Developing bonded warehousing: Experience from the UK

This paper is intended to provide readers with a general overview of the bonded warehousing regime in the United Kingdom (UK) and to provide points for discussion to the government of China. The paper provides insight from Deloitte LLP and the London Metal Exchange (LME), giving an overview from a regulatory and commercial perspective, in addition to practical examples of how warehousing schemes operate and the advantages for industry.

The rapid proliferation and economic impact of special economic zones have been documented in numerous studies. By some estimates, there are over 3,000 zones in 135 countries today, accounting for over 68 million direct jobs and $500 billion of direct-trade related value-add within zones. Most of these studies however focus on government-owned, developed and operated zones, missing the fact that there have been dramatic developments in the private sector and the use of public/private zones, supported by the implementation of the World Trade Organisation and World Customs Organisation frameworks, focused on providing customs duty (and other related taxes) relief and incentives.

The UK used to operate five Free Trade Zones. UK Free Zones were located at certain ports of entry and controlled principally on the basis of the requirements of customs warehousing procedures and there were no special reliefs in Free Zones from other taxes, excise duties or local authority rates. However, due to the development of customs legislation in the EU and the more commercially attractive benefits of utilising customs procedures such as customs bonded warehousing, the UK ceased to renew the licenses for the Free Zones in 2012. Since then, there has been growth in the development of bonded warehousing.

Bonded warehousing is a customs procedure allowing the import of goods for storing in a secure area without payment of import taxes until the goods are removed for domestic consumption. Generally, the duty liability is cancelled upon re-export of the goods outside the EU. A bonded warehouse can be both public or private and the authorisation to have a bonded facility can be granted over the operators’ existing premises or preferred location. The authorities govern the bonded warehouses via customs legislation and users can be granted an integrated authorisation, allowing importers to benefit from other customs processing reliefs. This makes bonded warehousing a relatively easy to use and attractive mechanism for importers, traders and manufacturers.

Key discussion points

  • Customs facilitation - Maximise the ease of use of a bonded warehouse regime to attract foreign companies to use the regime
  • Tax incentives - Offer an attractive alternative to other global supply chain/sourcing/manufacturing investment opportunities for penetrating the Chinese market
  • Welcome foreign warehouses and form partnerships with the world’s premier foreign exchanges and enable the quickest and best access to the world’s leading bonded warehouses expertise.


You can also download this report in Chinese.