Hidden in HM Revenue & Customs special procedures guidance is a single, easy-to-overlook line that holds huge untapped potential for many UK based brands and 3PLs.
It is a technical note explaining how ‘re-exported goods’ can completely avoid UK import duty and VAT, even if they have sat in a UK warehouse for months or even years.
A UK-based electronics reseller used this rule to release over £1.2 million in working capital last year, outpacing competitors who still pay all their taxes as soon as their goods land in the UK.
Many UK businesses believe that becoming a customs or bonded warehouse (two different names meaning the same thing) is not a viable option for them in 2025.
They believe it is ‘too complex, only for bigger companies, or too much hassle’.
Like most businesses that import goods, they keep paying import duty and VAT upfront. They tie up all that cash paid upfront on stock they might not sell for months, or even years.
In 2025, with new US trade tariffs kicking in, tighter EU VAT reforms on the horizon, and a global customs compliance regime that’s increasingly complex, this often-overlooked opportunity might be the most profitable tool your business isn’t yet using.
If you are a brand owner or a 3PL, this article will unpack how bonded warehousing really works. We’ll clarify when it makes sense and when it doesn’t.
Most importantly, we’ll explain how you can make this often-overlooked element of the customs rulebook work for you and your clients and how doing so can transform your cash flow.
WHY THIS MATTERS, RIGHT NOW
Bonded warehousing isn’t new. But in the current market climate, ignoring its potential could be a big mistake.
Five years post-Brexit, global trade is more politicised than ever. This year alone, cross-border trade has faced a wave of new measures, higher tariffs (particularly to the US), and new regulatory frameworks for a huge variety of product types.
Many retail-focused businesses have found themselves priced out of the US market overnight due to the current administration’s ongoing tariff war. Change has been the only constant.
Businesses locked into Chinese inbound supply chains and selling the imported goods on to the US without a bonded warehouse are in a particularly tough spot, seeing their margins decrease significantly as a result.
In the UK and internationally, if you don’t operate from a bonded warehouse, the rules dictate that businesses must pay their import taxes upfront and pay customs duty again when importing their goods into the US.
Meanwhile, the UK’s Border Force is doubling its headcount of inland customs compliance officers.
These new officers, like the existing ones, will target traders with surprise customs audits, often carried out long after the goods have cleared UK customs.
Additionally, the EU’s VAT in the Digital Age (ViDA) reforms are changing the EU’s indirect tax landscape. The EU is demanding real-time digital reporting and robust valuation and origin data.
There’s also the cash position. For any business, working capital is oxygen. Every container that clears customs straight into ‘free circulation’ drains that oxygen instantly.
Import duty, import VAT, and even anti-dumping tariffs (in certain cases) must be paid at the point of import, before you’ve sold a single unit of stock from the container.
Bonded warehousing turns that cash flow-drain on its head.
A bonded warehouse defers all import tax liability until the goods are sold or eliminates these import taxes entirely when the goods are sold overseas and re-exported.
This point is so important it bears repeating.
Bonded warehousing defers the import tax hit until you have sold the goods or eliminates it completely when the goods get sold and re-exported to an overseas customs territory.
Done right, bonded warehousing is not an obscure ‘special customs procedure’, it’s a real, practical hedge for your cash-flow against volatile tariffs and unpredictable markets.
BONDED WAREHOUSING IN 2025
In the UK, a bonded warehouse is a secure, HMRC-approved facility where you can store imported goods without paying any import duty or VAT upfront.
Without a bonded warehouse, these import taxes must be paid upfront for your goods to clear GB customs.
With a bonded warehouse, the import taxes are suspended (or deferred) by HMRC. This deferral has no time limit; it lasts for as long as the stock resides in the bonded warehouse.
The trigger for paying the import tax is the sale of the goods. It is only when the goods are released into ‘free circulation’ that the import taxes become payable to HMRC. You pay the import tax when the goods leave your warehouse, not before.
Alternatively, if the sale of the goods is to an overseas customer, outside of the UK in this example, then no UK import taxes are payable to HMRC, at all, ever.
The use of bonded warehousing can provide a specific benefit for imports of goods that are subject to anti-dumping rates, countervailing duties or safeguarding thresholds where quotas apply.
Quotas allow you to import limited amounts of specific goods (sometimes from specific countries) at a lower rate of duty than would otherwise apply.
Where a quota is close to being breached and there is a risk of a higher duty rate applying, it may be possible to delay the release of the goods from the bonded warehouse until the quota resets and the lower rates can continue to apply.
CUSTOMS WAREHOUSING vs EXCISE WAREHOUSING: WHAT'S THE DIFFERENCE?
Before diving deeper, it's crucial to understand that there are two distinct types of bonded warehousing in the UK, each serving different purposes.
CUSTOMS WAREHOUSING: For imported goods from overseas. It allows you to defer import duty and VAT on goods brought into the UK from non-UK customs territories. This is what most importers, retailers, and 3PLs need, and it's the focus of this article.
EXCISE WAREHOUSING: For UK-produced goods subject to excise duties, primarily alcohol, tobacco, and fuel. These warehouses allow manufacturers to store their products without paying excise duties until the goods are released for consumption in the UK market.
The key difference is simple: customs warehousing is for imports; excise warehousing is for domestic production of duty-liable goods.
If you're importing products from China, the EU, or anywhere outside the UK, you need customs warehousing.
If you're a UK brewery storing beer before it hits the shelves, you'd need excise warehousing.
Most businesses reading this article will benefit from customs warehousing, so that's where we'll focus our attention. The principles, processes, and benefits we'll explore all relate to customs warehousing for imported goods.
BONDED IN ACTION (EXAMPLE 1): The Aluminium Window Anti-Dumping Challenge
One client of Dains Customs uses their bonded warehouse permission to avoid anti-dumping duty on their regular imports of aluminium used to manufacture window frames.
This client further enhances their position by using an IPR (Inward Processing Relief) authorisation. This allows them to import aluminium, process it into frames, and re-export the finished windows, avoiding UK anti-dumping duty.
Their ‘Bonded + IPR’ permissions have significantly improved their profitability while having an entirely positive effect on their business cash flow.
This manufacturing client is saving over six figures annually, on an ongoing basis, compared to what their position would be without these two permissions in place.
Bonded warehousing is not just a feature of the UK import tax system, either. The concept exists globally under World Customs Organization standards, so similar customs regimes and permissions are available across all WCO geographies.
The principles are always the same: store goods under bond, manage the stock securely and defer your import tax liabilities until you sell the goods.
Using bonded warehouses in different countries is a highly effective component of an international supply chain strategy used by many of the world’s biggest multinational brands and retailers. You can do the same.
PRIVATE vs PUBLIC BONDED WAREHOUSES
Many businesses assume that bonded warehousing requires leasing an enormous warehouse, in their own name, that they must operate themselves. It doesn’t, but there are two clear options, and they open the model to a much wider range of businesses.
PRIVATE BONDED WAREHOUSE
Private bonded warehouses are for businesses that only want to store their own imported goods. The ‘warehouse authorisation holder’ and the ‘depositor’ are one and the same business entity. This entity is responsible for everything: the security of the facility, the record-keeping, and all customs procedures.
A private bonded warehouse is ideal if you have in-house logistics capabilities and want total control of everything. It suits businesses that import and export goods regularly and applies even when working out of a modest warehouse facility.
PUBLIC BONDED WAREHOUSE
Public bonded warehouses are for businesses that want to store goods belonging to other businesses, or ‘depositors’ to use HMRC’s language.
A public bonded warehouse suits a 3PL or fulfilment provider. In this scenario, the importer (a brand, for example) will utilise the warehouse approval held by their chosen 3PL to defer import taxes without holding their own authorisation from HMRC.
The brand would usually pay a fee to the 3PL for using their authorisations but still unlocks all the main benefits of a bonded warehousing approval without taking on the full operational burden of running the warehouse.
Gaining approval from HMRC to trade as a public bonded warehouse can be a significant differentiator in the competitive 3PL fulfilment space for service providers.
BONDED IN ACTION (EXAMPLE 2): The SME Clothing Brand Sourcing Garments from China
Another Dains client, a clothing retailer, imports their clothing and accessories into the UK from China. They pick and pack the goods in the UK and export them to consumers in the US.
The UK import duty rates on their clothing range between 6–12%. This retailer is a scale-up and does not have a large warehouse facility, so had their stockroom authorised as a bonded warehouse.
Their Chinese-made clothing and accessories are now imported into the UK using their own bonded warehouse authorisation (into their stockroom). When the goods are sold overseas (exported to customers in the US), this is done without the imposition of any UK import taxes on these overseas sales transactions.
In turn, this approval has allowed the clothing retailer to lower its checkout pricing and increase its margins, reinvesting this cash into other areas of their business.
The significant savings from becoming bonded gives them a competitive advantage and reduces the impact of the US trade tariffs on their young business.
WHAT YOU CAN & CANNOT DO WITHIN A BONDED WAREHOUSE
When your goods are in a bond, you can:
Store goods indefinitely, without paying any UK import taxes. There is no maximum time limit provided you keep your HMRC authorisation valid and maintain ongoing compliance standards.
Perform ‘usual forms of handling’ on goods, such as minor processing, repackaging, sorting, or relabelling, things that don’t change the essential nature of the goods.
Break bulk; split inbound shipments for different final destinations.
Re-export the goods; move the goods onto another country (customs territory) without paying any import taxes in the UK.
What you can’t do is carry out any ‘significant processing’ of the goods imported into a bonded warehouse.
Processing the goods in any way requires an additional permission called ‘IPR’ or ‘Inward Processing Relief’, as detailed in ‘EXAMPLE 1’ above.
Maintaining robust processes and records is a must if you are planning to become a bonded facility. The warehouse can’t simply be a ‘free for all’ for unrecorded goods.
Every movement of the goods must be tracked and recorded. Your Warehouse Management System (WMS), and importantly the data within it, must stand up to a deep and detailed audit by HMRC.
Along with maintaining robust records, your customs declarations must be completely watertight and site security (CCTV, alarm systems, access controls) must also be securely maintained.
BONDED IN ACTION (EXAMPLE 3): The SME Electronics Trader with £50K in Savings Unlocked
A UK-based SME that imports Asian consumer electronics for resale in the UK, Ireland, and Germany, decided to implement a bonded warehouse.
Historically, like most UK businesses, they cleared every shipment into free circulation on arrival, paying UK import taxes upfront, regardless of the final destination of their goods.
When Brexit bit, they faced additional EU taxes on re-exports, plus the cost of reclaiming the UK VAT elements. Their cash flow was a mess. Following advice, they allocated a secure area within their small industrial unit and applied for private bonded warehouse status.
It took three months to prepare their approval, and some capital expenditure was needed. They invested in getting the right advice and support, securing their site to the level HMRC required. They also upgraded their WMS and incurred costs training staff on CDS procedures and codes.
In their first year, they deferred nearly £50,000 in import taxes.
This more than covered their setup costs, but the deferral also freed up working capital needed to reinvest into other areas of their business.
Now, when orders come in from the EU, they break bulk in their bond and ship orders directly, never paying UK import taxes.
That is the primary benefit of bonded warehousing in action: imported stock can rest in a UK warehouse indefinitely and never trigger UK import tax when sold overseas, leaving the UK as if it never entered.
WHEN BONDED WAREHOUSING MAKES THE MOST SENSE
There is no single formula for when bonded warehousing makes the most sense, so it is always best practice to explore it with a specialist advisor.
The advisor will need to know the specifics of your business and your trade flows to determine if it is right for your needs. That said, patterns do emerge from the data and use cases above. Bonded warehousing makes the most sense when:
You import significant levels of stock from overseas customs territories.
You sell into multiple overseas markets from a single hub or location.
You hold your stock for extended periods of time prior to selling it.
You face seasonal surges in demand that require significant upfront stock investments.
You sell goods and work in sectors that are heavily exposed to anti-dumping duties or volatile trade tariffs.
You run a 3PL or fulfilment house that could be restructured as a bonded warehouse; mitigating a compliance risk (see ‘The Fulfilment House Dilemma’, later in this article), creating a new revenue stream and delivering a value-added benefit that will delight your current and future clients.
Bonded warehousing makes less sense when your supply chain is ‘just-in-time’, if your goods move in and out of your warehouse quickly, you rarely re-export them, or the costs of obtaining and maintaining the required permissions outweigh the benefits.
Like most things, it is a numbers game, but for many businesses the savings are real, tangible, and significant, particularly for internationally focused businesses in the current climate.
RUNNING THE NUMBERS: THE IMPACT ON YOUR CASH
Let’s break down the principles here with some example numbers based on a UK business trading internationally:
Annual stock import value: £3 million.
Average UK customs duty percentage: 4% (0% anti-dumping).
UK VAT: 20%.
If all stock imported from overseas is customs cleared on arrival, the import tax bill in this example is £720,000, paid upfront (£120,000 in duty and £600,000 in VAT).
That money is locked away until you sell the goods.
Or worse, if half of that stock eventually gets re-exported, you are paying ‘double-duty’: UK import tax upfront, then import VAT at the customs border of the destination country when the goods are transported.
In the same example, with a bonded warehousing approval, it looks like this:
You defer the entire £720,000 until goods are ‘released into free circulation’ (sold in the UK).
Any stock that is re-exported out of the UK never triggers UK import taxes.
You pay less tax, thus increasing your margin on the goods, and gain the cash flow benefit.
As if that were not enough, there is another benefit.
What happens if an inbound consignment arrives from your overseas manufacturer and is found to be short of expected items, some of the stock is damaged in transit, or it gets damaged in your warehouse after import?
With a bonded warehouse authorisation, you can adjust your declarations to account for these losses, so you never have to pay UK import tax on any ‘missing, rejected or damaged’ goods.
This is not an option when the import taxes have been paid before you pop the seal on the shipping container.
Even when factoring in all the costs of the authorisation project, the applicable fees from HMRC and any professional services investments needed to help you get going, most businesses still significantly benefit from becoming bonded.
Done well, the benefits far outweigh the costs, usually many times over.
THE 3PL & FULFILMENT HOUSE DILEMMA
One of HMRC’s latest compliance initiatives has been to target 3PLs and fulfilment houses. They are on the lookout for 3PLs that store goods for multiple clients but fail to keep proper records and checks on the VAT status of the goods in their possession.
If the customer of a 3PL under-declares or misclassifies their goods, the fulfilment house can be on the hook, as well as the owner of the goods, when HMRC identifies non-compliance.
Fines, penalties, or losing ‘trusted trader’ status can deal a significant blow to the 3PL’s profitability, or worse, shut them down. One way to flip this risk is to convert your HMRC status from a ‘fulfilment house’ into a ‘public bonded warehouse’. Doing this means:
Securing the premises and implementing all the processes and best practices required by the authorisation.
Developing and maintaining watertight stock intake, storage and exit procedures and records.
By doing so, the 3PL’s current and future clients get all the bonded warehouse benefits, and the 3PL gets a new revenue stream by allowing clients who trade cross-border to utilise its approvals.
BONDED IN ACTION (EXAMPLE 4): The Midlands 3PL that De-Risked & Grew
This Dains Accountants & Advisers client gained their approvals in Spring 2023 and has grown dramatically, increasing their profitability by gaining approval while mitigating the growing risk of handling cross-border clients.
They charge their clients a modest but fixed percentage of the customs value on the import paperwork to use their bonded facility and deferment account.
Equally importantly, they now face HMRC audits with confidence, knowing they operate with watertight compliance.
They have turned what was previously a potential risk area, operating as a ‘fulfilment house’ in HMRC terms, into a profitable, risk-free and customer-pleasing value-added benefit by making the change from fulfilment house to bonded warehouse.
BONDED IN ACTION (EXAMPLE 5): The Amazon FBA Seller
Another successful bonded warehouse project undertaken by Dains involved a growing Amazon seller that imports consumer goods from Asia and sells them across UK and EU via Amazon FBA.
Previously, they paid UK import duties and VAT upfront on all stock and faced complications distributing to EU Amazon fulfilment centres.
With £100,000 worth of monthly inventory, they were paying £24,000 in UK taxes upfront (20% VAT plus 4% duty) before knowing which Amazon marketplace would generate the final sale.
Their bonded warehouse authorisation transformed this. Stock destined for Amazon UK now gets released into free circulation when leaving for the UK FBA fulfilment centres, and stock heading to the EU FBA fulfilment centres ships directly from the bond without any UK import tax liability.
Monthly cash flow improved by considerably depending on UK/EU sales split. Over 12 months, this freed up over £150,000 in working capital previously tied up in advance tax payments.
THE HMRC APPLICATION & APPROVAL PROCESS
HMRC is thorough in its checks, but also transparent in its expectations. To run your own private or public bonded warehouse, you’ll need:
GB EORI number and a UK-established Ltd company.
Safe, secure and clearly defined premises.
Robust WMS that records and holds information on all the relevant data points; commodity codes, goods movement dates, and goods owners’ (or depositors) entity details if operating a public bonded facility.
Financial guarantee: this is calculated to be equal to the peak duty liability on the value of the stock held in the bond, unless you also gain AEO (Authorised Economic Operator) status, in which case you can be granted a waiver.
A trusted customs agent or partner who knows these processes inside out and can handle and scrutinise all your declarations, in and out of the bonded warehouse, should you decide to outsource this element of the work.
Written procedures and detailed record-keeping for all intakes, goods storage, UFH (Usual Forms of Handling), and, most importantly where bonded warehousing is concerned, detailed line-item level records for all removals of stock.
SIMPLIFIED PROCEDURES
HMRC offers several simplified procedures to reduce the administrative burden of operating a bonded warehouse:
SIMPLIFIED DECLARATION PROCEDURE (SDP): Allows traders to make an initial simplified import declaration with basic information, followed by a supplementary declaration with full details later. This speeds up the physical release of goods while maintaining compliance.
ENTRY IN DECLARANTS RECORDS (EIDR): This lets authorised traders record imports in their own systems rather than submitting immediate declarations to HMRC. Declarations are submitted periodically, typically monthly, based on your records.
Most applications succeed if properly prepared, but HMRC will reject incomplete submissions. Working with a customs specialist during the application process significantly improves approval chances and speeds up the timeline.
Expect regular site audits from HMRC and Border Force once you gain your approvals. They can and will visit a bonded warehouse with little or no notice, so your records must always match what’s physically in the warehouse.
If you fall short, you risk losing your authorisations and tax advantages, as well as potential fines or penalties. For most businesses, a well-configured and maintained WMS system will do much of the heavy lifting on all the record-keeping requirements.
PARTNERING WITH A BONDED 3PL
Most SMEs choose a 3PL without considering if they are a bonded warehouse. Where the 3PL partner is bonded, the benefits to the retailer, marketplace seller or brand are substantial:
No need to invest in your own premises, staff or WMS systems.
No need to hold your own fiscal guarantees, deferment accounts, or approvals with HMRC.
The warehouse-keeper (3PL) handles the authorisation process and is responsible for the ongoing compliance.
The retailer still gets to defer their import taxes and keep more working capital in their business.
The 3PL will typically charge for this, but the savings should still offset the additional 3PL costs, many times over.
COMMODITY CODES & CDS ENTRIES
A well-run public bonded warehouse will always insist on tight record-keeping for all stock arrivals, but in HMRC’s eyes, the primary liability for accurately recording imports remains with the beneficial owner of the goods.
So, whether you are a 3PL or a brand owner, never leave these things to chance.
Always keep detailed records of your imports, have ongoing compliance reviews, and apply stringent diligence across all aspects of your stock holding and imports.
One slip can be costly, and compliance audits from HMRC or Border Force will often happen many months after the physical import of the goods took place. Common pitfalls where businesses get into difficulties:
Using incorrect commodity codes can mean underpaid or overpaid duty. Both are bad.
Incomplete origin proofs mean potentially losing out on any preferential rates that could be available, or worse, claiming a relief incorrectly only to have it clawed back, possibly accompanied by a fine or penalty.
Failure to correctly link CDS declarations to imports can also lead to penalties or paying the applicable taxes twice over.
FUTURE TRENDS
Green, Digital, Resilient. Elite traders are using bonded warehousing as a springboard for smarter supply chains. Some of the most interesting future trends in this area include:
GREEN BONDED ZONES: using carbon monitoring and renewable energy systems to meet Scope 3 emissions targets.
BLOCKCHAIN: verifying commodity codes and chain-of-custody to withstand origin audits.
SINGLE TRADE WINDOW: connecting bonded stock data in real time to customs authorities, slashing paperwork and clearance times.
IDP (‘Intelligent Document Processing’): utilising AI and OCR technology to read and convert detailed customs documentation into data files that can be transmitted digitally, reducing the time and errors involved in manually processing customs documents.
This is not science fiction; these technologies are being invested in and deployed today to maintain competitive advantages and ensure businesses are future-proof globally for many years to come.
BONDED READINESS CHECKLIST
If you are considering the benefits of bonded warehousing for your business, either directly or via a partner, the questions you should ask yourself are as follows:
Do you or your clients tie up cash paying import taxes many months before the sale of the goods is made?
Do you or your clients sell into one or more international markets on a regular basis?
Does your current fulfilment partner or 3PL offer a public bonded warehouse service option?
Do you risk ‘double taxation’ on goods that end up being re-exported to international destinations?
Would the “cash unlock” from the import tax deferral allow you to negotiate better supplier terms, fund bigger stock orders, allow you to invest into new product lines or other areas of need within your business?
Is your warehouse operating with robust security, well organised processes and strong record keeping?
Are the goods you import attracting anti-dumping duty or subject to quotas?
If you answer one or more of these questions with a ‘Yes’ then bonded warehousing could be the untapped opportunity that you should be leveraging today, to stay ahead of the competition tomorrow.
THE OVERLOOKED LINE
In HMRC’s special procedures guidance on bonded warehousing it states:
"Goods can be entered for customs warehousing to suspend import duty and VAT until they are released for free circulation or re-exported out of the customs territory."
One simple line. But, for many businesses it is a very powerful line, that often gets overlooked.
With the right advisors in your corner, the correct permissions and approvals in place and some investment into the setup and maintenance of your approval, the benefits to the businesses who don’t overlook this line in the rulebook can be profound.
This is not a loophole. It’s how the rules work.
Not just here in the UK but also internationally too, and it’s there for anyone and everyone, but only the businesses who read, prepare and act unlock its full value get to reap its benefits.
Read it. Use it. And make that overlooked line work for you.
Used properly, it can mean the difference between surviving the trade shocks and thriving through them.
Because in a world of shifting tariffs and squeezed cash, the smartest businesses use every line in the rulebook, even the ones most other businesses miss.
A minefield or an opportunity?
The numbers speak for themselves but only if you have organisation and structure in your business.
If you are growing at such a pace that your warehouse runs on “organised chaos” then bonded warehousing probably is not for you at the current time. You’d be better to wait until things stabilise.
Alternatively, if you have reliable and accurate systems, solid operating procedures and overall confidence in the accuracy of your operation you should consider what becoming a bonding your warehouse can do for your bottom line and cash-flow.
Remember compliance is a journey not a destination.
Need help exploring the benefits of bonded warehousing for your specific trade flows?
If so, book a call here: https://www.shipmaxinternational.com/contact
Disclaimer: This article is guidance only and businesses should seek tailored advice for their specific circumstances.