Warehouse space is surging in demand at the Port of Los Angeles as U.S. importers scramble to store Chinese goods during a temporary truce in the ongoing trade war. A 90-day rollback in tariffs triggered a spike in shipments, with bonded warehouses offering a key advantage: the ability to delay tariff payments until the moment goods enter U.S. commerce.
What is a bonded warehouse and why is it valuable?
Bonded warehouses are secure facilities authorized by U.S. Customs and Border Protection, where importers can store foreign-status goods without immediately paying duties. U.S. Customs authorizes 11 different classes of bonded warehouses. Most importers use Class 2 (private) or Class 3 (public), while Class 8 allows for operations like sorting or relabeling. Bonds typically start at $100,000.
Unlike standard storage, these facilities allow duties to be deferred for up to five years. Tariffs are assessed when goods are withdrawn into U.S. commerce, not when they arrive, allowing importers to delay payment or re-export goods duty-free.
U.S. Customs and Border Protection regulates bonded warehouses and allows importers to store foreign-status goods. Tariffs are assessed when goods are withdrawn into U.S. commerce, not when they arrive, allowing businesses to delay payments or re-export inventory duty-free. Limited processing, such as packaging or light assembly, may be permitted under customs supervision.
This makes bonded warehouses a strategic buffer. Importers can pay the lower rate if tariff rates fall during the storage period. If goods are re-exported without entering U.S. markets, no tariffs are paid.
How has the tariff pause impacted shipping demand?
Shipping volumes from China to the U.S. jumped significantly after Washington and Beijing agreed to reduce tariffs to 30% for 90 days after talks in Switzerland.
Business Insider reported that bookings at German shipping firm Hapag-Lloyd rose more than 50% during the week of May 12, following weeks of steep declines under President Donald Trump’s earlier 145% tariff.
Container-tracking firm Vizion reported a 277% surge in U.S.-China bookings in early May. However, logistics executives warn the spike could be short-lived depending on the outcome of further trade talks.
Why are Southern California warehouses under pressure?
With duties temporarily eased, importers are racing to move inventory through Southern California ports and into bonded facilities. But the region has limited bonded capacity. Of the area’s nearly 2 billion square feet of industrial space, only a small portion is certified by U.S. Customs and Border Protection. The customs approval process and strict infrastructure requirements mean most facilities don’t qualify for bonded use.
“Everybody wants to bring their goods here and store them close in the Southern California market, banking on the fact that this is going to get resolved in the next 30 to 60 days,” Danny Reaume, an industrial property broker at JLL, said, according to the Los Angeles Times.
What happens after the 90-day pause?
Under U.S. law, 19 U.S. Code § 1315, tariff rates are determined when goods leave bonded storage, not when they arrive. That timing window is driving the current warehouse demand.
Economic impact
Under 19 U.S. Code § 1315, tariffs on bonded goods are assessed at the time of withdrawal, not entry, enabling strategic cost deferral.
If talks fail and tariffs return to previous highs, goods withdrawn later will face the steeper rates. If negotiations succeed and tariffs drop further, importers storing goods in bond can wait out the volatility and benefit from lower costs when they release their shipments.
Companies unable to secure bonded space must either pay tariffs at current rates or delay imports, increasing the risk of inventory gaps.
How long does it take to create bonded warehouse space?
The approval process alone can take 90 to 120 days, depending on facility readiness and customs review. Operators must meet federal security, fire safety and access standards and post a financial bond to protect potential government revenue. Customs certification adds additional lead time.
Given the slow conversion process, most businesses are turning to third-party logistics firms with existing bonded capacity. Companies like Geodis and DHL are actively assessing whether to build more facilities to meet demand.
Could foreign trade zones offer another option?
Some importers are turning to federally approved foreign trade zones (FTZs) as an alternative to bonded warehouses. These designated zones are considered outside U.S. customs territory for tariff purposes and offer greater flexibility in storing and processing goods.
FTZs allow goods to be stored indefinitely and may undergo inspection, repackaging, manipulation or manufacturing. Those zones are beneficial for operations that benefit from “inverted tariffs,” where the finished product has a lower duty rate than its components. Businesses can also reduce costs by implementing weekly entry procedures, consolidating customs filings and lowering associated fees. FTZs can hold domestic and foreign-status goods; some offer tax advantages for value-added activities.
While FTZs and bonded warehouses allow importers to delay or reduce tariff payments, they differ in structure and timing. Tariffs in FTZs are generally assessed when goods are admitted to the zone, whereas duties are applied when goods are withdrawn into U.S. commerce.
Each option comes with tradeoffs. Bonded warehouses are typically faster to access and better suited for short-term duty deferral. FTZs involve a more complex setup process. However, they offer additional benefits for companies that need long-term storage, mixed inventory or manufacturing capabilities. Unlike FTZs, bonded warehouses generally prohibit full manufacturing, allowing only minor manipulations such as repacking or labeling.
Why this matters for the US economy
Southern California is one of the world’s largest industrial real estate hubs and home to the nation’s busiest ports. As bonded space disappears, supply chain disruption could ripple through retailers and manufacturers nationwide.
Without access to bonded storage, some importers may face a tough choice: absorb high tariffs or delay shipments entirely, risking inventory shortfalls and lost sales.