How does buy-now-pay-tariffs-later sound? Many customers have questions regarding their options to manage the complex and quickly changing trade environment. In this edition of “Tariffic News”, I explain the tariff related advantages of utilizing a bonded warehouse as part of the delivery process, without the word “delve” or the em dash!
A bonded warehouse is a U.S. Customs and Border Protection authorized facility where imported goods can be stored, deferring duties, tariffs, or certain import taxes that would be charged at the time of entry.
This separates the import process into two steps. First, the goods enter the United States and are placed under bond. Second, duties are paid only when the goods leave the bonded warehouse for domestic delivery. If the goods are re-exported or otherwise never enter U.S. commerce, those duties may not be owed. Goods can typically remain in bonded storage for up to five years under CBP oversight.
Simply put, using a bonded warehouse is a lawful way to align duty payment with actual commercial use rather than the arrival date of the shipment.
Duties and tariffs are paid only when goods are released for domestic use, not when they arrive in the United States. This reduces the amount of cash tied up in inventory and better aligns duty payments with revenue or program milestones.
Trade policy and tariff rates can change after goods are imported but before they are delivered. Storing goods in a bonded warehouse preserves flexibility. If tariffs are reduced or eliminated, customers avoid paying higher rates unnecessarily. If tariffs remain in place, payment is deferred until release. Of course, there is always a risk that tariffs could increase. There are additional fees associated with warehousing and additional customs entries, but for high value items, the cost is negligible.
An esteemed and wise Cyntony customer (as all of our customers are) places a large order for sophisticated direction-finding antennas. Since they are integrated into a complex system, the factory can only consume a certain number of antennas per week. Additionally, the order is placed ahead of when the antennas are needed to reduce supply chain risk. In the political realm, an important court case may lower the tariff burden shortly after the expected import date.
This scenario offers several reasons why bonded warehousing should be considered. By storing the large order of antennas in a bonded warehouse and withdrawing them just in time for production, the customer improves cash flow by delaying the tariff/duty expense. The customer could stand to benefit from the outcome of a court case that eliminates or reduces tariffs. If the court eliminates the tariff, then the goods will be able to be withdrawn from the warehouse duty-free.
For customers importing high-value RF, communications, and sensing equipment, the ability to defer duty payment through bonded warehousing is appealing. This approach is not appropriate for every shipment, but when timing, value, or policy uncertainty matter, it is a tool worth considering early, rather than after goods are already in transit or have hit our shores.
Cyntony is eager to work with customers to evaluate bonded warehousing as part of a broader logistics strategy.