(This column originally appeared in the Inquirer)
It’s no secret that the Trump Administration’s back-and-forth tariff policies have created significant challenges for businesses that rely on materials coming in from overseas. One way to mitigate the impact of these costs and avoid raising prices on customers is receiving these materials into a bonded warehouse.
Demand for bonded warehouses from the mid-Atlantic to the Pacific Northwest has surged since President Donald Trump imposed steep tariffs on dozens of countries, according to a report by Transport Topics.
At a bonded warehouse, which must be certified by U.S. customs, no tariffs are charged for goods received. Tariffs are just deferred and then imposed when the goods are ultimately shipped from the warehouse.
Many such facilities are located in the Delaware Valley. Snapl Solutions Inc., a third-party fulfillment and logistics service based in Gloucester City, N.J., is one.
According to Max Levin, Snapl’s managing director, bonded warehouses like his offer operational flexibility, tariff mitigation, and improved cash flow, and can be a good strategy for companies — particularly smaller companies — to “ride out” the tariff turmoil.
“Companies can pull out smaller releases of inventory at a time and pay tariffs at that time — which may be lower — instead of paying higher rates at the time of purchase,” he said. “Many companies are waiting for the dust to settle and are using bonded warehouses as a way to manage their cash flow better.”
So how does this work?
Like many bonded warehouse operators, Levin’s company works directly with their client’s customs broker to make sure all the shipping paperwork (bills of lading, packing lists, etc.) is complete and compliant. They also coordinate the pickup and receipt of the materials received at a port by an approved carrier so they can be transferred to their warehouse.
“Many businesses don’t realize that the transportation companies — carriers — also need to be certified and bonded as well as our warehouse, and that’s another value we provide,” he said. “Choosing a warehouse that is closer to ports will also help reduce costs.”
Once items are received at his warehouse, quantities, supplier, values, and other information are verified and entered into their system, and formal notifications are made to the customs service and other authorities. Items are then stored and managed in accordance with the particular requirements of the client.
When their client needs products, an order is submitted — usually electronically — and specific items are identified and released along with the appropriate paperwork. Final tariffs, which are ideally lower than at the time of purchase, are then calculated and charged to the client.
Bonded warehouses like Levin’s maintain compliance logs, copies of all paperwork, and other reports for auditing and inventory management.
Regarding the cost, Levin said he charges a monthly fee of anywhere from $15-$50 per pallet of materials for storage and then there are additional charges for picking, packing, and shipping. It’s important to consider these costs compared to the tariffs potentially saved in order to determine whether this strategy is best for your company, he said.
The process can be complicated at first for many clients, Levin noted, but over time becomes easier, with some clients expanding their use of his facilities to further reduce their tariff exposure.
For example, some companies can receive products into their warehouse and then ship them directly out to foreign customers without paying any tariffs at all. Other clients changed their processes to ship raw materials directly to their warehouse so they can perform more assembly in this country and therefore incur lower tariff rates.
“We have one client that sells sunglasses, and they’re now receiving individual parts for the sunglasses from China instead of the finished product,” he said. “That way they’re paying tariffs on the manufactured price and not the retail price (which is higher).”
Given all their capabilities, a bonded warehouse may provide a more profitable solution to a company, regardless of how tariffs shake out. Many provide additional services like repackaging, shrink-wrapping, refrigerated storage, and kitting. Bonded warehouses can provide a buffer during changes in regulations, such as when new tariffs are imposed or rules of origin change under trade agreements.
“It’s important to consider a bonded warehouse provider as a long-term partner,” Levin said. “Particularly for smaller businesses we can provide a level of inventory management and efficiencies that they may not be able to provide themselves.”
