In today’s eCommerce world, entrepreneurs are always exploring options to lower costs and improve fulfillment operations. However, the ongoing US-China trade war and tariffs imposed by both sides are making it hard for businesses to keep their bottom line. In 2018, for instance, the Trump administration imposed three rounds of taxes to 25% for over $250 billion Chinese goods. In theory, such moves are meant to make US-produced goods cheaper and lessen reliance on foreign products, but where does this leave importers? As a U.S. retailer, how can you cut down on costs with ridiculously high tariffs? There is hope!
No business wants to spend an extra 25% on their goods, especially not the small to midsized businesses that these tariffs hit the hardest. While some retailers are starting to source products from Southeast Asia, Cambodia, Vietnam and other countries with more favorable trade terms, the answer might actually be lying in the north – Canada to be specific.
In 2016, the Obama administration came up with Section 321, a minimis exemption that raised the duty-free quota on products worth $800 or less coming in from Canada to the United States. This move has opened up Canada for e-commerce and has since offered a unique solution to U.S. import tariffs.
Instead of paying huge taxes by importing directly from other countries to the U.S., you could make Canada an intermediary. All you have to do is ship to Canada first and then import under Section 321 for duty-free shipping to the United States.
Section 321 Explained
Goods incoming directly to the U.S. from China are taxed at 25%, but you can use Section 321 to avoid paying that import tax. All you have to do is break the shipments down into sections worth $800 or less. This is where Canadian fulfillment comes in.
There could be additional costs with these supply chain changes. To deal with this, you can try taking advantage of the Custom Bonded Warehouses (CBW) or the Duty Drawback Programs (DDP), by which you may be able to fulfill your orders without having to make drastic investments or amendments to your operations.
With such programs, you can store your goods without paying your duty immediately. This will reduce mismanagement of your inventory and give you the much-needed duty relief.
Canadian Fulfillment: The Way to Go
Canadian fulfillment accomplishes one important thing: they take care of all the details so you can focus on your business. You don’t need to hire staff and rent space in Canada to import and repack goods there; that’s what Canadian fulfillment is for.
A Canadian fulfillment center doubles up as a warehouse for goods storage, allowing importers to hold onto their products. Some of the fulfillment service providers have several centers, which gives them a diverse geographical reach that allows eCommerce establishments to enjoy affordable shipping, quick delivery, and a diverse market.
What More Will You Gain with Canadian Fulfillment?
The most obvious benefit of working with a third-party logistics company for your fulfillment needs is that it will cut down your import costs, while also saving you from having to handle all the work by yourself. However, the benefits go deeper than this.
No More Long-term Leases
Canadian fulfillment will offer you flexible pricing to help you grow through good and low periods. The fulfillment center will adapt to your needs and adjust costs reasonably. This will keep you from bearing the consequences of the financial commitment that you’d make renting your own warehouse.
Work with the Experts
When working with an outsourced fulfillment service provider, you get the warehouse space and skilled people working on your orders. Each third-party logistics company has a team of logistics experts to manage all the labor needed for receipts, stock management, order processing, and shipping. This will offer you a whole new agility level that you might not achieve easily alone.
While working on your imports and orders by yourself is often free, it could actually cost you more in the long run. Your customers need fast shipping, and handling it in-house can make you fall short of their expectations.
By having a Canadian fulfillment partner, your business will benefit from their prowess and will leverage their purchasing power on shipping and packaging costs. A reliable service provider will share real-time stock count and status updates to keep you proactive.
You Get More Time to Optimize
You most probably didn’t set up your eCommerce store because you’re great at packing boxes. You’d rather spend your time managing and optimizing your business operations. Once you allow a fulfillment service provider to handle your logistical details, you will get more time to focus on tasks that have a greater impact on your bottom line.
The key to succeeding in eCommerce is having a flexible approach to business and a not-too-rigid operating system.
While there is a possible resolution of the U.S.-China tariffs in the future, you should keep looking for creative solutions, such as utilizing Section 321, to keep your margins intact. Take advantage of this today to grow your business and reach more marketplaces.