Section 321 and How to Save Money with It?

| Updated on March 27, 2024

Life has changed in relation to the way people go about their shopping. While the days of going to the grocery or department stores for necessary household items or for gifts are not over, you can’t ignore the rise of eCommerce businesses. In fact, according to the United Nations Conference on Trade and Development, the total of online retail sales increased from 16% to19% as of 2020. For 2021, this trend doesn’t appear to be slowing down. Furthermore, the healthy competition between brick-and-mortar establishments and eCommerce has ramped up as businesses reopened, and staff returned to work onsite. While that’s great news for the economy in general, there’s a catch that involves the supply chain and logistics—trade tariffs. Fortunately, there’s also an answer to this conundrum which is a law known as Section 321.

In 2019, tariffs on goods imported from China increased from 10% to 25%. This has left businesses scrambling for solutions from finding alternative sources for parts and products to raising prices and passing the cost on to the consumer. While the latter option would not bode well for business, and sourcing still proves to be a challenge, owners and operators can opt for the Section 321 classification on all their imported goods. Consequently, to streamline this process, they also seek the services of fulfillment companies to ensure all regulations are followed and to handle the logistics planning. 

As mentioned, the Section 321 classification aids in keeping costs down for both business owners and their customers. Initially, the classification benefitted businesses whose shipments do not exceed a de minimis limit of $800. However, eCommerce and other retailers who import their supplies from China invoke this law on a broader scale by involving Canadian fulfillment companies to oversee various aspects of shipping and receiving. This practice allows for multiple shipments that are strategically scheduled to be able to arrive at their destination without having to pay the costly tariffs. If these shipments do not arrive all at once, they will qualify for the Section 321 classification. 

Furthermore, the CBP has incorporated a test for completing the paperwork electronically. The test run of this platform enabled logistics managers to gain clearance more quickly through entry type 86 in the Automated Commercial Environment with a decreased possibility of delays due to the real-time response. Also, this new procedure shows marked improvement in efficiency as opposed to gaining clearance through a manifest. Moreover, it cuts down on the cost for both the fulfillment company and its clients. 

And how does this application of Section 321 and an effective process affect prices for the consumers? Fortunately, the avoidance of tariffs and other duties along with the streamlined services of Canadian fulfillment companies translates to better pricing for the customers who won’t have to carry the burden of making up for high taxes and high shipping costs. Plus, the products are more likely to be delivered in a timely manner straight to the consumer. The optimal service consequently leads to increased sales and healthy growth for the company which ultimately benefits both the business owner and the client. 

Likewise, there are a few considerations that business owners must remember regarding Section 321. First off, as noted, multiple shipments that qualify for the Section 321 designation cannot be claimed on the same day by the same person or organization. Thus, business owners and logistics specialists would have to plan out a strategy for the timing of the shipments. Secondly, certain items won’t qualify for the Section 321 category. These include cleaning supplies and other substances that require inspection, products that fall under the Anti-dumping Duty, most tobacco and alcohol products, and items that are regulated by multiple agencies like the FDA and the USDA, among others. About supplies from China and Section 301, if the logistic specialist stays within the boundaries of Section 321 regarding the value and timing of the shipment, there are no causes for concern since Section 321 overrides Section 301. 

In short, Section 321 counters against the challenges brought on by a trade war with China and subsequent tariffs that are incurred by importing. At the same time, if your items are produced in China and therefore need to be imported to the U.S., Section 321 would still apply to shipments on the condition that they follow the aforementioned regulations and do not value more than $800. Another benefit involves a lower cost to the business owner if he or she partners with a third party, like a Canadian fulfillment company, who receives, stores, and then ships the items to the customers. Even with this type of collaboration, the person in charge of the eCommerce or brick-and-mortar retail will still fare better off without the expenses of tariffs and other duties. Plus, he or she wouldn’t have to spend valuable time or more money on accurate completion of the paperwork because a specialist who is knowledgeable about Section 321 and logistics planning would have that under control. Thus, the trade war might continue for the unforeseeable future, but fortunately, the consumers won’t have to pay the price for it.

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