There are a number of duty saving strategies businesses can use to save money, reduce duties and tariffs, and seek refunds. These strategies are always a high priority for companies involved in international trade, but especially during these difficult times. This is the third in ST&R’s series of articles examining these strategies in more detail and discussing the use of Section 321 duty waivers. Previous articles have discussed the first-sale rule and transfer pricing.
19 USC 1321, commonly referred to as Section 321, allows US Customs and Border Protection to admit qualifying goods duty and tax free (and with fewer information requirements) provided are imported by one person in one day and have a total fair market value of $800 or less. Currently this so-called de minimis the exemption applies not only to basic MFN duties, but also to Section 301 tariffs, including those in effect 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 accelerated further as more consumers shop from home. This increase has raised concerns among some policymakers, but legislative proposals that would place significant limitations on Section 321 appear to be making little headway at this time and a similar regulatory proposal does not appear to be actively considered.
Additionally, an ongoing CBP test results in faster customs clearances for Section 321 shipments, which means fewer delays and lower costs. This test allows these shipments (including those subject to partner government agency data requirements) to be entered through a new informal Type 86 entry into the automated trading environment. By using this method, shipments can be cleared faster than it usually takes to clear via manifest.
While Section 321 shipments thus provide an opportunity to reduce tariffs and other costs, when evaluating this opportunity, companies should carefully consider the accuracy of the information provided for these shipments to avoid cargo holds and possible seizures due to PGA compliance or intellectual property issues.
Companies should also be aware that due to concerns that the increasing volume of Section 321 shipments will affect their import compliance efforts, CBP continues to consider transmitting additional data elements, such as different entities at different points in the supply chain, for Section 321 goods, prior to their arrival. This could eventually lead to changes in 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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