Guide: Eliminate Customs Duties Under Section 321

An Ecommerce Brand’s Guide to Claiming Section 321 and Saving Significant Money on Importing Goods Into the US

Jim Sharkey
May 9, 2024
Ocean shipping containers

Educating yourself on the cost-saving and time-saving opportunities available to you under Section 321 is critical to all ecommerce businesses importing goods from China.

Note: This article is solely for informational purposes and does not constitute legal advice.

What is Section 321?

The law: Under US law, Section 321 (also known as De Minimis Entry) of the Tariff Act of 1930 allows qualifying shipments to enter the US without having to pay the typical import-related fees, taxes, and duties. Qualifying shipments are defined as those with a maximum value of $800 (the de minimis value). 

What are the benefits of Section 321?

By utilizing Section 321, ecommerce brands can eliminate most of their current custom duties expense for goods manufactured in China. These duties can be quite significant - up to 25% of the value of the goods. Importantly, the impact to shipping speeds are generally limited, especially when coupled with a fulfillment strategy that involves some fulfillment from the US.

Are there limitations to Section 321?

As noted above, if the value of the shipment is over $800, custom duties will need to be paid on the imported goods. It is also important to note that shipments to companies (business addresses) are covered by Section 321 (meaning you can ship to a business in the US duty-free, if the total value of the goods are under $800 being shipped to that business on a given day).

In addition, there is a limit of one shipment per person per day, i.e., you can only claim one Section 321 shipment to a single person or customer each day. To avoid serious penalties, make sure that your carrier or partner does not make multiple Section 321 claims to a given recipient on the same day.

Finally, certain exclusions apply to certain classes of goods, with examples of excluded goods including items regulated by government agencies such as the FDA and USDA, harsh chemicals, alcohol, cigarettes, cigars, and other items that require customs inspection and are restricted, along with goods that fall under antidumping and countervailing duty laws. The regulations continue to evolve, with a trend toward expanding the types of goods allowable under this tax exemption (expanding, for example, to goods such as food and beauty products).

What is the history of Section 321 and how did it come to be?

Section 321 has its origins in the Tariff Act of 1930. The Tariff Act of 1930, also known as the Smoot-Hawley Tariff Act, is primarily known for raising duties on a range of industrial and agricultural imports to the US up to 20%. But it also created some duty-free exemptions for personal items (up to $5 in value) and items mailed to the US (up to $25 in value). These de minimis values increased over time with inflation, reaching a de minimis value of $200 in the year 2000.

In 2016, the de minimis value was raised from $200 to its current threshold of $800. This change was made in response to the massive growth in global ecommerce: The increased volume of small parcel imports of relatively low value was overwhelming the existing staff of customs agents. The prevailing opinion was that it was not worth the investment of additional time and resources necessary to continue inspecting all low value imported shipments, especially when the benefits of increased global trade and a streamlined and simplified entry process for more Section 321 shipments were taken into account.

Are there any expected changes to Section 321?

As with many issues related to global trade, there are some parties in favor of the current de minimis value of $800 and other parties that are in favor of lowering the value. In particular, companies that manufacture and sell goods in the US (who compete with companies producing goods offshore at a lower cost) view the de minimis value as creating an unfair advantage. On the other hand, those goods available at a lower cost benefit the consumers who purchase them.

Lobbying on both sides of this issue is ongoing. The current de minimis value of $800 took ~20 years to be raised from the $200 value, and no changes to Section 321 are expected in the immediate future.

Do I pay Mexican import duties?

Although Section 321 allows for the import of goods with a value under $800 to be imported the US duty-free, it does not address import duties into other countries - like importing goods into Mexico for fulfilling orders destined for the US. However, it is possible to eliminate import fees when importing goods to Mexico under the IMMEX program. In order to import goods under the IMMEX program, you need to work with an authorized company that can import the goods on your behalf utilizing that company's IMMEX certification.

What is the IMMEX program?

The IMMEX program is an import duty-deferral program created by the Mexican government. Companies authorized to participate in the IMMEX program are usually referred to as a maquiladora.

IMMEX allows goods to be imported into Mexico for 18 months without paying any duties. If the goods are exported within 18 months, no duties are levied.

Companies certified to participate in IMMEX must submit documentation monthly to the Mexican government on the age of all inventory held in Mexico.

Can I utilize the ports of Los Angeles and Long Beach?

Yes, you may import goods into the ports of Los Angeles and Long Beach. To avoid paying customs duties, the goods must be transported to Mexico under bond: A bonded carrier will post a customs bond, acting as collateral, allowing the carrier to defer the payment of customs duties. The liability of customs payments will be cancelled once the goods leave the United States and are imported into Mexico. Typically, goods may remain in the United States under bond for up to 30 days.

Goods may also be imported directly into Mexico. The port of Ensenada, 45 minutes south of Tijuana, is Mexico's second busiest port. The port of Ensenada is significantly smaller than the ports of Los Angles and Long Beach but has expanded significantly in the last decade.

Is it better to import through the ports of Los Angeles and Long Beach, or is it better the import through Ensenada? The short answer is that it depends: Given how much more volume the ports of Los Angeles and Long Beach, ocean shipping rates are usually lower to those ports. However, those ports also come with the higher costs of transporting products to Tijuana as well as the costs of holding the goods in bond.

Mochila can help you evaluate the pros and cons of these two options based on the specific characteristics of your business.

What is the impact to shipping speeds when fulfilling from Mexico?

Section 321 significantly speeds up the import process using an electronic filling system, allowing orders to be fulfilled in Mexico, imported to the US, and handed off to US delivery carriers, e.g. UPS, FedEx, USPS, the same-day. The entire process adds 4 - 5 hours to the entire process versus fulfillment completed in fulfillment centers located in the US.

How Mochila can make Section 321 work for your ecommerce business

Through our strategic location in Mexico (in close proximity to the US border near Southern California), Mochila assists ecommerce brands in taking advantage of this statute, collaborating with our ecommerce clients to store their inventory and import their qualifying shipments under Section 321 into the US tax-free and duty-free

Furthermore, ecommerce brands can always combine the use of Mochila's fulfillment center in Mexico with its network of fulfillment centers in the United States to create a omni-channel supply chain optimized for fulfilling orders across all sales channels: ecommerce, store replenishment, and wholesale.

Apparel, footwear, and home goods brands (among others) are encouraged to explore this opportunity to optimize their import strategy with a US-based 3PL. 

Questions? Reach out to learn more and explore how Mochila can help optimize your fulfillment processes by taking advantage of Section 321.

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