Warehousing plays a central role in global trade and ecommerce. The type of warehouse you use impacts how goods are stored, managed, and cleared through customs.
Many brands and importers compare bonded and non-bonded warehouses when deciding how to move inventory internationally. Understanding the differences between these options helps clarify how goods flow from manufacturer to end customer.
China-bonded warehouses are storage facilities that effectively treat your inventory as if it's outside China. Using a bonded warehouse legally exports your goods out of China, allowing your factory to get a refund from the government on the local 13% VAT it needs to charge, allowing them not to charge the VAT to the brand.
China-bonded warehouses are storage facilities that let factories treat goods as if they’ve already left China. By moving finished products into a bonded warehouse, the manufacturer can process them as “exported” and claim back the 13% VAT they would otherwise have to charge. In practice, this means the factory can be reimbursed for their VAT charge that they would otherwise pass on to the brand.
However, bonded warehouses are costly to operate due to higher labor and real estate costs. Additionally, shipping from a bonded facility to your customer needs to be shipped to the more expensive Hong Kong airport, leading to higher shipping, pick-and-pack, and storage fees.
People often use these terms interchangeably, but there's a slight difference. Bonded storage refers to the service of holding goods under customs control. A bonded store is the actual building where this happens. Both operate under the same customs rules and let your goods sit tax-free until you're ready to sell them domestically.
Here's the step-by-step process:
The whole system revolves around delaying that customs bill until you actually need the products.
A non-bonded warehouse is a typical storage facility, like what you’d find in the U.S. Once your products clear customs and duties and arrive at a non-bonded warehouse, they’re officially in the local market. From there, they can move freely to retailers or directly to customers.
The main differences come down to customs involvement, payment timing, and operational complexity:
Non-bonded warehouses work better in specific situations where simplicity and speed matter more than deferred payments.
If you're running flash sales, restocking popular items quickly, or handling time-sensitive products, non-bonded warehouses eliminate customs delays. Your inventory moves directly from warehouse to customer without additional clearance steps.
When using a non-bonded facility, it allows us to ship from any airport in China, getting access to more cost-effective flights. Also storage in a non-bonded facility is cheaper than storing goods in a bonded facility.
Bonded warehouses offer several benefits that align with how modern ecommerce brands operate, especially those selling internationally.
Instead of paying customs fees immediately, you keep that cash available for other priorities like inventory purchases or marketing campaigns. This delay can significantly impact your working capital, especially for high-value products with substantial duty rates.
You can store bonded inventory for up to five years in most countries without paying duties. This works well for seasonal products like holiday merchandise or items with unpredictable demand patterns.
Bonded warehousing isn't always the right choice. The system comes with specific challenges that can complicate your operations.
Operating under customs supervision means extensive documentation for every shipment. You'll handle import declarations, inventory records, and movement logs. Customs officials may audit your records periodically, adding administrative overhead to your operations.
Bonded facilities must meet stricter security standards than regular warehouses. Enhanced surveillance, restricted access, and secure perimeters increase operating costs. Insurance premiums also run higher to cover goods under customs control.
Different bonded warehouse types serve different business needs and operational requirements.
Public Bonded Warehouse - Third-party operators run these facilities and serve multiple importing companies. You share space and costs with other importers, making this option accessible for smaller operations without the investment required for private facilities.
Private Bonded Warehouse - Companies own or lease these facilities for exclusive use. While requiring higher investment, private bonded warehouses give you complete control over inventory, security, and warehouse processes.
Common Bonded Goods - typical products stored in bonded warehouses include:
Selecting between bonded and non-bonded warehousing depends on your specific business factors and operational priorities. If you are on the fence between bonded vs non-bonded facilities the number one question you should ask yourself is:
Will it cost me less to pay the 13% on COG but access the much cheaper shipping, warehouse, and pick-and-pack rates?
Most brands we work with, use the non-bonded facility as it nets out cheaper to save on the shipping, warehousing, and pick-and-pack fees. However, you should consider the following question:
Do your products have a high Cost of Goods (COG)?
In some cases, if your products COG are very expensive, it may make more sense to use the bonded facility.
Brand Vertical: Apparel
Average COG: $10
With a non-bonded facility, your supplier would charge 13% sales tax or VAT in China. For example, if your Cost of Goods (COG) is $10.00, the tax would amount to $1.30 per item. Given the lower price point of your goods, using a bonded facility might not be cost-effective, as the tax paid would exceed much more significant savings in shipping fees, warehousing fees, and pick-and-pack rates.
Brand Vertical: Electronics
Average COG: $50
If your Cost of Goods (COG) is $50.00, using a bonded warehouse could save you approximately $6.50 per item. In this case, it may make more sense to pay more in shipping out of our bonded warehouse in China, as the extra cost of shipping may be less than $6.50.
Here are other determining factors you can use in order to determine if bonded or non-bonded is right for your brand:
1) Map Duty Rates and Sales Channels - Start by researching duty rates for your product categories. Higher rates make deferred payments more valuable. Also consider your sales channels - fast-moving products may work better with non-bonded solutions, while export-focused or seasonal goods often benefit from bonded storage.
2) Model Inventory Turnover and Cash Flow - High inventory turnover can make immediate duty payments manageable in non-bonded warehouses. Slow-moving or seasonal inventory often aligns better with bonded storage, where you can defer payments until products actually sell.
No, most factories will let you release goods without a bonded facility if you reimburse them the 13% VAT they would normally claw back from the government. In many cases, this ends up being simpler and still cost-effective for the brand.
Not usually. Splitting inventory this way creates extra complexity since goods would need to be separated and managed at a high frequency. Most brands find it’s more efficient to choose one setup that fits their strategy.
Yes, bonded warehouses can process returns and perform light manufacturing tasks like refurbishments under customs supervision. Additional permits may be required depending on local regulations and the specific activities involved.
