Explainer: Customs bonded warehouses for Canada imports

What is a Customs bonded warehouse?

A Customs bonded warehouse is a privately owned, secure storage facility that’s licensed by the Canada Border Services Agency (CBSA). This type of warehouse allows importers to store imported goods without having to pay duty or taxes right away. Instead, the importer can store the goods for an extended period of time before they’re exported or released onto the domestic market. Typically, the goods can be stored in a bonded warehouse for a period of up to four years without paying tax or duty.

How importers benefit from bonded warehouses

1. Better management of cash flow

The option to defer duties and taxes allows you to reallocate those funds for investment in another part of your business. This can greatly improve cash flow for companies that import large volumes of goods or high-value goods.

2. Exemptions for duty and taxes on re-exports

If you import goods to a bonded warehouse, and then export the goods from the bonded warehouse outside of the Canadian market, you can avoid paying duties and taxes. This can create significant cost savings for Canadian businesses involved in international trade.

3. Greater supply chain flexibility

Using a bonded warehouse allows you to import goods in bulk and store them without incurring upfront costs for taxes and duties. This helps to ensure a sufficient quantity of stock on hand to respond to consumer demand while minimizing the costs of excess inventory.

4. Access to value-added services 

Some bonded warehouses provide additional services ranging from packaging and labeling to light manufacturing and product assembly. This helps businesses meet some regulatory requirements for their goods while enabling more agile and responsive processes.

How do Customs bonded warehouses work in Canada?

Usually, when importing goods into Canada, duties, taxes, and other fees must be paid up front. After taxes and fees are paid, the goods are released from Customs. A Customs bonded warehouse lets importers defer payments until the imported goods are ready for the next step of their journey, whether the goods enter the Canadian market or get exported to their next destination. In general, the process of utilizing a Customs bonded warehouse involves:

1. Importing the goods - The goods are imported into Canada and land at a bonded warehouse that’s under CBSA supervision.
2. Storing the goods – Your goods can stay at the bonded warehouse for up to four years without prompting duty payments or taxes.
3. Providing value-added services – Bonded warehouses can offer additional services that allow the importer to add value to their products before they enter the Canadian market or are re-exported.
4. Paying duties and/or moving goods - Duties and taxes are only payable when the goods are removed from the warehouse for domestic sale. If you choose to export the goods directly from the warehouse, you can avoid paying Canadian duties and taxes.

Customs bonded warehouses operate under a set of strict regulations enforced by the CBSA. Importers must comply to avoid penalties or delays when moving goods across the border. Providing accurate documentation and paperwork, such as warehouse entry forms and import declarations, is an essential part of complying with bonded warehouse regulations.

The warehouse that you use also has to comply with various security regulations. Bonded warehouses must provide a controlled access environment with around-the-clock surveillance systems. The warehouse must also undergo audits to verify that they meet operational and compliance requirements outlined by the CBSA.

Finding a Customs bonded warehouse that works best for your business is easier said than done. An experienced customs broker can guide you through the process of working with a Customs bonded warehouse to help you make the most of this valuable trade resource. Connect with Cole now to learn more. 

The more you know!

We invite you to continue growing your knowledge base by exploring our earlier Explainer posts:

Explainer: What is a customs entry?

Explainer: Why businesses work with Customs compliance consultants

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