Changes to Section 321 Loophole and How it Affects Ecommerce Shippers

Guest Post

Munish Gupta is Founder/CEO of Supply Chain Advisory Group, a logistics consulting firm specializing in aiding companies with global product distribution and international expansion

International trade is a complex aspect of ecommerce shipping. If you are a brand manufacturing product overseas, there are a lot of customs regulations you must keep up with regularly.  

Some brands might try to choose to lower their import fees by re-directing shipments through other countries just to get around US customs taxes. Any brand who has been shipping products into Mexico and trucking them across the US border has been doing this to avoid certain US import taxes. This is known as Section 321 Loophole, or the China Tariff Loophole—brands using this routing method may need to rethink their supply chain strategy this year.  

The US House of Representatives and Senate are currently reviewing proposed amendments to Section 321 to close the loophole on Section 321. Here is more about Section 321 and how the new laws may affect ecommerce companies. 

What is Section 321? 

When products are imported into the US the Customs and Border Protection Department (CBP) applies taxes and duties based on the current international trade laws that apply to the shipment type. As stated in Section 321 of the Tariff Act of 1930, CBP is authorized to provide exclude duties and taxes for shipments with goods that aggregate a value lower than $800 US. 

This retail value threshold is called de minimis. Section 321 is commonly applied to shipments coming into the US. The de minimis threshold varies based on the country of import and the country of export—and it is determined by the government of the import country. Currently the Section 321 limit is <$800 USD but it was previously <$200 until 2015. De minimis is not to be confused with tariffs, which can also vary greatly depending on the country of origin.