | Simplifies customs clearance and transport | Documentation errors can cause fines or delays |
| Compliance | Ensures customs law adherence and smooth operations | Detailed rules need expert navigation |
The Benefits of Bonded Cargo Freight
Bonded cargo offers several advantages for businesses engaged in international trade, including deferred payment of duties and taxes, strategic inventory management, and opportunities for quality control and inspection.
Deferred Payment of Duties and Taxes
Bonded inventory is stored without immediate payment of import duties and taxes. This deferral continues until the goods are withdrawn for domestic consumption or are re-exported, improving cash flow and financial flexibility.
Strategic Inventory Management
Storing goods in bonded warehouses enables businesses to manage inventory more effectively by positioning products closer to target markets. This proximity reduces lead times and transportation costs, allowing you to respond swiftly to market demand fluctuations and seasonal trends.
Quality Control and Inspection
Bonded warehouses provide a controlled environment where goods can undergo quality inspections and necessary modifications before entering the domestic market. This process ensures that products meet required standards and regulations before you pay for them.
Are There Risks to Using Bonded Cargo?
While using bonded cargo offers benefits such as deferred duty payments and strategic inventory management, it also presents certain risks that businesses should consider.
Goods May Be Returned or Destroyed If Not Paid
If import duties and taxes are not settled within the designated storage period, customs authorities may take action, including returning bonded inventory to the origin country or destroying them. This results in financial losses and potential supply chain disruptions.
Complex Process Can Be Confusing
Navigating the regulations and documentation associated with bonded cargo can be intricate and challenging. Errors may lead to delays, fines, or legal issues. So, you should have a good freight forwarding service on your side to guide you on paperwork, regulations, and compliance — like Twings Supply, your professional partner in shipping.
How to Choose a Shipping Partner for Your Bonded Cargo
When choosing a shipping partner, consider their expertise in the industry, their array of services, their intermediary capabilities, and their partnerships.
| Criteria | Details |
|---|---|
| Expertise in Customs Regulations | ✅ Up-to-date knowledge of customs rules and licensing ✅ Ability to act as a customs broker to ensure compliance |
| Comprehensive Services | ✅ Provides both bonded cargo facilities and transport ✅ Offers repacking and secure storage options ✅ Benefits of a one-stop solution for efficiency |
| Intermediary Capabilities | ✅ Accepts payments on behalf of the government ✅ Facilitates communication between businesses and customs |
| Strong Partnerships | ✅ Builds long-term trust and understanding of business needs ✅ Enhances customer relationship management for smoother operations |
What Documents are Required for Bonded Cargo Freight?
The primary documents required for bonded cargo include an in-bond application
customs bond, commercial invoice, bill of lading, packing list, and import or export declaration. Here are the required documents in detail:
- In-Bond Application: This document provides comprehensive details about the shipment. It must be submitted electronically to CBP via an approved EDI system.
- Customs Bond (CBP Form 301): A financial guarantee for compliance with all customs regulations during transit. It holds the carrier liable for the carriage and disposition of an in-bond shipment.
- CBP Form 7512: Serves as the transportation entry and manifest for in-bond shipments, detailing the movement and facilitating tracking by customs authorities.
- Commercial Invoice: Issued by the seller to the buyer, includes transaction details such as the sale price, terms of sale, and a detailed description of the goods.
- Bill of Lading: A contract between the shipper and carrier, acknowledging receipt of cargo for shipment and outlining the terms of transport. It serves as a document of title and a receipt for the goods.
- Packing List: An itemized list detailing the contents of each package in the shipment, including weights, dimensions, and packaging type.
- Import/Export Declaration: A document declaring the details of the shipment to customs authorities, necessary for both importing and exporting goods.
- Warehouse Entry (if applicable): Documentation required when goods are stored in a bonded warehouse, indicating the nature and quantity of goods entered.
- Transportation and Exportation Entry (if applicable): For goods moving through one country en route to another, this document facilitates the in-bond movement without the payment of duties.
Twings Supply: Your Partner in Freight Forwarding
Looking for help with bonded cargo or other shipping needs? The team at Twings Supply is committed to adding real value to our clients and streamlining their processes every step of the way. Contact us today and let us guide you through the process.
FAQs on What is Bonded Cargo Freight?
What are examples of bonded goods?
Examples of bonded goods include imported items such as alcohol (wine, spirits, beer, etc.), tobacco, electronics, clothing, and luxury items like jewelry and high-end watches.
What is not allowed in a bonded warehouse?
Items not allowed in a bonded warehouse include goods that are prohibited by law, such as illegal drugs and counterfeit products. Items posing significant safety hazards, such as certain explosives, flammable substances, or weapons, are also barred from being stored in bonded facilities. Additionally, products that require special permits or certifications, like some restricted chemicals or endangered species, cannot be stored in bonded warehouses.
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