{"id":14598,"date":"2022-08-01T03:22:14","date_gmt":"2022-08-01T10:22:14","guid":{"rendered":"https:\/\/michaeljbrumm.com\/dcl-v3\/?p=14598"},"modified":"2024-06-10T09:55:17","modified_gmt":"2024-06-10T16:55:17","slug":"changes-to-321-loophole","status":"publish","type":"post","link":"https:\/\/michaeljbrumm.com\/dcl-v3\/blog\/shipping\/changes-to-321-loophole\/","title":{"rendered":"Changes to Section 321 Loophole and How it Affects Ecommerce Shippers"},"content":{"rendered":"

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.\u00a0<\/span>\u00a0<\/span><\/p>\n

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\u2014brands using this routing method may need to rethink their supply chain strategy this year.\u00a0<\/span>\u00a0<\/span><\/p>\n

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.<\/span>\u00a0<\/span><\/p>\n

What is Section 321?<\/span><\/b>\u00a0<\/span><\/p>\n

When products are imported into the US the <\/span>Customs and Border Protection Department<\/span><\/a> (CBP) applies taxes and duties based on the CBP laws that apply to the shipment type. Section 321 is one of the more popular applications.\u00a0<\/span>\u00a0<\/span><\/p>\n

Section 321 states that goods under a certain value are exempt from paying duties and taxes. These lower-value shipments need to comply with the de minimis threshold in order to be duty and tax free. Currently the Section 321 limit is <$800 USD (<\/span>it was <$200 until 2015<\/span><\/a>).\u00a0<\/span>\u00a0<\/span><\/p>\n

What is the 321 Loophole?<\/span><\/b>\u00a0<\/span><\/p>\n

As soon as any new import\/export legislation gets passed, some companies find a way to circumnavigate it. Such is the case with Section 321.\u00a0<\/span>\u00a0<\/span><\/p>\n

The \u201cSection 321 loophole\u201d is when a merchant sends products that are manufactured internationally to Mexico or Canada, stores the products in Mexico or Canada, and then ships them across the US border. Products being trucked across the US-Mexico or US-Canada border are not subject to the same duties and taxes as those shipped in from other countries.<\/span>\u00a0<\/span><\/p>\n

This loophole exists because of the <\/span>trade agreements between the US, Mexico and Canada<\/span><\/a>. Most experts agree that the loophole works best when fulfilling in Mexico.\u00a0<\/span>\u00a0<\/span><\/p>\n

The benefits of redirecting products through Mexico or Canada are obvious\u2014a merchant won\u2019t pay the same duties and taxes as they would if they shipped to the US directly from a foreign country and fulfilled in the US.\u00a0<\/span>\u00a0<\/span><\/p>\n

But there are also many drawbacks to re-routing your supply chain to specifically avoid Section 321 are many. Here are a few:\u00a0<\/span>\u00a0<\/span><\/p>\n