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E-Commerce Enjoys a Competitive Edge with Section 321

E-Commerce Enjoys a Competitive Edge with Section 321

Most e-commerce businesses, especially those based in the United States, are steeped in the complicated world of cross-border shipping as they import goods from China and elsewhere. These e-tailers often see a significant percentage of their profits eaten up by tariffs, but there’s a unique way to avoid these transit costs: Section 321.

A Brief History of Section 321

Few can forget the high-pitched trade war we saw between the U.S. and China a few years back, causing serious e-commerce woes as new duties and tariffs made importing goods from China considerably more expensive. So Uncle Sam came up with Section 321 as a clever workaround. The statute allows certain goods valued between $200 and $800 to enter the United States duty-free. Canada, with its low import tariffs, quickly became a top way station for bulk U.S.-bound goods. And the Section 321 program has proven wildly popular — the U.S. Customs and Border Protection recently committed to extending Section 321, announcing that the deal will remain in place until August 2023.

There are some restrictions on goods. Potentially hazardous products which require customs inspection, such as some cleaning products and chemicals, don’t qualify. Nor do cigars, cigarettes, or alcoholic beverages. And shipments into the United States are limited to one parcel valued at $800 or less a day, which makes it all the more logical to rely on a fulfillment company. One can buy in bulk from China and have those shipments broken into smaller lots for daily deliveries.

From Cargo to Customer with Section 321

Section 321 isn’t just about getting goods to a Canadian warehouse and then on to your storage facility in the United States at a low cost – though that can be the case. More and more, today’s e-tailers look to Canadian fulfillment companies for direct-to-consumer services; fulfillment companies can receive shipments from overseas, break them down, package individual orders to your specifications, and ship them directly to your customers with transfers to U.S. carriers. This can be done all without e-tailers having to physically handle the goods and all without paying a dime in U.S. customs.

Section 321 Rides the Swelling E-Commerce Tide

If you’re in the e-commerce business, chances are you’ve seen a rise in sales during the Coronavirus pandemic; globally, we witnessed a staggering jump with e-sales growing more than 25%, topping 4.2 trillion dollars. E-commerce sales in the United States are on track to hit record numbers, with the market-research gurus at eMarketer forecasting that e-commerce will see over $900 billion in sales in the U.S. this year, making up over 15% of all retail sales. Health and beauty products, which qualify for 321 status, are a niche that’s particularly attractive for use with the program; their e-commerce sales saw a 16% growth in the first quarter of 2021 and that trend shows no sign of slowing.

Canada Is the Top Choice for Section 321

You need no leap of logic to see why Canadian fulfillment is the best option for e-commerce businesses based in the United States: Canada is close. So close that fulfillment companies are flourishing just over the border, able to bring shipments into the United States in a matter of hours, usually handing them off to U.S. carriers for delivery to their final destinations in the United States on the same day. But isn’t Mexico also close? Yes, and there are some Mexican fulfillment providers, but we haven’t seen nearly the level of services and infrastructure across the southern border as we have in Canada.

So unless you have some strange affinity for paying high tariffs and making lower profits, a Canadian fulfillment company may be the perfect fit for your e-commerce business.

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by Brian Perry // Brian Perry is a contributor to Businessing Magazine.

Opinions expressed by contributors are their own.