In recent years, e-commerce has grown to a significant extent, and it has brought about significant changes in trade. For instance, in the United States alone, e-commerce sales have increased by 43 percent, from $571.2 billion in 2019 to $815.4 billion in 2020. Despite this growth, the global supply chain disruptions, social distancing restrictions, and lockdowns have led to significant delays in processing shipments at the American border. In response, the U.S. government enacted Section 321 legislation to help ease the load on the U.S. customs service.
Section 321, Type 86, is a U.S. Customs and Border Protection (CBP) law that classifies imported goods when they meet the “too small to be significant” threshold for duty or tax, which is now $800 or less. The rise of e-commerce has led to an increase in the volume of large shipments arriving at U.S. customs borders, and Section 321 seeks to clear low-value goods quickly to help relieve backlogs and strain on services like customs clearance.
The Pros Of Section 321
- Slash fulfillment costs: As shipping costs continue to rise, it is essential to reduce expenses where possible, and Section 321 provides an avenue to do so. The customs duties and taxes saved on shipments can add up over time, and you can then pass the savings on to customers.
- Accelerate customs clearance to (re)stock goods sooner and gain a competitive advantage: If you sell high volumes or are in a competitive niche, Section 321 can be a helpful shortcut. You can access inventory sooner to avoid stockouts and land new products on your shelves before your competitors.
- Goods from China fall within Section 321: Although the tension and subsequent trade war between the U.S. and China have been well-publicized, Section 321 overrides Section 301, which sets tariffs on shipments coming from China.
The Cons Of Section 321
- Not all products are eligible: The strict $800 cap means that even if your product is $1 over, your shipment won’t qualify for Section 321, and customs taxes and duties will apply. Additionally, you can only invoke Section 321 once per day, so you’ll need to be strategic about how you bundle and send shipments.
- Extra administration and learning curve: To claim Section 321 correctly and avoid costly mistakes, you need to know how to claim it properly. This requires extra time to learn and execute it, which can hamper operations, especially during peak periods or if you have a small team.
- The Harmonized Tariff Schedule (HTS) code requirement can be burdensome and costly: It’s difficult to classify goods into the correct code without the right knowledge and experience. Worse, if you submit incorrect paperwork, you could face penalties and shipment delays. If you don’t want to spend time learning the ropes, you’ll likely need help from a customs broker.
How To Leverage Section 321 To Upgrade Your Fulfillment
Claim Goods Correctly
Section 321 of the U.S. Customs and Border Protection law provides an opportunity for importers to clear their low-value goods quickly, save money, and relieve the burden on the customs clearance service. However, to take advantage of this legislation, importers need to claim their goods correctly.
Claiming Section 321 is a simple process, but executing it correctly requires more preparation. If importers are going to tackle Section 321 in-house, they need to build a process to ensure they claim it correctly. Here are some essential steps to follow:
- Create an e-manifest: When shipping goods into the U.S., some products may need an e-manifest. This is an online declaration to the U.S. Customs and Border Patrol to request the use of Section 321. To claim Section 321, be sure to select it on the e-manifest.
- Share requested details: The importer needs to provide shipment details such as the monetary value and stock quantity of the shipment, the name of the shipping party, consignee, consignor, and the point of origin.
- Use a Customs Broker: While Section 321 shipments are duty-free, they still require customs clearance, and the process can be time-consuming and complicated. Using a customs broker can help simplify the process and ensure compliance with regulations. Customs brokers have expertise in navigating customs procedures and can help you avoid mistakes that could result in fines or delays.
- Invest in Warehouse Management Systems: As Section 321 shipments increase, it’s essential to have a robust warehouse management system (WMS) in place. A WMS can help you track inventory, manage orders, and automate fulfillment processes. By automating the fulfillment process, you can reduce errors and increase efficiency, allowing you to handle more shipments with the same resources.
- Consider Outsourcing: If your business is growing rapidly and you don’t have the resources to handle the increased volume of shipments, consider outsourcing fulfillment to a third-party logistics provider (3PL). A 3PL can provide warehousing, transportation, and fulfillment services, freeing up your time to focus on growing your business.
- Stay Up to Date on Regulations: Customs regulations are constantly changing, and it’s essential to stay up to date to avoid costly mistakes. Make sure you’re aware of the latest regulations and work with a customs broker or 3PL who can help you navigate any changes.
In summary, leveraging Section 321 can provide significant benefits for your business by reducing costs and increasing efficiency. By correctly claiming goods, using a customs broker, investing in warehouse management systems, considering outsourcing, and staying up to date on regulations, you can upgrade your fulfillment and position your business for growth.