Section 321: How to Import for US Consumers

You might be forgiven for never having heard about something called Section 321. What is it? Well, it’s a statute that the US customs and border patrol use to govern imports from China. In short, anything that gets exported from China and into the US has to have a value lower than $800 or it’ll get tagged with some pretty hefty import duties. Section 321 is the exemption classification that most importers are hoping to get for their goods.

This is great for ecommerce sellers that can use a direct sales model to ship products for individual customer orders. So, an online shop can sell an item to a customer, and have that item shipped directly from China to fill that single order. As long as the product’s value stays under $800, there’ll be no import tax levied by the CBP.

This has become really popular in the last few years with SHEIN and other mega popular apps using this business model for online sales.

The problem, at least for US companies, is that this exemption for goods under $800 doesn’t fit well with the current retail business model – which has traditionally relied on bulk container shipments of goods that get warehoused in the US and then broken down for order fulfillment, or distribution to retail outlets. These bulk shipments get tagged with incredibly high taxes. Often in excess of 30%, which makes it extremely difficult for retail outlets to compete against online vendors.

 

Canadian Fulfillment to the Rescue

To help level the playing field, some US companies have turned to Canadian fulfillment to help close the gap in competitiveness. Canadian fulfillment is the practice of using a Canadian order fulfillment company to receive the bulk shipment of goods coming in from China, and then to have the goods warehoused in Canada, and only shipped to US consumers when they make an individual purchase. The Canadian fulfillment sales model can then allow US companies to remain financially viable, even after the tariffs the Trump administration levied in 2016.

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The Future of Section 321

With new legislation passed just this year that will further intrench the Section 321 exemption for imports, it looks like the current reality of tax-free products under $800 is here to stay. Just last month, the CBP announced a new dedicated facility for inspections and processing of Section 321 goods.

Carlos C. Martel, CBP Director of Field Operations says that “In support of the economy recovery efforts, the new cargo processing space streamlines the unprecedented volume of e-commerce shipments at LAX, while ensuring the highest levels of national security,” The new facility will process up to 40% of shipments that meet the Section 321 classification in the US.

With that kind of support coming from government, its unlikely to lose steam or see any big changes in the near to medium term.

So, if you ‘re a business that operates in the US and has production in China, learning the in-and-outs of Section 321 and the possible benefits of Canadian fulfillment are essential to being competitive. And it might save you a lot of money.

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