International Trade: Customs Warehousing and Inventory Management

Warehouse Regulation in International Trade

Specific areas where imported products are temporarily exempt from paying:

• Customs tariffs
• VAT (Value Added Tax)
• Special taxes

The exemption lasts as long as the goods remain in that special area. These areas are perfectly delimited with clearly defined boundaries, and goods can stay there for an unlimited period. Each country is free to establish as many of these areas as it wants.

Customs Clearance

When merchandise arrives in the EU, a customs regime must be applied. This is a set of rules that products must follow to move legally in or out of a country.

Procedure

1. Submission of a customs declaration: Filling in the form, attaching documents, and showing the goods.
2. Checking and control of goods: Verifying information, determining quantity and characteristics, and classifying goods according to the tariff.
3. Acceptance of the customs declaration: Eligibility check and recording of results.
4. Release of goods: The goods can now legally move.

Customs and Bonded Warehouses

Facilities strategically located near ports, airports, and other critical entry points for international trade. They are authorized by customs authorities to store imported goods without immediate payment of duties and taxes. This term has two meanings: Physical Facility and Legal Customs Situation.

11 Types of Warehouses

• Temporary storage premises (RTO)
• Free warehouse
• Bonded logistics parks
• Aircraft and ship stores
• Bonded bins
• General Order (GO) warehouses
• Modification warehouses
• Type B, C, D, and E

Free Zones

Enclosed areas within the EU customs territory where non-Union goods can be introduced free of import duty, taxes, and commercial policy measures.

Authorized Activities

1. Usual Manipulations: Inventory taking, placing marks, seals, or labels, packing, etc.
2. Processing: Under the inward processing regime.
3. Destruction of goods.
4. Abandonment of goods.

After these processes, goods can be released for free circulation or re-exported.

Bonded Warehouse Benefits

Payment control, cost savings, in-house fulfillment, long-term storage, restricted goods flexibility, international shipping, 24/7 access, and increased security.

Inventory Management

Types of Inventory

A) According to the degree of transformation:

• Raw materials
• Manufacturing products/components
• Finished products

B) According to function:

• Cycle inventory
• Seasonal inventory
• Security inventories
• Inventories of recoverable material
• Inventories of useless material

Inventory Management Costs

• Supply Cost (Ca)
• Storage Cost (Cal)
• Unsatisfied Demand Cost: Stock-out cost and rupture cost.

Financial Metrics and Formulas

Average Maturity Period (PMM): Measures how many days it takes for a company to recover invested money, from the purchase of raw materials to collecting payment from customers.

• Economic PMM formula: PMMe = PMa + PMf + PMv + PMc
• Financial PMM formula: PMMf = PMMe - PMp
• VAT: Tax Base x Rate
• Minimum Stock: Cmn x Tr
• Maximum Stock: (Cmx x Tr) + Emn

The Wilson Model (EOQ)

The Economic Order Quantity (EOQ) system is a widely used stock management method to reduce inventory costs. It is one of the simplest models to implement, making it a standard in warehouse management.