Section 321: The Legal Way to Avoid Duties and Tariffs When Fulfilling Your Products in the United States

You can save a lot of money and time by keeping your US imports below $800 and utilizing Section 321 of the Tariff Act of 1930. Money and time can be saved on imports whether you're a US company or a non-US company selling internationally. With this high de minimis value, importing goods to the U.S. has never been easier, faster, or more seamless.? You should also keep in mind that this $800 represents only the cost of goods; it does not include shipping.

What are Duties?

All manufacturing companies must deal with the issue of duties. Businesses that import goods from overseas are charged a duty by the US government. Tariffs and duties (the terms are used interchangeably) are taxes imposed by governments on imported goods in addition to their freight and insurance. Each country applies a different tariff to different products.

As an example, the United States maintains a 25 percent tariff on about $160 billion of Chinese products, while another $105 billion, mostly consumer goods, is taxed at 7.5 percent.

What is Section 321?

Now let's talk about Section 321 and why it's important for manufacturing and warehousing companies in Mexico. Businesses that frequently import goods can take advantage of Section 321 for duty-free imports to provide a more cost-effective option. It involves avoiding customs fees, import taxes, and import duties so businesses can save money.

According to Shipcalm:?

"When importing items into the United States, there are numerous shipping logistics that need to be considered to guarantee a successful delivery. International customs, taxes, and import duties all tremendously affect expected shipping costs. Practicing efficient shipping practices guarantees that you’re saving money in the long run and securing profit, with international shipments causing the most complications. US Customs and Border Patrol (CPB) has many laws and restrictions on imports, which is why there have been numerous efforts made to simplify the process. These efforts play a huge role in why businesses are now able to apply for Section 321."

How Does Section 321 Work?

An item imported to the US that has a retail value under $800 can be claimed under Section 321 However there are some conditions that must be met; according to Inbound Logistics:

“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.”

Other qualifications for 321 are described by ShipBob:

US customs laws and regulations: There is a list of goods that are restricted by the administrative ruling:

• Products that require customs inspection (such as harsh chemicals or cleaning supplies).
• Goods that fall under the Countervailing or Anti-Dumping Duty.
• Products that are regulated by certain government agencies, including FSIS, USDA, NHTSA, CPSA, or the FDA.
• Cigarettes, cigars, and alcoholic beverages.

Imports from China: Section 321 overrides Section 301 tariffs on China if the items being shipped meet the de minimis value.

Limited to one shipment per day: Section 321 holds a daily restriction that consists of only one shipment per person (i.e., the company) per day.?

How Does Section 321 Benefit Companies Manufacturing in Mexico?

Shipping directly from China to the U.S. can cost around 20% more in import taxes, according to the Office of the U.S. Trade Representative. Companies that already have warehouse or fulfillment operations in Mexico can take advantage of this.?

Upon entering a free trade zone in Mexico, goods are imported, then shipped directly to U.S. consumers within the shipping zone coverage area of the company, without paying duties or tariffs.

Although most companies buy more than $800 worth of goods, there are fulfillment centers in Mexico and Canada that are complying with Section 321 that can be used to purchase Section 321-eligible goods.

For example, if the goods come from China and are valued at $8,000, the shipper can have them shipped to Mexico or Canada instead of directly into the United States. By shipping the products to the U.S. in 10 separate shipments of $800 on 10 different days, the shipper can avoid paying about $1,600 in tariffs on its total imports from China that it would incur if it imported them directly from China in bulk.

In both scenarios, the Chinese company shipping goods to the U.S. can save on import duties, and the Mexican company with warehousing and fulfillment obtains fees from the shipping companies.

If you are interested in learning how section 321 can benefit your company when shipping goods into the U.S., NovaLink offers Mexico Manufacturing Consulting. In addition to warehousing for your imported goods, our consulting group can assist you in understanding the rules and regulations for section 321, which will benefit your business. Visit NovaLink for more information.