Background

There are a number of duty savings strategies companies can use to conserve cash, lower customs duties and tariffs, and seek refunds. These strategies are always a high priority for businesses involved in international trade, but particularly so during this difficult period. This is the third in ST&R’s series of articles examining these strategies in more detail and covers the use of Section 321 duty exemptions. Previous articles addressed the first sale rule and transfer pricing.

19 USC 1321, commonly referred to as Section 321, enables U.S. Customs and Border Protection to admit qualifying goods duty- and tax-free (and with fewer information requirements) provided they are imported by one person on one day and have a total fair market value of $800 or less. Currently this so-called de minimis exemption applies to not only base MFN duties but also Section 301 tariffs, including those in place against hundreds of billions of dollars’ worth of imports from China.

Use of this exemption has skyrocketed alongside the growth of direct-to-consumer (B2C) e-commerce, which has further accelerated as more consumers shop from home. This increase has prompted concern among some policymakers, but legislative proposals that would impose significant limitations on Section 321 appear to be making little headway at present and a similar regulatory proposal does not appear to be under active consideration.

In addition, an ongoing CBP test is yielding faster clearances for Section 321 shipments, which means fewer delays and lower costs. This test allows such shipments (including those subject to partner government agency data requirements) to be entered via a new informal entry type 86 in the Automated Commercial Environment. Using this method, shipments can be cleared quicker than it may typically take for clearance via manifest.

While Section 321 shipments thus offer an opportunity to lower tariffs and other costs, in assessing this opportunity companies should carefully consider the accuracy of the information provided for such shipments to avoid cargo holds and possibly seizures due to PGA or intellectual property compliance issues.

Companies should also be aware that due to concerns that the increasing volume of Section 321 shipments is affecting its import compliance efforts, CBP continues to consider the transmission of additional data elements, by different entities at different times throughout the supply chain, for Section 321 goods in advance of their arrival. This could eventually lead to changes in the Section 321 data submission requirements.

For more information on using the Section 321 duty exemption, please contact Lenny Feldman at (305) 894-1011.

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