As international trade becomes increasingly complex, bonded warehouses have emerged as a strategic solution for businesses to optimize supply chains and significantly reduce costs. This article provides a comprehensive guide to bonded warehouses — from basic definitions to procedural steps and practical benefits for import-export companies.
1, What is a Bonded Warehouse?
A bonded warehouse is a designated area (warehouse or yard) authorized to store goods that have undergone customs procedures while waiting to be exported or awaiting import clearance into Vietnam. This is a flexible solution that helps businesses streamline logistics and optimize delivery times.
Legal Basis: Clause 10, Article 4, Customs Law 2014
Essentially, a bonded warehouse functions as a “buffer zone” between the international and domestic markets. It allows businesses to store goods without paying import duties upfront, offering flexibility in inventory management and cash flow.
2, Types of Goods Allowed and Prohibited in Bonded Warehouses
a, Goods from Abroad Entering Bonded Warehouses
These include goods awaiting import clearance into Vietnam or awaiting export to a third country:
- Goods owned by foreign entities not yet contracted to sell to businesses in Vietnam
- Goods imported by Vietnamese businesses waiting to enter the domestic market or be re-exported
- Goods brought from abroad into bonded warehouses pending re-export
b, Goods from Vietnam Entering Bonded Warehouses
These include goods that have completed export customs procedures:
- Exported goods awaiting shipment
- Goods whose temporary import-export period has expired
c, Goods Prohibited in Bonded Warehouses
Important Note: Not all goods can be stored in bonded warehouses. The following are strictly prohibited:
- Counterfeit goods or goods falsely labeled as Vietnamese origin
- Dangerous goods or those causing environmental pollution
- Goods banned or temporarily suspended from export/import (unless approved by the Prime Minister)
Legal Basis: Article 85, Decree No. 08/2015/NĐ-CP
3, Value-Added Services in Bonded Warehouses
Bonded warehouses are more than just storage facilities. Under Article 83 of Decree No. 08/2015/NĐ-CP, businesses can carry out the following value-added services:
- Packaging, splitting, sorting, and maintaining goods
- Sampling for inspection and customs procedures
- Transferring ownership of goods without removing them from the warehouse
Special Case: Bonded warehouses designated for chemicals or petroleum may perform blending or conversion if they meet regulatory requirements.
4, Customs Procedures for Goods through Bonded Warehouses
a, Exporting to Bonded Warehouse and Re-Importing to Domestic Market
Due to challenges in “on-the-spot import-export” procedures, the General Department of Customs issued Official Letter No. 4826/TCHQ-GSQL (dated 14/11/2022) allowing businesses to export goods to bonded warehouses and then re-import them into Vietnam.
Process:
- Complete export customs procedures to send goods to the bonded warehouse
- Transfer ownership of the goods while they’re in the warehouse
- Register an import declaration and complete import procedures under Article 91, Circular 38/2015/TT-BTC
Responsibilities of Declarant:
- Declare the import form according to required data fields
- Follow customs procedures corresponding to the import type
Important Note: Certain goods cannot be imported from bonded warehouses into Vietnam, such as:
- Goods listed in Decision 15/2017/QĐ-TTg that must clear customs at the port of entry (except if the warehouse is inside that port)
- Such goods may only enter Vietnam via authorized Customs Sub-Departments
b, Exporting from Bonded Warehouse to Foreign Countries
According to Clause 3, Article 91 of Circular 38/2015/TT-BTC:
Responsibilities of Declarant:
- Submit independent transport declarations for customs-supervised shipments
- Submit a copy of the export slip showing specific items for each import declaration
- Provide details to port/warehouse operators about goods eligible for customs clearance
Export Regulations:
- Goods must exit through ports designated by the Prime Minister
- Customs authorities supervise until goods leave Vietnam
- If not exported within 15 days or if the port is changed, notification is required
- For land or river border checkpoints: export confirmation via customs system after crossing
c, Importing from Foreign Countries into Bonded Warehouses
Under Clause 1, Article 91 of Circular 39/2018/TT-BTC:
Responsibilities of Declarant:
- Submit an import declaration as per form (if paper-based: 2 originals of form HQ/2015/NK)
- Submit a copy of the bill of lading or equivalent transport document (not required for border land ports)
- Submit a copy of the temporary import-export license (if required)
- Submit the original of any required technical inspection certificate (unless already submitted electronically)
Import Regulations:
- Import date is recorded by customs in the system
- Conditional temporary imports may only be warehoused within the province/city of entry/exit
- Entry is only through ports approved by the Prime Minister and as guided by the Ministry of Industry and Trade
5, Main Benefits of Using a Bonded Warehouse
Using bonded warehouses offers numerous advantages for import-export businesses:
- Deferred Import Duties: Goods stored in bonded warehouses are exempt from immediate import taxes, helping improve cash flow.
- Flexible Transactions: Businesses can sell, trade, or transfer ownership of goods without physically moving them.
- Long Storage Periods: Goods can be stored for up to 12 months, extendable once for another 12 months with valid justification.
- Efficient Delivery Process: Goods can be quickly delivered from the warehouse with high security and minimal delays.
- Value-Added Services: Tasks like packing, splitting, and sorting can be done onsite, reducing logistics costs.
- Supply Chain Optimization: Ideal for managing goods distribution across multiple markets.
6, VAT Issues and Solutions for Businesses
a, VAT Challenges for Exporting via Bonded Warehouses
In principle, goods exported via bonded warehouses are eligible for 0% VAT and refunds. However, in practice, many businesses exporting to bonded warehouses and then re-importing into Vietnam are denied 0% VAT and VAT refunds by tax authorities.
Tax Authority’s Reasoning:
- These transactions are classified as “on-the-spot import/export” with the foreign buyer already present in Vietnam
- Hence, they do not meet the definition of exports under point c, Clause 1, Article 35 of Decree 08/2015/NĐ-CP
- The Ministry of Finance argues that such goods are not truly exported for consumption abroad or to tax-free zones
b, Solutions for Businesses
- Prove the Transaction is Genuine: Demonstrate that the export to the bonded warehouse is a real deal with a foreign buyer who directly designates the bonded warehouse — without involving a third party. This supports the application of 0% VAT.
- Monitor Legal Updates: A draft amendment to the Customs Law proposes removing the requirement that the foreign trader must not be present in Vietnam. If passed, businesses could apply for retroactive VAT refunds.
- Seek Expert Advice: Work with customs and tax professionals to prepare documentation and clarify compliance strategies.
–> Related articles: Customs Consulting Services
7, Frequently Asked Questions About Bonded Warehouses
1, How long can goods be stored in a bonded warehouse?
Goods can be stored for a maximum of 12 months from the date they are brought into the bonded warehouse. This period can be extended once for up to another 12 months with valid justification.
2, Can ownership of goods in a bonded warehouse be transferred?
Yes, enterprises can transfer ownership of goods directly within the bonded warehouse without removing them, saving both cost and time.
3, Are exports to bonded warehouses eligible for the 0% VAT rate?
In principle, exports via bonded warehouses are eligible for the 0% VAT rate. However, if the goods are re-imported into the domestic market after being exported to the bonded warehouse, tax authorities often do not approve the 0% VAT rate.
4, What services are allowed in bonded warehouses?
Permitted services include: packaging, splitting, classification, goods maintenance, sampling for inspection, and ownership transfer. For specialized bonded warehouses storing chemicals or fuel, blending or conversion of types is allowed if conditions are met.
5, How to establish and operate a bonded warehouse?
To set up and operate a bonded warehouse, enterprises must meet requirements under customs law, such as having a separate location, surveillance cameras, inventory management software, qualified staff, and must be licensed by the competent customs authority.
Conclusion
Bonded warehouses play a vital role in Vietnam’s export-import strategy, offering benefits such as deferred tax payments, optimized storage, and enhanced flexibility in international trade. However, businesses must pay close attention to VAT regulations and customs procedures to fully capitalize on the advantages of bonded warehouses.
Need tailored advice on bonded warehouse procedures or want to use bonded warehouse services for your business? Contact us today for support!