The closest seaport may be 1,000 miles away in Galveston, Texas, but Jamie Cord likes to use a nautical reference in explaining a unique feature of one of his warehouses in Altoona.
“It’s like the cargo is still on the ship and hasn’t officially reached the shore yet so tariffs aren’t owed until the goods leave (the warehouse),” said Cord, president and CEO of JT Logistics, which is offering so-called bonded warehousing that allows importers to hold items duty free until they’re ready to go to market.
It’s believed to be the first of its kind in the Des Moines metro. But as President Donald Trump employs steep tariffs to address trade issues, it may not be the last.
Bonded warehouses, overseen by the U.S. Port Authority, are still relatively rare in the United States but are gaining popularity. Companies importing goods into the United States, especially from China, are rushing to convert warehouses into bonded facilities.
The U.S. has about 1,700 of the warehouses, where imported goods can be held without immediate payment of customs duties such as tariffs, currently set at 30% for items from China. The fees are only paid when the goods leave the bonded warehouse, allowing businesses to manage funds more effectively at a time of extreme trade policy volatility.
JT Logistics, with more than 2 million square feet of warehouse space in seven buildings at the interchange of Interstate 35 and U.S. 65, has 200,000 square feet of bonded warehousing space. The warehouse is called bonded because the company just post a bond with the government to ensure it is complying with trade requirements.
In turn, it protects the warehouse with fences and security cameras. To prevent any unauthorized removal of inventory, only workers who have undergone background checks are allowed access.
“It’s 100 percent secure,” Cord said. “I’m an owner of the building and I can’t go in there.”
Increased trade volatility spur interest in bonded warehouses
The Port Authority would not confirm how many bonded warehouses there are in Iowa, but Jason Ickert, chief operating officer for JT Logistics, said the company has the only such facility in the Des Moines area.
Cord said his company started offering bonded warehousing space several years ago, before the Trump tariffs. The recent trade measures have spurred interest.
Another option for managing tariffs are Foreign Trade Zones, where some manufacturing can take place using imported goods.
“And the reason why you might do that would be to actually do something called an inverted tariff, where maybe you bring in three components from another country, but by putting those three components together, the tariff rate on that new finished product is actually less than the individual tariff charge on the three components themselves,” said Peter Ralston, director of the Supply Chain Forum at Iowa State University.
Free trade zones also sometimes are used in manufacturing of goods that use foreign components and then are exported, accruing the jobs and other benefits associated with production but avoiding tariffs and other cost barriers.
Iowa has foreign trade zones in Des Moines, the Quad Cities, northwest Iowa and Cedar Rapids, and each can be expanded geographically to form subzones around specific facilities. For example, Des Moines’ trade zone, managed by the Greater Des Moines Partnership, includes a company in Council Bluffs and Winnebago Industries in Forest City, said Ryan Carroll, director of regional business development for the Partnership.
“We can do something to basically allow us to expand the FTZ around a company’s physical property in several counties that are outlined for that. And then we have kind of the general purpose area, which is a warehouse in Clive that has a little bit of FTZ space,” Carroll said.
Advantage: more cost certainty
Qualifying for the designations involves some expenditures, such as the costs of establishing the facility to meet federal requirements, said Carroll and Ralston.
“There are some fees obviously to establish a foreign trade zone sub zone,” Carroll said. “There are application fees, there’s legal fees, those types of things associated with that on top of having to look at the other items as well.”
One expense, he said, is for setting up a system to track all of the imported goods coming into a facility to meet reporting requirements.
“Sometimes those things can be kind of front-end barriers to doing this because there’s a little bit of time and cost involved with it, but ultimately, long term, strategically, if you’re importing stuff and unless we have free trade agreements with everybody, it makes a lot of sense to look at,” he said.
Ralston said bonded warehouse space can cost up to two times the price of a regular warehouse and recent demand due to tariffs has pushed those prices up in some place to fourfold those for a typical warehouse.
But he said both bonded warehouses and FTZs offer some distinct advantages to companies that rely on imports.
“To me, the massive advantage of being in a bonded warehouse or a foreign trade zone is it creates slightly more cash flow and maybe a little bit more cost certainty,” he said. “It gives companies a chance to inventory without having to pay the tariff for what’s still in the warehouse. That provides a little bit more cost certainty. I’m not saying cost benefit, but rather cost certainty, and it just helps to be a little more certain of your cash position.”
Having the product in-hand but not having to immediately pay the tariff also gives companies an opportunity to manage market volatility, as with Trump’s on-again, off-again tariff policies, he said. He pointed to steel tariffs, which recently went down for a while before again going up.
“So if you had steel in a bonded warehouse or FTZ you could have (waited) and paid a lower tariff rate,” Ralston said.
For companies managing supply chains, the uncertainty in the marketplace can be more unsettling than the actual tariffs, Ralston said.
“When I talk to Iowa businesses, it’s not necessarily the tariffs that bother them, it’s the uncertainty behind supply-chain decisions,” he said. “Supply chains crave certainty and what we have right now is a period of uncertainty in a weird way.”
Ralston said that if tariff were set without frequently being changed, companies would be in a better position to manage their effects.
“If it was just announced that this is what the tariff rate will be and a this is what it’s going to be moving forward and we’re not going to change it, manufacturing supply chains could figure out the best way to deal with it,” he said. “But right now there’s so much uncertainty and so much volatility that supply chains are having a really hard time operating. It’s the uncertainty behind just so many different decisions right now that’s causing a lot of harm in supply chains.”
Iowa’s economy can be particularly impacted by tariff policy, he said.
“Iowa is a production state, not a consumption state, so typically we’re going to produce more than we consume,” he said, adding that the state “gets hit on both sides” of tariff policy by having to pay tariffs for raw materials and parts needed for manufacturing but also getting hurt in the export of agricultural products.
A recent report by taxflation.org noted that from April 2024 to April 2025, tariffs paid by Iowa importers went up by 304%, the 11th largest increase among all the states.
Reuters contributed to this article.
Kevin Baskins covers jobs and the economy for the Des Moines Register. Reach him at kbaskins@registermedia.com.
