What is Section 321?

Section 321 is the legislation that describes de minimis. A de minimis shipment, or Section 321 shipment, is a shipment that allows for goods valued at 800 USD or less to be imported duty-free into the United States.

A Section 321 shipment must not be a part of lots from a larger order and there is also a one shipment per day limit. Simply put, you can't split a larger shipment into smaller ones to avoid the de minimis fee of 800 USD. Section 321 clearance is beneficial since there is not a lot of paperwork which allows for faster customs processing.

The de minimis was originally 200 USD but this was increased to 800 USD in February 2016. This change made the program much more attractive to Direct to Consumer brands looking to make shipping from Canada/Mexico into the USA custom-free while saving on duties and tariffs.

There are some goods that cannot be released as section 321. The following require inspection and are prohibited:

• Chemicals or Hazardous Materials
• Goods regulated by the FDA, FSIS, NTSA, or USDA
• Alcohol and Tobacco
  
  On October 1st, then-President Trump enacted Section 301 which added additional tariffs to Chinese goods, as much as an additional 7.5% on top of already hefty tariffs (28.5%). At the time of writing, President Biden has no plans on removing these additional Chinese Tariffs.
  As long as the high tariffs remain, Section 321 is a clear advantage for importers to save on costs.

What does Section 321 mean for DTC brands?

If you're a brand, you might wonder how Section 321 can help your business and whether it's worth shipping your goods to Mexico or Canada. Here are some ways that Section 321 can give you a competitive advantage.

While many DTC brands can save money importing into Canada or Mexico and then shipping into the USA, the biggest savings are with Apparel and Footwear brands manufacturing in Asia.

Doing business in Canada or Mexico.

One of the first steps to get started shipping from either Mexico or Canada is to set up registries/licenses with the in-country governments for taxation purposes. This is the first step and it can take some time –and anyone who has worked with foreign governments can attest to this.

We recommend scheduling time with your accountant and attorney to make sure all the forms are filled out correctly. Some example forms that will need to be filled out for non resident importers in Canada are below.

Mexico setup.

Companies looking to import or export from Mexico must register in the Federal Taxpayers Register (Registro Federal de Contribuyentes). Registration with the RFC allows companies to:

• Issue electronic invoices (known as CFDI).
• Apply for certificates and permits.
• Complete customs formalities.
• Apply for tax rebates.
• Obtain an electronic signature, which is required to use the Mexican Digital Window for Foreign Trade (Digital Window).
• Register to the Importers’ Registry or Exporters’ Registry.

Companies that import or export will require specific documentation that their warehouse will provide. Of special note, Footwear and Apparel imports to Mexico require registration in a special importers or exports registry.

Reverse logistics.

As a brand selling to consumers online, returns are a key component of the sales cycle. Reverse logistics can function much the same way they do if you shipped from the USA. Many brands today use a returns platform to make the refund process easier. Brands can use their current return provider, whether it be Loop Returns, Returnly, or Happy Returns and returns can be sent back to the origin of shipment in Canada or Mexico to be added back into inventory for resale.

Shopify setup (optional).

The below setup would be for a brand looking to also sell within Canada or Mexico and have two domains. One domain for the United States and another domain within CA or MX to take advantage of that country's consumers.

If you're selling and your site is built on Shopify, moving your fulfillment to Canada or Mexico to take advantage of section 321 requires just minor changes. Shopify connects directly to ChannelApe with a Shopify App. ChannelApe then connects to your fulfillment provider to route orders and returns to the correct warehouse.

At most, we see some brands copy their USA Shopify site using apps like Rewind or with the help of their Shopify Account Manager. The new site would have the domain .ca or .mx to take advantage of selling to consumers in the country where the fulfillment center is located. Canadian and Mexican consumers are 4 times more likely to purchase from a .ca or .mx domain because they know they are getting charged in local currency and the brand has a presence in Canada or Mexico (a requirement for the domain registration).

Conclusion.

We want to make this easier for you. That’s why we’ve invested the time to help brands like yours navigate Section 321 and the challenges of e-commerce effectively.

Cutting costs is just as crucial as increasing revenue and offering a great customer experience. And as a brand, knowing international shipping and trade legislation can change the way you do business. Section 321 eliminates a significant amount of taxes and fees –so enabling items to be imported will help to retain any profits made.

It’s important to keep in mind that businesses can gain an edge by providing speedy shipment to consumers, while saving money. This is why many companies hire a reputed 3PL provider to guarantee that importing is well-coordinated.

You don't have to go it alone when it comes to cross-border shipping. Contact us to learn more about how ChannelApe can help your business.