Tariff strife heats up demand for bonded warehouses near LA ports

The tariff turmoil has turned bonded warehouses into a hot ticket for a few Los Angeles landlords.

Importers still receiving shipments from overseas are scrambling to rent space in the bonded buildings, where they can buy time for tariff tensions to wither, the Los Angeles Times reported.

The rare buildings are suddenly in hot demand, allowing goods to be stored without paying tariffs until they are shipped out.

The bonded warehouses require operators to put up a bond to protect potential government duty revenue, with customs bonds typically starting at $100,000. They also require workers to undergo background checks.

Otherwise, tariffs are assessed as soon as imported products touch American dirt, with the current tariff on Chinese imports at 145 percent. Over the next few weeks, those and the 10 percent tariffs that apply to nearly all nations are expected to severely choke imports at Los Angeles and Long Beach ports

Some importers still receiving shipments are scrambling to rent space in bonded buildings, where they hope to buy time for the tariff tensions to ease, according to industrial broker Danny Reaume of JLL.

“There’s been an absolutely crazy increase in demand for bonded space,” Reaume told the Times. “Everybody wants to bring their goods here in advance of what they hope is a resolution” of the tariff war.

The importers aim to store their goods in such warehouses for a month or two until the trade conflict is settled, he said.

At worst, the importers expect to pull their goods out of the bonded warehouses a little at a time, paying tariffs as they go while keeping the rest of their imports from the tax man.

Unfortunately for importers, only a “tiny” fraction of the roughly 2 billion square feet of industrial property in greater Los Angeles is bonded by U.S. Customs and Border Protection, Reaume said.

Typically, bonded warehouses are used by importers that bring in goods from one country before bundling them and shipping them to another without having to pay tariffs. Such warehouses also allow importers to perform limited assembly or other improvements to goods.

Many importers are canceling orders or sending goods back to China before they’re unloaded, according to Reaume.

Others are paying to bring their orders ashore because they don’t want to strain their relationships with national retailers by not giving them the goods they promised, or trying to raise their wholesale prices.

“Suppliers are eating a lot of these tariffs,” Reaume told the Times.

Warehouse operators who want to get their buildings bonded to serve the surge in demand are out of luck in the short term.

The application process can take several months, French international transportation and logistics company Geodis said in a recent report on bonded warehouses. Properties must meet certain requirements for ingress and egress, as well as fire safety and security standards.

The overall demand for warehouses used to move goods through Los Angeles County ports is expected to fall as widespread tariffs take effect, sapping the economic vitality of one of the world’s largest industrial real estate markets.

— Dana Bartholomew