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MBA 2009-12 : Group 1

Prasenjit Roychoudhury (25)

Sarup Paul (32)Subhajit Ghosh(39)

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Bonded warehouses

are warehouses in

which dutiablegoods may be stored

without paying the

duties on such goods

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Also known as a Customs warehouse,

Acts sort of like a no man's land where goods can be deposited withoutan importer or an agent needing to pay duties on them

Decides to sell the goods for re-export, duties will not be incurred.

If the goods are destroyed, the obligation to pay duties will also be

resolved If the imported goods are released for sale, however, customs duties

will come due

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Previous to the establishment of bonded warehouses inEngland the payment of duties on imported goods had tobe made at the time of importation-

It was not always possible for the importer to find sureties,

and he had often to make an immediate sale of the goods,in order to raise the duty, frequently selling when themarket was depressed and prices low;

The duty, having to be paid in a lump sum, raised the priceof the goods by the amount of the interest on the capital

required to pay the duty; Competition was stifled from the fact that large capital was

required for the importation of the more heavily taxedarticles;

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In 1733, Sir Robert Walpole tried asolution to the import problemwhen he came up with his systemto place tobacco and wine in

designated warehouses. The proposal was unpopular, and

it was not till 1803 that the systemwas actually adopted.

Imported goods were to be placed

in warehouses approved by thecustoms authorities, andimporters were to give bonds forpayment of duties when thegoods were removed.

Source: Wikipedia

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Mason Transfer and Grain

Co., bonded warehouse on

the South Texas Border.

Taken by Robert

Runyon sometime between1900-1920.

Source: Wikipedia

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Rules are country specific

Two types of Bonded warehousein India Private - Private companies

generally contract out theirwarehouse space. These privatecompanies will sometimes coverthe cost of the duties and fees forthe importer.

Public - government agencyGoverned by Indian customs actChapter7 rules 138 to 173

USA 11 types

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Sorting

Repacking

Relabeling

Remarking

Regaining

Assembled

Stored

Manipulated

Salvaged

Cleaning

Processed

Sampled

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AdvantagesAdvantages

The importer can store their goods without having to paythe immediate duties on them

If the importer sells the products for re-export, they do nothave to pay any duties at all.

By placing the goods in a bonded warehouse that hasadequate insurance, the value of the goods will be coveredshould they get damaged or destroyed while in storage.

If the products are damaged or destroyed, then theimporter does not have to pay custom duties.

By having bonded warehouses, it frees up cash flow forimporters. They can also take their time to market theirgood properly to get the best price possible.

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Thank You !