Bonded warehouses: A growing 'temporary solution' to tariff war

PHARR, Texas (ValleyCentral) — The uncertainty of tariffs is affecting local trade as local custom brokers and trucking companies try to adjust to the changes coming to international trade. However, they may be finding a temporary solution through a service they already offer to their trading partners.

Custom Broker Crispin Flores says the constant back and forth over the tariffs has led to a lot of confusion and distress with clients.

“The uncertainty, the unknown variables," Flores said. "Right now, we don’t know what’s going to happen and our clients don’t know what’s going to happen, and they ask us for information and we're like we don't know."

He also says they have to do more training and hire people able to do the job to reduce any errors with the constant changes.

“It has gone a bit more worrisome because now you are wondering, well, am I really reporting correctly and in my mind that can open a big can of worms in the end, as customs can come in again and say that now we are going to do some audits," he added.

Flores adds that the work has become more complicated and has increased their workload dramatically as their suppliers worry about what to ship and when.

“We used to do what we call a tariff number, which is basically one line in our documentation," Flores said. "Now, some of those lines have gone up to two, three, four, or even five lines depending on the commodity and the origin of the good."

Congressman Henry Cuellar says tariffs are not just causing uncertainty and raising prices, but also impacting jobs.

“If you raise the tariffs, for example, we are talking to the trucking industry," the congressman said. "If you intend to buy 10 trucks, you might have to buy them later because the cost of your truck is going to go up by $25,000 or $30,000. Instead of buying 10 trucks, they will but four or five and that has an impact on jobs because there will be less driving those trucks.”

The concept of bonded warehouses seems to be a promising solution in the midst of tariffs. These are facilities where imported goods can be stored without immediate payment of import taxes and duties.

“It is something that helps importers and defer requirements on imports like permits or quotas and things that people do not have at the time but they are looking them at right now as it will help them in the end and keep that money in their pocket instead of giving it to customs," Flores said.

Flores says a part of his warehouse offers this service, where importers can keep their products up to five years as long as they pay a monthly rent to the warehouse.

UTRGV Economic Professor Gautam Hazarika says this might be a good solution, but only for the short term.

“In the short term, perhaps, but see in the long term, it will all depend on trade flows," Hazarika said. "So if the long-term effect of tariffs is a reduction in imports from, say, Mexico, then less warehousing will be required, right? So this could be just a temporary blip to in order to beat the tariffs, you follow me, but in the long term, it may, it may slow down, because that's what tariffs do they they reduce the volume of trade."

Flores says many of his clients, including one from China, are considering the idea. He anticipates more bonded warehouses will pop up in the coming months.

“We talked to customs about it and they said a lot of people are looking to set up these types of warehouses in the area to help those people who need to defer their payment duties," Flores said.