Section 321 and How to Save Money with It?

Life has changed in relation to the way people shop. While the days of going to the grocery store or department store for necessities for the home or to buy gifts are not over, you can’t ignore the rise of e-commerce businesses. In fact, according to the United Nations Conference on Trade and Development, total online retail sales increased from 16% to 19% as of 2020. For 2021, this trend does not appear to be abating. Additionally, healthy competition between brick-and-mortar stores and e-commerce has increased as businesses have reopened and staff have returned to work on-site. While that’s great news for the broader economy, there’s a catch involving supply chain and logistics: trade fees. Fortunately, there is also an answer to this puzzle in a law known as Section 321.

In 2019, tariffs on imported goods from China increased from 10% to 25%. This has left companies scrambling to find 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 remains a challenge, owner-operators can opt for Section 321 classification on all their imported products. Consequently, to streamline this process, they also seek the services of compliance companies to ensure that all regulations are met and handle logistics planning.

As mentioned, the Section 321 classification helps keep costs down for both business owners and their customers. Initially, the classification benefited companies whose shipments do not exceed a de minimis limit of $800. However, e-commerce and other retailers that import their supplies from China invoke this law on a broader scale by engaging Canadian fulfillment companies to oversee various aspects of shipping and receiving. This practice allows for multiple shipments that are strategically scheduled to reach their destination without having to pay expensive fees. If these shipments do not arrive all at once, they will qualify for Section 321 classification.

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In addition, CBP has incorporated a test to complete the procedures electronically. The test run of this platform enabled logistics managers to get authorization faster via input type 86 in the automated trading environment with less chance of delays due to real-time response. Furthermore, this new procedure shows a marked improvement in efficiency compared to obtaining authorization through a manifest. Additionally, it reduces the cost for both the fulfillment company and its customers.

And how does this application of article 321 and an effective process affect prices for consumers? Fortunately, the avoidance of duties and other fees along with streamlined services from Canadian fulfillment companies means better prices for customers who won’t have to bear the burden of offsetting high taxes and high shipping costs. Also, products are more likely to be delivered in a timely manner directly to the consumer. Consequently, optimal service leads to increased sales and healthy growth for the business, which ultimately benefits both the business owner and the customer.

Similarly, there are some considerations for business owners to remember regarding Section 321. First, as noted, multiple shipments that qualify for the Section 321 designation cannot be claimed on the same day by the same person or organization. Therefore, business owners and logistics specialists would need to plan a strategy for the timing of shipments. Second, certain items will not qualify for the Section 321 category. These include cleaning supplies and other substances that require inspection, products that are subject to antidumping duty, most alcohol and tobacco products, and items that are regulated by multiple agencies such as the FDA and USDA, among others. About supplies from China and Section 301, if the logistics specialist stays within the limits of Section 321 regarding value and timing of shipment, there is no cause for concern as Section 321 overrides Section 301.

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In short, Section 321 counteracts the challenges brought about by a trade war with China and the subsequent tariffs incurred on importation. At the same time, if your items are produced in China and therefore need to be imported into the US, Section 321 would still apply to shipments as long as they follow the mentioned regulations and are not worth more than $800. Another benefit is lower cost to the business owner if they partner with a third party, such as a Canadian fulfillment company, that receives, stores, and then ships the items to customers. Even with this type of collaboration, the person in charge of e-commerce or physical retail will do better without the expense of customs duties and other duties. In addition, he or she would not have to spend valuable time or money accurately completing paperwork because a specialist with knowledge of Section 321 and logistics planning would have it under control. So the trade war could continue into the unforeseeable future, but luckily, consumers won’t have to pay the price for it.

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