How to Import Duty-Free with Section 321

How to Import Duty-Free with Section 321

Running an e-commerce business can be a great source of income, but it can also be complicated. Ordering products from the other side of the world, navigating global logistics and even setting up successful sales channels are all a huge problem for retailers to overcome. Then throw into the mix of this a huge trade war between the United States and China and this can create huge problems for retailers trying to run a successful e-commerce business.

For these retailers, leveraging Section 321 can be a great way to reduce tax liability and help improve margins and customer satisfaction.

What is Section 321 and How Can it Help?

Section 321 is defined as a “U.S. Shipment Type that allows the import of goods up to the total value of $800 without paying any tax on those goods,” with some exceptions. This $800 limit is called “de minimis.” Section 321 was created to enable the U.S. Customs and Border Agency to track and protect against illegitimate trade while providing the public the benefits of duty-free shipments for qualified imports.

It should be mentioned though, to qualify for Section 321 relief, imports can only come from certain countries, meaning that to qualify they must come through either Canada or Mexico. This may feel like an extra step, but it would be quicker and cheaper to go through Canada or Mexico to then be able to qualify for the relief.

What are the Benefits?

There are many benefits both to retailers and consumers including lower tariffs, faster import and delivery times and improved customer satisfaction.

For U.S. e-commerce retailers, the ongoing trade war between the United States and China has created both a logistical and economic headache for retailers. The biggest issue is the increase in cost, due to tariffs being added. These tariffs eat into what is already a low margin business and could be the difference between profit and loss. Using section 321 allows retailers to avoid these costs as long as imports meet the requirements.

Another benefit to using Section 321 is faster clearance and delivery times. As Section 321 deliveries require less customs paperwork than other sections (such as Section 301), meaning retailers can get their goods either straight to their distribution partner or out to their customer even quicker. If they didn’t use Section 321, this would lead to slower import times and higher clearance costs due to these delays.

All the above leads to an improved customer experience as consumers are getting their goods at a lower rate and at faster time, provided the retailer passes on the benefits of Section 321 onto their customers.

How does an E-commerce Business Leverage Section 321?

An e-commerce business can leverage Section 321 by first ordering their goods from China as they would normally. The business would then arrange to have them shipped to an intermediary or third party in Canada or Mexico. Finally, the e-commerce business would ship their goods either to their distribution centre, or to their final destination—depending on their distribution set up and sales channels. From here they would be eligible to leverage Section 321, provided they were compliant with all the other aspects of the legislation.

If their requirement necessitated it, an e-commerce business could also look to store their goods in either Canada or Mexico too. This way they could bring goods in whenever they needed and still leverage Section 321’s tax benefits.

Final Thoughts

Section 321 can be a great way to reduce tax liabilities for e-commerce businesses. It can allow them to enjoy the lower cost of manufacturing from China, but also bypass painful tariffs by routing their deliveries via Canada or Mexico first. Leveraging Section 321 leads to lower tax costs, improved delivery times and increased customer satisfaction.

Jeffrey Wilkins is a freelance writer from Newfoundland, Canada. During his journey as a writer, he has written for multiple business niches including logistics, and trade. His work has appeared in various publications including Yahoo, The Associated Press, Business Insider and many more.

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