Warehouse

A warehouse is a place where goods are stored and safeguarded until they are transported to another destination. It could be materials, from a supplier or finished products from a manufacturer. The activities conducted within a warehouse are known as warehousing.

While companies may have their own warehouses, as the volume of goods increases their storage capacities may not suffice to meet the demands. The storage needs can be outsourced to a third-party logistics provider in such situations.

Warehouses come in two types; bonded and non-bonded. The key distinction is that bonded warehouses facilitate moving goods between free trade zones, without duty payment until they are released to the mainland. On the contrary, duties are paid for goods stored in bonded warehouses once they are transferred from the port to the free zone.

Why Warehouses are important in the supply chain?

• To stabilize the supply chain and cut delays in meeting immediate requirements, the shipments have to be stored closer to the end customers. Warehouses help with the continuous flow of products within the supply chain, from collection to distribution. Products are stored and protected until a requirement arises.
• Manufacturing, shipping, and distribution costs could easily be reduced.

Bonded Warehouses

• These are warehouses inside a free trade zone where imported items can be stored indefinitely without paying duty and VAT. Sellers are renting government-owned space for a charge to store goods. Customs authorities will grant bonds, which will provide financial protection for the goods for the storage period.
• Suppose you imported toys from China to JAFZA, and your buyers are located in Qatar, Bahrain, and Saudi Arabia, then it is recommended to choose bonded warehousing since you won’t be bringing the goods into the UAE mainland. A portion of the goods could be transported through any mode of transport, depending upon the requirement. This could be based on either urgency or cost.  
• Goods can be stored for a period of up to 2 years in JAFZA.
• Prohibited commodities could be stored here without any time limits, on the condition that they won’t be moved to the mainland.
• The products could be brought to the mainland after being inspected for duties and VAT.

Non-Bonded Warehouses

• These are the warehouses for which the duties are immediately paid when taken out of the port and items could be stored indefinitely for a reasonable charge. Port authorities are the ones who are in charge of these warehouses instead of customs authorities. These warehouses are seen in both free trade zones and the mainland. The only difference is that the ones in the mainland hold goods whose VAT has already been cleared.  
• These warehouses are mostly used by businesses who intend to sell their products in the local market close to the free trade zone where it was imported.
• If you imported shoes from Vietnam to JAFZA and intend to sell them immediately within the UAE market then using a non-bonded warehouse could be a plausible option.
• Storing prohibited goods has certain time limits.

Bonded Transportation

• The goods that are stored within the bonded warehouse are considered to be bonded cargo. They can either be released to the mainland after paying the VAT or could be exported to other free trade zone areas of any country around the world without paying it. The kind of transport used to transport bonded cargo to another free zone is bonded transportation.
• They could be transported through various means like land, sea, or air depending upon the requirements and market demands. When it is transported through land then the process is defined as bonded trucking. The goods are further transported either through sea or air. They could be consolidated as LCL or FCL by Sea.
• Taxes are only to be paid in the final destination, for the portion of the goods that are released into the mainland.

Strategy to Optimize Bonded Storage and Transportation

• Suppose you want to import multiple pallets of clothes from Europe to JAFZA and you intend to sell them in UAE and its neighbouring GCC countries. The best possible way to store it would be using a bonded warehouse. This is because when the commodities are stored in a non-bonded warehouse, taxes have to be paid for both in UAE and in the destination country when they will be transported from UAE.
• Storing in a bonded warehouse solves half of the problems. The other half depends upon how the products are released into the mainland. When the entire shipment is released to the mainland, then taxes have to be charged on the entire shipment. But if only the portion that is supposed to be sold in UAE is released, then the taxes are charged for that particular portion. The destination duty and tax are different depending upon the country and the costs will add up and make a significant difference once we are dealing with bigger numbers. In the end, the total percentage of taxes paid in all the countries for bringing the shipments to the mainland will always be lower than the taxes paid for the entire commodity.
• The mode of bonded transport for transporting the bonded shipments should depend upon critical factors like time and cost. If the shipments have to be immediately delivered to the destination due to market demands then opting for Air export will allow the goods to reach the destination within a few hours. If time isn’t an issue, it is better to opt for Sea export, which can save a lot of costs.
• Sea export can be either LCL or FCL depending on the volume or value of the shipments. Transfer of ownership along with terminal handling charges, clearance charges, and port charges has to be paid in case Sea export. Only border crossing charges have to be paid for bonded trucking.
• If the value of the total shipment is AED 900,000 and one-third of the shipment is released in UAE, one-third is shipped to Qatar, and the rest to KSA. The total taxes to be paid in this situation would be around AED 75,000. On the other hand, if the entire shipment were brought into the UAE mainland, then the total taxes would be around AED 90,000 and further taxes will have to be paid when they’re exported to other countries.