Companies looking to ship goods to Canada might be confused about the difference between a bonded warehouse and a sufferance warehouse. After all, when you ship goods to another country, they don’t just get sent straight there. Instead, a regulatory agency will inspect the goods for legitimacy and legalities. In Canada, the entity that does this is known as the Canada Border Services Agency (CBSA). If your goods can’t get immediate clearance, then they can sit, and sit, and sit. To delay excise taxes, customs duties, and more, you might stash your goods in a bonded or sufferance warehouse. What are these and what's the difference?
Both bonded warehouses and sufferance warehouses are private facilities that are regulated by the CBSA and used to defer duties for a period of time. Sufferance warehouses are used for short term storage (40 days or less depending on the product), while bonded warehouses can hold goods for up to 4 years in most cases. There’s also some other important differences between bonded and sufferance warehouses in regards to modifications that can be made to goods in each warehouse.
In this article, we will expand more on the differences between bonded warehouses and sufferance warehouses, including the warehouse types, time limits, regulations to adhere to, and the benefits. By the time you’re done reading, you’ll be able to decide if a bonded warehouse or a sufferance warehouse would work best for your company.
Let’s begin with the definition of a sufferance warehouse. As we mentioned above, a sufferance warehouse is one that’s privately owned and regulated by the CBSA. Like with a bonded warehouse, you can avoid customs duties for the duration of time the goods stay in a sufferance warehouse.
Before you can get your item into a sufferance warehouse, you must post your financial security bond. It’s important to note that the only modifications that can be made to goods in a sufferance warehouse are markings or stampings. Even this can only occur in special circumstances.
What are those circumstances? According to Canadian law, alterations or modifications can occur through licensees for:
The products you may keep in a sufferance warehouse vary. That’s why there are five types of sufferance warehouses for related goods. These are Type A, Type B, Type C, Type S, and Type PS facilities.
Let’s talk about each warehouse type in more detail now.
The first category of sufferance warehouses, Type A, encompasses all general merchandise. Those who use these warehouses include stevedoring companies and harbor commissions (AW), cargo handlers (AH), railway companies (AR), marine companies (AM), and airlines (AA).
Type B sufferance warehouses also store general merchandise, but this time for commercial motor vehicles made for highway use.
Yet another type of sufferance warehouse for general merchandise, Type C spaces are run by a third party. These may include customs brokers, bonded freight forwarders, deconsolidators, or consolidators. The parties will import, sort, deconsolidate, and/or store the items in question.
Specific commodities go into Type S sufferance warehouses. These include licensed warehouses (SO), provincial liquor jurisdictions (SL) and used personal effects and household goods (SH). Human plasma, flowers, poultry, fish, fresh meat, vegetables, and fruits (SF) can also get stored in these warehouses.
Only private railway siding gets stashed in a sufferance warehouse that’s Type PS. These importers may operate or own the railway sidings. They have imported goods in carloads that have yet to be released through the CBSA.
As noted earlier, sufferance warehouses are designed for short-term storage. The time limit is 40 days or fewer. If you need to keep your goods in storage for longer than 40 days, then you’d want to think about using a bonded warehouse instead.
Looking at the nature of the items you can store in a sufferance warehouse, it doesn’t necessarily make sense to keep them all in a facility for 40 days. Edible items like vegetables and fruits would surely go bad by then.
That’s why the CBSA mandates different time limits depending on the item. Here’s a breakdown:
What happens if you by chance don’t get your imported goods out of the sufferance warehouse in time? Per the law, the CBSA or another Canadian authority will do the following with your items:
A customs bonded warehouse is the other option you can use for storage of imported goods into Canada. These warehouses are licensed by the CBSA. The items stored here are on their way to being imported yet aren’t released. There are no duty payments despite the imported status of the goods.
You also have more freedom to change your goods when in a bonded warehouse compared to a sufferance warehouse. For example, you can trim or cut the item down. You may also choose to dilute it.
You can even test defective parts or products while your item sits in a bonded warehouse in Canada. If you want to package the product for the first time, change the packaging, or upgrade the labels, you can.
If you’re contemplating a bonded warehouse for keeping your company’s imported goods, then you’re going to want to know how these warehouses work. Below are the steps you may follow if you wish to use a bonded warehouse.
While bonded warehouses offer the convenience of a duty-free facility with more time for goods storage, these warehouses have rules. Make sure you familiarize yourself with the following Canadian warehouse regulations.
Customs Bond Posting
If one is necessary, then you must post your customs or financial security bond with the chief officer of customs. Your bond can be in the form of a transferable bond, certified check, or cash.
For all facilities licensed as a bonded warehouse, they must have security requirement signs, window and door locks, and “components of sturdy construction.”
When a facility enters use as a bonded warehouse, the license owner must ensure goods are stored in a secure and safe manner. All goods must also be labeled or otherwise identifiable. This allows for CBSA officers to compare documentation of the goods against the product itself.
No one can take the goods from the warehouse or deliver them unless they’re a carrier, related employee, or licenser.
The following items are not allowed in a bonded warehouse:
While very strict limits exist on goods arriving to a sufferance warehouse facility, that’s not the case with a bonded warehouse. At the very least, you may keep your goods stored for a few months, and at longest, over 10 years.
Here’s how the goods storage times go for a customs bonded warehouse:
Even the shortest timespan, the 90 days for trade show goods, is a lot longer than the 40 days you get when keeping your items at a sufferance warehouse.
On that note, let’s discuss the benefits your company could reap if you were to choose a bonded warehouse for the storage of duty-free imported goods:
While bonded warehouses certainly do have a slew of benefits, they’re not your only choice. You should also consider a sufferance warehouse for your cargo control and goods storing needs. Now that you know the differences between the two, the question becomes how to choose from a bonded warehouse or sufferance warehouse?
The first factor that can guide your decision is how long you need your goods in storage. If you need to put a short-term stop on your import duty, then a sufferance warehouse makes the most sense. Remember that you get only 40 days, so a little over a month. Many other products may have shorter spans, with the briefest only four days and some longer periods up to two weeks.
If you don’t have immediate plans for releasing your imported goods, then it’s best to go with a bonded warehouse. At most, you can keep your goods in one of these warehouses for 15 years. While those are products of a specific nature (aircraft and watercraft parts and components), even for more general products, you won’t have to take them out any sooner than four or five years. That’s much better than a mere 40 days.
Another factor you have to think about is how much access you want to your stored items. If you don’t mind keeping your goods behind lock and key, then choose a sufferance warehouse. You’re not totally cut off from your goods, but you need to acquire permission before you can access them. Considering your items are only stored in the warehouse for 40 days, this might not be worth it.
With a bonded warehouse, not only can you see your goods as desired, but you can also make changes or manipulations to them. As you recall from earlier in the article, these approved manipulations include cutting the item, disassembling and reassembling, labeling it and changing the labeling, testing for defects, and diluting the item. You can’t do any of that when your goods go into a sufferance warehouse.
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The next time you wonder about the difference between bonded warehouses and sufferance warehouses and which is better for you, call on our team at R+L Global Logistics. We’ll help get you there. Give us a call at 855-915-0573 today!