Every eCommerce business wants to reduce its costs or offer something unique to customers, and these often involve importing products. Thankfully, you can not only achieve these goals but also add some cost-savings to the mix for your eCommerce fulfillment by taking advantage of the Customs and Border Protection’s (CBP) Section 321 provision.
Section 321 helps companies avoid taxes and duties on some goods they import. The regulation is nuanced but primarily designed for companies whose shipments are lower in cost, with products totaling less than $800. As manufacturing in China ramps back up, the provision becomes even more critical for today’s businesses capitalizing on the U.S. eCommerce boom.
So, let’s look at what the provision covers and who it can help. This guide is a generalized overview, and every eCommerce company should do its own research on Section 321 to ensure you and your products qualify.
What exactly is Section 321 Entry Type 86?
Section 321 Entry Type 86 is a de minimis shipment that allows businesses to import goods duty-free into the U.S. when valued at $800 or less. Eligible informal entry shipments can be imported by air, land, or sea and use all commercial ports of entry.
It relies on CBP’s Automated Commerce Environment (ACE), so importers can save money on shipments and often speed up how quickly they move through customs. The low value-ceiling makes this a very enticing prospect for many eCommerce companies.
Who does it help?
Red Stag Fulfillment sees Section 321 as a big help to eCommerce businesses that import their products. It can be a useful tool whether you important regularly or less frequently based on fluctuating demand. As eCommerce sales have increased in the U.S., so has the use of Section 321 Entry Type 86 for eCommerce fulfillment.
The immediate assistance it provides is eliminating customs tax and duties. However, trade analysis has shown that Section 321 helps shipments get cleared faster, so they’re experiencing fewer delays and associated costs. That can make a world of difference for eCommerce companies that have seen their supply chains disrupted due to COVID-19.
Achieving that speedy clearance requires you to use the ACE for your documentation, typically meaning your business will need help from a freight forwarder.
Is it mandatory?
Section 321 is entirely optional for the goods you import. Use is growing rapidly because of how much it can save eCommerce companies, and anyone using it is considered a “test participant” at this point. Requirements may change in the future that mandate use of the designation and/or related systems such as ACE entry. At the present moment, customs brokers and ABI self-filers are directly impacted by the Type 86 entry of Section 321.
What’s the risk?
At this point, it is unclear if Section 321 Entry Type 86 shipments introduce any additional risks beyond non-compliance with its one-shipment-per-day limitation. Evaluate Section 321 carefully using the same metrics that you apply to other imports.
Notably, eCommerce companies should ensure that they’re providing accurate information for each shipment. Like other imports, inaccuracies and improper documentation can lead to cargo holds or seizures. Section 321 also doesn’t remove other requirements or limitations, such as intellectual property compliance.
Please continue to monitor for updates
There’s one potential area of uncertainty that companies and their partners should review regularly. CBP generally requires you and your supply chain partners to deliver information on Section 321 goods before they arrive at any entry point. Every document needs to be delivered prior to arrival, but different rules and requirements may govern how each entity in your supply chain provides that data.
Currently, there’s not any specific requirement governing Section 321 data submission. However, due to the program’s increased usage, it wouldn’t be surprising if its regulatory requirements increased this year.
Section 321: Terms and conditions apply
Section 321 Entry Type 86 is growing and expanding, allowing more companies to use the program for their goods. In 2019, CBP expanded imports eligible for informal entry to include cosmetics, food products, and other smaller groups typically controlled by Partner Government Agency (PGA) regulations.
While eligible goods are growing, there are some standard terms and conditions that importers, shippers, and their partners should know.
Price and U.S. regulations
Reports say that Section 321 entries are often subject to a high degree of scrutiny from CBP. Reviews and checks primarily focus on the value of the goods being imported to ensure that they do not cross the $800 threshold. CBP uses a mix of models and price estimates to determine value, including comparing your products to similar goods or prices from other vendors that sell the same products.
It’s also worth noting that a variety of exemptions and exceptions apply to Section 321 Entry Type 86. Alcohol and tobacco products are generally ineligible, as are most products and goods governed by anti-dumping and countervailing duties (AV/CVD). Your goods may be ineligible if their product categories require inspection or if there are governing import quotas for those products and categories. Your goods may also be ineligible if they have an applicable Federal Excise Tax.
There are two significant shipment limitations to consider, covering how and how often you import goods. The first thing to note is that merchandise imported by mail is generally exempt from Section 321 Entry Type 86. The second consideration is that you can only apply Section 321 entry to a single order per day. So, if you’re using multiple carriers or freight forwarders, you need to ensure that you don’t have two trying to use Section 32 entry simultaneously.
A note about China
Perhaps the best news for eCommerce companies is that Section 321 overrides many Section 301 import duties related to the U.S.-China trade war. If your goods meet the de minimis value, you can avoid the broad range of importer taxes and tariffs. That can likely be significant savings for many eCommerce companies.
4 benefits of Section 321
The biggest benefit to using Section 321 shipments is that eCommerce companies reduce their import costs. These daily shipments are duty and tax-free, and you may even avoid the Section 301 tariffs if you import from China.
For many companies, China offers access to lower-cost manufacturing options. If that’s true for your business, going for Section 321 Entry Type 86 shipments might enable you to lower multiple cost factors.
Another significant improvement for Section 321 is that it reduces your paperwork burden and can minimize time spent in customs. Not only do your shipments need less paperwork, but your eCommerce fulfillment partners can automate some of the documentation and other required information sharing. So, your goods generally are cleared faster and avoid common delays in customs.
ACE entry prep
The Automated Commercial Environment (ACE) system for eManifest allows companies to secure more rapid clearance processing and compliance. Its web portal allows trade companies, government agencies, and CBP to communicate, and you can use it to access customs reports. The portal is free and well-suited for low-volume companies. Adopting ACE for your Section 321 shipments can help you start to speed up your eCommerce fulfillment.
As you grow and increase your import volumes, understanding ACE makes it easier for you to secure automation and integration tools. CBP-approved service providers can help you use preset shipment details and perform other tasks that remote repetitive manual data entry requirements for higher volumes.
Savings to offer customers
Ultimately, you’re reducing expenses with Section 321 Entry Type 86 shipments. As you save more, you can start to pass these savings on to customers. At the same time, securing more reliable relationships with carriers and freight forwarders may reduce delays and concerns you have with product shipping. If you optimize your restocking efforts to get as close to the $800 valuation as safely possible, you can shave logistics costs while maintaining inventory levels.
Combining these practices with a U.S. 3PL like Red Stag Fulfillment allows you to import at bulk volumes. From there, your U.S. partner can support last-mile delivery to meet domestic customers as orders happen. You save, and your customers get faster, more reliable delivery. These gains can grow even larger if you have partners with locations in California or near other major import/export locations.
How you should declare Section 321
There are a few declaration rules to be aware of for Section 321. In many cases, the shipment of your goods valued at $800 or under will be able to enter duty-free without formal entry. If your goods do require an eManifest, then you’ll need to directly let CBP know that you want a Section 321 entry.
When your shipment requires an ACE eManifest, there are some declaration steps to follow:
- Select the “Section 321” option on the Ace manifest.
- Provide the number of goods in the shipment
- Include all required details, especially value, shipper, consignee, and country of origin
- Submit the eManifest
- Truck: Carrier must file the ACE manifest as intangible goods/Section 321
- Ocean: Importer Security Filing and Additional Carrier Requirements (commonly known as “10+2”) are still required. Generally, you’ll need to present an arrival notice and invoice in person, and stamped copies need to be brought to CFS warehouses
- Air: Airline manifests should list goods as intangible goods/Section 321
Freight forwarders and customs brokers can help you with the documentation and automation to support some of the more considerable benefits for Section 321. It’s also a promising idea to work with them to manage your overall supply chain and ensure you avoid penalties related to making multiple Section 321 claims in a single day.
Best practices and due diligence
A strong supply chain team is needed for eCommerce companies looking to take advantage of the Section 321 savings. Your eCommerce fulfillment partners must communicate to help you avoid penalties related to having multiple transactions per day. Visibility should be a requirement you have from your partners.
Here are a few additional things to keep in mind:
- Specify which shipment will make the Section 321 claim each day and notify that eCommerce fulfillment partner.
- Get partners to only make a Section 321 claim when you specifically tell them to for a shipment.
- Ask partners to create formal entries for every other shipment you have each day.
- Try to link your eCommerce fulfillment network and create clear lines of communication for your freight forwarders, customs brokers, and carriers.
- Minimize the number of customs brokers you use to keep import and export filing consistent.
- Create a clear audit trail for your shipments, especially if you high volumes of low-value shipments.
COVID-19 taught the logistics world to look for alternatives and backups as needed. Protecting your operations for Section 321 filings might mean using a single customs broker for these scenarios. Any second customs broker partner could be told not to have Section 321 claims as long as your other relationship is in place.
How can Red Stag Fulfillment help you?
Importing goods to the U.S. can be tricky. You need reliable partners with established relationships in the freight forwarding space and a domestic footprint for fulfillment support. Red Stag helps companies by offering a reliable United States fulfillment network strategically placed to keep products close to customers and drive down your costs.
Our eCommerce fulfillment specialists can help you understand United States regulations and meet customers with a variety of same-day and next-day fulfillment options to minimize the time between order and delivery. By streamlining U.S. and last-mile fulfillment, we make it easier for companies to make the most of Section 321 filings and the savings that this import option provides.