Excerpt from: China Supply Chain and Logistics Strategy
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| August 24, 2005 | | Encourages Central DC and Overnight Network Strategy for Imported Parts |
What is a Warranty Bonded Warehouse?
- China Customs rules allow special treatment of service parts
- Service parts VAT = 17% of part value unless for in-warranty replacement –no WTO changes to this
- Key points:
- No duty if original part is in-warranty
- Deferred duty (monthly vs. daily) payment for out-of-warranty parts
–30-day part “loan” when unclear what part is required to repair equipment
- Physical separation of inventory (by wall or cage) for imported parts and among companies
- Defective returns flow outside bonded area
–Inventory management system must keep track of paperwork, Serial numbers and information for original equipment, related replacement parts, “loans” and defectives, this is a major challenge.
- Actual implementation is highly dependent on local China Customs treatment (i.e., Beijing is different from Shanghai)
- Many 3PL’s operate warranty bonded facilities on a common “campus” in Beijing)
- Requires Importer of Record status –many MNC’s do not have this and require from their Import/Export partner
- Customers primarily benefit from reduced and deferred duty payments
Customer’s challenges:
- Complex Customs rules
- Implementing the required inventory management system
- Maintaining service levels through single DC model within Customs “hours of operation”
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