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India’s robust warehousing ecosystem is an essential cog in its international trade machinery. With the government’s focus on “Ease of Doing Business,” customs warehousing regulations have undergone significant transformation, making them more efficient and business-friendly. For businesses engaged in importing or exporting goods, understanding these customs regulations is crucial to optimize operational costs, reduce duty burdens, and stay compliant.
This blog provides a comprehensive guide to India’s customs warehousing regulations—from the legal framework and types of warehouses to the licensing process, warehousing operations, and modern schemes like MOOWR.
1. Legal Framework Governing Customs Warehousing Regulations
India’s warehousing system is governed by Chapter IX (Sections 57–73A) of the Customs Act, 1962. These provisions provide the legal basis for warehousing imported goods before duty payment. The main objective is to facilitate trade by allowing importers to defer customs duties until goods are either sold domestically or exported.
In addition to the Customs Act, the Central Board of Indirect Taxes and Customs (CBIC) has notified various supporting regulations:
- Warehouse (Custody and Handling of Goods) Regulations, 2016: These define the responsibilities of warehouse keepers, particularly about safeguarding goods, maintaining inventory records, and allowing customs inspection.
- Public Warehouse Licensing Regulations, 2016: They lay out criteria and procedures to license public warehouses that can store goods from multiple importers.
- Special Warehouse (Custody and Handling of Goods) Regulations, 2016: These deal with sensitive or high-risk goods such as arms, chemicals, and narcotics that require stringent controls and specialized infrastructure.
2. Types of Warehouses under Indian Customs Law
There are primarily three types of customs-bonded warehouses in India:
- Public Bonded Warehouses: These are open to multiple importers and typically operated by government agencies like the Central Warehousing Corporation (CWC) or by private operators with a valid license under Section 57 of the Customs Act. These are ideal for small or medium enterprises that do not need a dedicated facility.
- Private Bonded Warehouses: These are exclusive warehouses used by a single importer. A license under Section 58 allows companies to store their own imported goods without paying duties upfront. These facilities are tailored for large corporations with high import volumes or goods needing specialized handling.
- Special Warehouses: Under Section 58A, special warehouses are used for high-risk or sensitive imports like hazardous chemicals, tobacco, arms, or pharmaceuticals. These warehouses require advanced infrastructure and stringent compliance protocols due to the nature of the goods stored.
3. Licensing Procedure for Operating a Bonded Warehouse
Setting up a bonded warehouse requires approval from the Principal Commissioner or Commissioner of Customs. Here’s how the process unfolds:
a. Filing the Application: Interested entities must submit a detailed application describing:
- Location and layout of the facility
- Security systems (CCTV, fire safety, etc.)
- Inventory management systems
- Staff details and handling capabilities
b. Financial Solvency: Applicants must demonstrate financial strength. Generally, a solvency certificate of ₹2 crore or more is required. Additionally, warehouse keepers must be capable of bearing potential duty liabilities.
c. Site Inspection and Infrastructure Assessment: Customs officials conduct an inspection to evaluate readiness. They ensure the warehouse meets infrastructure norms such as proper flooring, fire safety, secure fencing, and dedicated entry/exit points.
d. Execution of Bond: Once approved, a bond is executed under Section 60. This bond guarantees duty payment should goods be diverted improperly or not cleared within the stipulated time.
4. Warehousing Process in India
Here’s how the warehousing process works once a shipment lands in India:
a. Bill of Entry for Warehousing (Into-Bond Bill): The importer must file a special document called the Bill of Entry for Warehousing. This is distinct from the regular bill of entry for home consumption and signals that the goods are being warehoused without immediate duty payment.
b. Customs Assessment and Examination: After filing, customs authorities inspect and assess the goods. They verify the declared value, classification, and applicable duties.
c. Bond Execution (Section 59): A bond equivalent to three times the duty amount must be executed to cover potential liabilities.
d. Transportation to the Bonded Warehouse: After customs clearance at the port, goods are moved to the bonded warehouse under customs escort or electronic tracking.
e. Storage and Supervision: The bonded warehouse operator must maintain:
- Inventory logs
- Entry and exit records
- Periodic reports to customs
- Systems for physical verification
Customs officers can conduct surprise audits or inspections to ensure compliance.
5. Duration of Warehousing
The maximum time goods can remain in bonded warehouses varies:
- General Imports: Up to one year from the warehousing date
- Capital Goods for 100% EOUs: Up to five years
If the importer fails to clear goods within the prescribed time, they must pay interest, and customs authorities can initiate clearance or auction procedures.
Extension Provisions
Importers can apply for extensions in six-month blocks. While the Commissioner of Customs grants the first extension, further extensions require Chief Commissioner approval, provided there are valid business or operational reasons.
6. Interest on Delayed Clearance
One of the cost implications of exceeding warehousing periods is interest liability:
- If goods are not cleared within the allowed timeframe, the importer must pay interest at 24% per annum on the applicable duties, calculated from the date of expiry to the date of clearance.
- Waivers or reductions in interest are rare but may be considered by CBIC under extraordinary circumstances like natural disasters or force majeure events.
7. Transfer and Movement of Goods Between Warehouses
The law allows goods stored in one bonded warehouse to be moved to another with customs permission. This is particularly helpful for businesses with multiple distribution hubs across India.
a. Inter-Warehouse Transfer:
Movement is allowed under strict documentation and supervision. The original warehouse must file a transfer application, and the receiving warehouse must acknowledge receipt and maintain proper records.
b. Use of ICEGATE and EDI:
With digital platforms like ICEGATE (Indian Customs EDI Gateway), importers and customs can track warehouse transfers in real time, ensuring transparency and reducing paperwork.
8. Manufacture and Other Operations in Warehouse (MOOWR Scheme)
One of the most innovative reforms in India’s customs warehousing policy is the MOOWR scheme (Manufacture and Other Operations in Warehouse Regulations, 2019).
This scheme allows importers to:
- Set up manufacturing or assembly units inside bonded warehouses
- Import raw materials and capital goods without duty payment
- Pay customs duties only on finished goods cleared into the domestic market
- Re-export goods without paying any duty
Key Benefits:
- No Export Obligation: Unlike EOU/SEZ models, MOOWR does not require export commitments.
- Deferred Duty Payment: Helps in cash flow management by delaying duty until actual domestic clearance.
- Single License for Manufacturing & Warehousing: Simplifies compliance.
This is particularly beneficial for foreign companies establishing contract manufacturing bases in India, as it offers both cost-efficiency and regulatory convenience.
9. Compliance, Record-Keeping, and Penalties
Operators of bonded warehouses must ensure:
- Daily Stock Registers: Must be maintained digitally or manually
- Security Surveillance: 24×7 surveillance and restricted access
- Monthly Returns: Filing inventory status with customs
Failure to comply with customs regulations can result in:
- License cancellation
- Monetary penalties under Section 117
- Prosecution in cases of intentional evasion or fraud
Conclusion
Customs warehousing regulations in India are designed to enable businesses to import, store, process, and re-export goods efficiently. By leveraging the benefits of duty deferment, bonded logistics, and MOOWR incentives, companies can significantly reduce operational costs and improve supply chain agility.
However, with these benefits come responsibilities. Businesses must ensure strict compliance, accurate record-keeping, and timely clearances. For companies that require reliable bonded warehousing solutions, working with an experienced provider like OSV FTWZ can simplify the process through compliant infrastructure, sector-specific expertise, and seamless customs coordination.