What You Need To Know To Take Advantage of Section 321
November 1, 2019
The goal for every business is to drive revenue while simultaneously decreasing costs. The pursuit of cost savings is one of the many reasons why a growing number of American businesses—particularly within the e-commerce space—have been manufacturing in Mexico.
While most would cite the low hourly costs of labor or the cheaper warehousing fees, many fail to realize there are savings to be had on shipping as well, especially if you are a business that specializes in high-volume, low-value shipments. Today, one example of a shipping-related cost-saving business opportunity in Mexico would be Section 321.
But what is it? Below, we’ll discuss what it is and how your business can take advantage of Section 321 customs.
What is U.S. Customs Section 321?
In the world of international trade, imports, and exports, there is a term known as a De Minimis. A Latin phrase, it means “about minimal things” or trivial matters. According to U.S. tax law, it is the “value threshold is the maximum monetary value of a shipment that can be imported into a country duty and tax-free.”
So why does it matter?
In order to regulate and tax imports arriving into the country, the U.S. separates shipment types A.K.A. release options into one of three categories:
- Formal Entries – High-value goods shipments that are valued above $2,500 USD.
- Informal Entries – Low-value goods shipments that are valued between $801 and $2500 USD.
- Section 321 – Low-value informal entries are exempted from duties or taxes so long as the shipment doesn’t exceed the de minimis.
A few years ago in 2015, the U.S. passed the Trade Facilitation and Trade Enforcement Act. Amongst other things, it included an update to section 321, which raised the de minimis value of goods being brought into the country from $200 to $800. The stated purpose of this was to “streamline and facilitate the movement of low-value shipments.” As a result, businesses shipping items beneath this threshold saw a massive opportunity to derive serious cost savings thanks to duty-free importation.
How Your Business Can Take Advantage of Section 321?
What many e-commerce businesses soon realized was that if they had or were to conduct business in Mexico, they could take advantage of updates to Section 321 by setting up packaging, distribution, and fulfillment centers near the Mexican border.
Freight shipments of goods would be sent duty-free to the Maquiladora. Then, low-valued items would be temporarily warehoused there in Mexico and would later be broken up and packaged into shipments no larger than $800. From there, the shipments could easily be sent north, one day at a time, over the border where they could pass through customs without any additional duties on the shipment.
That said, you can’t simply finagle the Section 321 rule so that everything you import falls under its auspices. Per the CBP, there are requirements and regulations, including Entry Type 86 or the following:
- You are only allowed to make one such shipment per person per day.
- You must provide evidence of the value via an oral declaration or the bill of lading (BOL), or a manifest with all of the BOLs.
- Consolidated shipments sent to an ultimate consignee are treated as a single importation (i.e. you can’t split one large order into several smaller shipments).
- No alcoholic provisions, cigars, or cigarettes may be included in the exemption.
- No merchandise of a class or kind given an absolute tariff-rate quota.
On top of that, there are some further restrictions, such as:
- Goods must not be subject to anti-dumping duties.
- Goods considered “high risk” may be denied entry.
- Goods must not require customs inspection.
- Goods must not be regulated by FDA, FSIS, NHTSA, CPSA, or USDA.
In an effort to further streamline processes and create increased visibility, CBP has recently rolled out an electronic manifest system that you must use to declare your shipment’s value. Those attempting to take advantage of U.S. Customs Section 321 will need to use the ACE Secure Data portal and submit entry forms at least an hour prior to a border crossing. The Manifest will include:
- The shipment control number (CSN)
- Detailed description of the cargo
- Listing of the cargo’s value
- Shipment’s country of origin (CoO)
- Shipper’s name, address, and contact info
Using Section 321
Failure to abide by the rules and regulations of Section 321 can result in fines and penalties, especially for repeated offenses. It matters not whether or not you knowingly did so, which is why it’s important that you ensure that your carrier is not making multiple Section 321 claims per day.
To avoid such problems, it would be wise to partner with a professional consultant such as NAPS—who can help ensure that you are not only deriving optimal cost savings but are doing so with legal compliance. So, reach out today, and we’d be happy to discuss all the ways that you could utilize Section 321 to your benefit.