Overview of Bonded Goods: Definition Scope and Management Requirements

The bonded system is an internationally accepted customs system that plays a significant role in promoting the development of international trade activities. The following introduces the customs clearance of bonded import and export goods.

The widespread application of the bonded system in international trade makes bonded goods under this system an important part of import and export goods. The customs clearance procedure for bonded goods is significantly different from that for general import and export goods. The general meaning of bonded goods refers to "goods that enter a country's customs territory, are not subject to import duties under customs supervision, are stored, and are then re-exported." The "Customs Law of the People's Republic of China" defines "bonded goods" as: "Goods that enter the territory with the approval of customs without going through tax payment procedures, and are stored, processed, or assembled within the territory before being re-exported."

From the definition in the Customs Law, bonded goods have the following three characteristics:

1. Specific Purpose. China's "Customs Law" limits bonded goods to goods imported for two specific purposes, namely, trade activities (storage) and processing and manufacturing activities (processing, assembly), distinguishing bonded goods from goods temporarily imported for other purposes (such as engineering construction, scientific experiments, cultural and sports activities, etc.).

2. Temporary Exemption from Taxation. Article 43 of the "Customs Law" stipulates: "Goods temporarily imported or temporarily exported with the approval of customs, as well as specially approved bonded goods, will be temporarily exempted from customs duties after the goods consignee or consignor pays a deposit equivalent to the tax amount or provides a guarantee to the customs." Bonded goods enter the territory without going through tax payment procedures; it is a temporary exemption, not tax exemption, and customs will decide whether to levy taxes or grant tax exemption after the final destination of the goods is determined.

3. Re-exportation. This is an important prerequisite for constituting bonded goods. Legally, bonded goods have not undergone import and tax payment procedures like general goods. Therefore, bonded goods must be re-exported in their original state or as processed products. This is both the principle of customs supervision over bonded goods and a legal obligation that operators must fulfill. The customs clearance of bonded goods differs from general import and export goods; it is not completed at a single point in time when import or export procedures are handled but covers the entire process from entry, storage, or processing to re-exportation. Only after handling various customs procedures throughout this entire process is the customs clearance of bonded goods truly completed.

The basic procedures for customs clearance of bonded goods include four steps: Contract Registration – Import Goods – Re-export – Reconciliation and Case Closure. Source: Customs Broker Exam Network

1. Contract Registration and Filing.

This refers to the unit managing bonded goods submitting relevant approvals, signed contracts with foreign parties, and other relevant documents to the competent customs to apply for contract registration and filing procedures. After customs approval, a relevant registration manual is issued. Contract registration and filing is the first procedure handled with customs and must be completed before the import of bonded goods. It marks the beginning of the bonded business and the start of the legal relationship establishing legal liability and fulfilling supervision responsibilities between the operator and customs.

2. Import of Goods.

This refers to when bonded goods that have already undergone contract registration and filing with customs actually enter the territory; the operating unit or its agent should hold the "Registration Manual" for the batch of bonded goods issued by customs and other documents to declare to the customs at the place of entry and handle import procedures.

3. Re-export after Storage or Processing. This refers to the bonded goods, after entering the territory, being stored in a location designated by customs or delivered to a processing and manufacturing enterprise approved by customs for processing and manufacturing. They are re-exported upon the expiration of the storage period or after the processing of products is completed. The operating unit or its agent should hold the "Registration Manual" for the batch of bonded goods and other documents to declare to the customs at the place of exit and handle export procedures.

4. Reconciliation and Case Closure.

This refers to the operating unit, within a certain period after the expiration of the filing contract or after the processed products are exported, holding the relevant processing trade registration manual, import and export goods declaration forms, and other relevant materials to go through the reconciliation procedures with the customs where the contract was filed. After customs verifies the import, storage, processing, use, and export of the bonded goods and determines the final tax levy or exemption opinion, the filed contract is reconciled and closed. This step is the end point of the entire customs clearance procedure for bonded goods, signifying the final termination of the legal supervision relationship between customs and the operating unit.