What is a Bonded Warehouse?


Imported dutiable products, often known as bonded goods, can be kept in a bonded warehouse until customs taxes and duties are paid. These are also referred to be "zero-GST warehouses" in Singapore and may be held by the government or a private company.


Learn more about the many kinds of bonded warehouses, how they differ from free trade zone (FTZ) warehouses and the difficulties they face. We also cover how to organize warehouse storage more effectively to improve your supply chain.


 

CONTENT PAGE


1. Types of bonded warehouses

2. Bonded vs free trade zone (FTZ) warehouse

3. Pros and Cons of bonded warehouses

 

1. TYPES OF BONDED WAREHOUSES


Public

Public bonded warehouses commonly known as license warehouse (LW) are owned and operated by the private Company that is approved by the Singapore Customs for storing imported dutiable goods namely liquor, tobacco products, motor vehicles and petroleum, with the duty and GST payable suspended. They can be used by anyone who wishes to store items under customs supervision.


These warehouses are licensed by customs authorities to operate as custodians and escrow to keep bonded goods until importers pay the duty.



Private

A private bonded warehouse is also known as Zero-GST Warehouse is a designated area approved by the Singapore Customs for storing imported non-dutiable goods with GST Suspended. Depending on circumstances, a ZG warehouse may be the entire premises, a designed part of premises, a storage tank or any other places approved by the Singapore Customs. A ZG warehouse cannot be used to store dutiable goods, locallyacquired or locally-manufactured goods and GST-paid goods.


There are 2 bonds for a bonded warehouse: wet and dry bonds.

  • A wet bond stores items subjected to excise tax, such as tobacco, spirits, wines or beers.

  • A dry bond is for the storage of all general goods other than alcohol and excise items.



2. FREE TRADE ZONE (FTZ) WAREHOUSE VS BONDED W/H

FREE TRADE ZONE (FTZ) WAREHOUSE

BONDED WAREHOUSE

Goods Allowed for Storage​

Locally made and imported goods

Mostly stores imported goods

Tax Benefits​

  • Deferred payment of taxes and duties

  • Transferring of goods between bonded and FTZ warehouses will not incur any additional duties or GST


  • Deferred payment of taxes and duties

  • Transferring of goods between bonded and FTZ warehouses will not incur any additional duties or GST

​Regulations

​Only able to operate within the FTZ

​Controlled by Singapore Customs offices or private companies

​Storage Time Limit

​Indefinite storage time in Singapore (bonded warehouses in other countries may have a time limit)

​Indefinite storage time in Singapore (bonded warehouses in other countries may have a time limit)

​Best Suited For

​For companies with customers mostly based in Singapore

​For companies with a regional customer base or businesses that use Singapore as a transshipment hub

The choice between a bonded and FTZ warehouse for storing your goods will be determined by what you intend to use it for and the location of your customer base. You could even hire both types of warehouses to optimize your supply chain.



3. PROS AND CONS OF BONDED WAREHOUSE

Advantages

  • Public

Duties are only collected once the goods leave the warehouse. As a result, importers can direct their resources and efforts toward essential or additional pre-sale operations, such as the legal work required to import their goods.


Bonded warehouses have been shown in recent studies to save approximately 25-30% of costs due to deferred taxes.


  • Long term storage

Bonded warehouses provide indefinite storage, giving you a safe place to keep your imported goods. Because the storage time is indefinite, you won't have to risk shipping your entire inventory to different warehouses when the storage time expires.


  • Safe and secured storage

Bonded warehouses have the capacity to store any type of product for extended periods of time while maintaining its quality. You can be confident that your valuable items will be well cared for.


Furthermore, goods are fully documented and protected. Bonded warehouses include advanced security features like CCTV cameras and fire suppression systems to ensure safe storage.


  • Proximity to ports

These warehouses are frequently located near major airports and ports, allowing businesses to store goods until they are ready for distribution.


This improves the entire supply chain by reducing lead times and transportation costs. Additionally, the risk of potential damage during transportation to the port is reduced.



Disadvantages

  • Risk of product removal

While storage time may be indefinite, customs authorities may auction the product if the importer fails to pay duties within a stipulated or specified time frame in order to recover the duties. It is not necessary to specify the storage period.


  • Complicated clearing process

No products can be removed from the warehouse until the duties are paid for. The clearing process is also complicated and time-consuming, as one may need to submit a request and the necessary documents and have your goods inspected. As a result, it might be hard to promptly carry out an emergency clearance when necessary.


  • Goods may accumulate

Bonded warehouses typically have indefinite storage periods. However, if stored goods accumulate to the point where they become unmanageable for the importer or warehouse, they may be disposed of.


Most products also have an expiry date, after which the inventory must be scrapped, resulting in a loss of profits.