Bonded Warehouse

BONDED WAREHOUSE. A warehouse in which goods liable to customs or excise duties may be stored without the duty being paid, subject to supervision by revenue officers and to secur ity being given for eventual payment of duty if the goods are not exported. Bonded warehouses constitute an important feature of the revenue machinery in all fiscally-developed countries, their function being to enable merchants to hold stocks of dutiable goods without paying the duty until these goods are to be put on the home market, and without paying it at all if they are exported. In the latter case merchants avoid the lock-up of capi tal in the payment of duties, and in the former case the period between payment of duty by the merchant and his recoupment by his customer is minimized, thus reducing the amount of work ing capital required. Customs duties are of greater antiquity than excise (internal) duties, and the original use of bonded warehouses was for the storage of imported goods, on which cus toms duties fall. There are, however, examples of the use of bonded warehouses for goods liable to excise duties.

A bonded warehouse is essentially a place for the storage of goods, but operations necessary for their preservation during storage, simple forms of treatment to improve their condition and their preparation for sale or exportation, are permitted. Examples are the "repacking" of goods into packages of different sizes; blending and bottling wines or spirits; fortifying wine with added spirit. As a rule manufacturing processes are not allowed to be carried on in bonded warehouses, but there are exceptions, e.g., the smelting and refining of crude ores in the United States. Goods for the home market pay duty according to the tariff in force at the time of withdrawal from a bonded warehouse. Allow ance is made for unpreventable losses in warehouse attributable to such causes as evaporation, leakage, etc., and merchants are only required to pay duty upon the quantity remaining at the time of withdrawal.

Origin and History.

In the United Kingdom, the beginnings of the bonded warehouse system go back to i7oo, when provision was made for the "wrought silks" of India and Persia, the use of which at home was prohibited, to be deposited in bonded ware house for re-exportation. In 1709 pepper and in 1742 rum, were allowed to be deposited in bond, either for subsequent re-expor tation or home consumption. Tea, rice and tobacco followed, and in 18o3 a general warehousing act brought further extensions. The consolidation of customs acts in 1825 brought the bonded warehouse system to something approaching its modem scope. The main customs law as to bonded warehouses is contained in the Customs Consolidation Act, 1876 (39 and 4o Vict., cap. 36), although alterations of detail have been effected by later acts. The principal statutory provisions relating to excise bonded ware houses are contained in the Spirits act, 188o (43 and 44 Vict., cap. 24). British spirits are regularly deposited in bonded ware houses for storage and maturing. The Customs and Inland Reve nue act, 1881, as amended by the Revenue act, 1898, allowed imported goods, i.e., goods subject to customs duties, to be de posited in excise warehouses, and goods liable to excise duties in customs warehouses. Since the amalgamation of the customs and excise departments in 1909 the distinction between customs ware houses and excise warehouses has ceased to exist.

Bonded warehouses in the United Kingdom are provided, not by the Government, but by private individuals or companies— frequently port authorities—who charge merchants for the storage of their goods. Every bonded warehouse must be approved by the commissioners of customs and excise, and its construction must conform to rules designed to secure that goods cannot be taken out without the knowledge of the revenue officers. A bonded warehouse may be approved for the storage either of dutiable goods in general or of one or more specified classes of dutiable goods. There are bonded warehouses at all the principal sea ports and also at many inland places. The bond required as security for the duty on the goods is entered into by the pro prietor of the warehouse.

The doors of bonded warehouses are locked outside working hours with revenue locks, in addition to those affixed by the pro prietor; but the proprietor remains solely responsible for the safe custody of the goods and the revenue officers are concerned only to see that none pass into consumption without paying the proper duty. Goods not liable to any duty, and goods, the impor tation of which into the United Kingdom is prohibited, may not be deposited in bonded warehouses. "Forestalling," or the with drawal of abnormal quantities of goods on the eve of a budget with a view to escaping an expected increase of duty, may be prevented by the commissioners of customs and excise, who are empowered by law to restrict the quantities which may be with drawn at such times. Facilities are given for the inspection of goods and the taking of samples by the owner or prospective purchasers, and goods may be sold "in bond" to await withdrawal by the purchaser when he requires them.

With regard to bonded warehouses in other countries, the general statements in the opening paragraph above sufficiently describe the essential conditions, although there is some diversity in details of practice. To mention one important particular, the provision of bonded warehouses is not invariably lef t to private enterprise, but may be undertaken by the State or a municipality.

United States.

In the United States the bonded warehousing system was inaugurated in 1846 when it was provided by law that goods might be deposited in public warehouses for a period not ex ceeding a year. The time was subsequently extended to three years, and varying types of warehouses were authorized.

The secretary of the Treasury in the United States is in charge of the warehousing system with authority to make rules. In gen eral, warehouses may be (I ) Government owned or leased, and under the direct control of the collector of customs ; (2) private importers' bonded warehouses established as a special provision for a large importer; (3) private bonded warehouses, doing a general storage business or dealing with specific articles such as grain or wines, permission being secured from the secretary of the Treasury and the goods remaining under the control of Gov ernment officials; and (4) manufacturing warehouses in which goods intended for export may be manufactured from imported materials without the payment of duty.

Goods remaining in custody for over three years may be sold under regulations prescribed by the secretary of the Treasury. At any time within three years they may be withdrawn upon pay ment of the duties and discharges, or may be shipped in a man ner prescribed by the secretary of the Treasury to another port and held there under the same circumstances as if originally imported at that place.

For the statutory provisions governing bonded warehouses see the Code of the Laws of the United States of America, Title 19, Subtitle IV., Part 4.