Indian exporters can enhance their operational flexibility and access global markets more effectively by establishing or utilizing bonded warehouses both within India and overseas. Typically located near ports or airports, these warehouses streamline export procedures and enable businesses to respond swiftly to market demands. Bonded warehouses may be public (government-owned or operated) or private (owned by individual businesses or corporations).
What is a Bonded Warehouse?
Bonded warehouses are secure storage facilities that operate under the supervision of customs authorities. They provide protection against damage, theft, and unauthorized access, while also offering significant financial and logistical benefits. One key advantage is that goods can be stored in these warehouses without the immediate payment of import duties or taxes. Duties are deferred until the goods are either exported or cleared for domestic consumption, thereby improving cash flow and operational efficiency.
Overseas Warehousing for Indian Exporters
Indian exporters can also open or lease warehouses abroad to support their international trade operations. However, doing so requires compliance with specific conditions set by the Reserve Bank of India (RBI), including:
- Maintaining a specified level of export turnover.
- Ensuring export receivables are within permissible limits.
- Conducting all transactions through designated bank branches.
Approval from Authorized Dealer (AD) Category – I banks is mandatory, and continued adherence to RBI guidelines is essential for renewals.
Bharat Mart in the UAE
The RBI has introduced specific regulatory relaxations for Indian exporters using ‘Bharat Mart’, a multimodal logistics and warehousing marketplace located in the UAE. These measures aim to simplify international trade and improve market access for Indian manufacturers, traders, and exporters.
Key Relaxations for Bharat Mart:
- Realization and Repatriation of Export Proceeds:
- AD banks are authorized to allow exporters to realize and repatriate the full export value within nine months from the date of sale of goods from the warehouse.
- Warehouse Operations:
- AD banks may permit Indian exporters (with a valid Importer Exporter Code) to open or hire warehouses in Bharat Mart without any preconditions.
- Operational Expenses:
- Exporters may remit funds for initial setup and recurring operational expenses related to their warehouse or office in Bharat Mart. Such remittances are allowed without preconditions, subject to verification of the reasonableness of the expenses.
These relaxations are enforced under Sections 10(4) and 11(1) of the Foreign Exchange Management Act (FEMA), 1999, and take effect immediately.
Overall Benefits of Using a Bonded Warehouse for Export
1. Financial Benefits
- Deferred Duty Payments: Improves cash flow management and allows businesses to plan around market price fluctuations.
2. Logistical Advantages
- Efficient Storage and Handling: Streamlines the export process, minimizes delays, and reduces transportation and warehousing costs.
3. Competitive Edge
- Proximity to Key Markets: Enables businesses to store goods closer to international customers, enhancing responsiveness and increasing market competitiveness.