Duty Free Entry into USA
SECTION 321
A de minimis shipment commonly referred to as Section 321, allows for goods valued at $800 USD or less, to enter duty-free into the USA. Under this legislation, the goods are also permitted to enter without formal entry. Therefore, this regulation is a great option for importers to save money and time.
- The “de minimis value” under Section 321 is the allowable value of goods eligible to be shipped into the United States, in one day, to one individual, free of duties.
- You can deliver shipments originating OUTSIDE the USA and valued under $800 to the hands of US customers without paying US duties.
- Section 321 applies to goods shipped from and/or manufactured in any international location. For example, goods manufactured in China and shipped from Canada would be eligible.
MANAGING CANADIAN DUTIES
- Goods exported from Canada (such as a shipment to a US consumer) qualify for Duty Drawback on export from Canada, and therefore NET duty paid could be brought down to 0%
- Note that goods being imported INTO Canada that were manufactured elsewhere (i.e China) would have to pay Canadian duties on import*, but it is these duties that would be eligible for drawback once the goods ship out of Canada. There is therefore an outlay of cash to pay Canadian duties initially.
- Canada has a relatively “friendly” drawback program, particularly compared to that of the USA.
- *Canada additionally has a Duty Relief Program which enables qualified companies to import goods without paying duties, as long as they eventually export the goods.
- You are not restricted to a specific geographic site to participate in the program.
- You do not have to post a bond to financially secure your liability.
- If you are the importer, exporter, processor, owner, or producer of the goods, you can apply for duties relief if you are directly or indirectly involved in importing goods that are later exported in the same condition you imported them.
- In most cases, the goods you import under the Duties Relief Program have to be exported no later than four years after you import them. This gives you time to identify your export markets.
MANAGING RETURNS
Your returns typical are directed back to your original shipping point. When shipping under Section 321 from Canada, your origin point is now in Canada. You will likely NOT want to direct returns back to origin as the complexities of a consumer shipping an international return can create unnecessary costs as well as a poor consumer experience. You will likely want to direct returns to a domestic USA point. NRI has facilities in the USA to direct returns to. If you have your own USA warehouse you can also consider directing them there.
IS IT RIGHT FOR YOUR COMPANY?
To perform a quick analysis on the opportunity value, there are a few simple calculations to perform to help as a guideline. From there, a deeper analysis should be done for accuracy.
- Understand your current duty cost. Either look at your total US duty paid on all imports, or at minimum asses one or two key products in your line. The total US duty paid becomes your opportunity for savings
- Asses your average freight cost for shipping your average-sized e-comm order domestically from within the USA. This will need to be compared with the cost of shipping from Canada. Consider your current packaging and if it is the most efficient (i.e. smallest) type of packaging solution possible. In step three this will be most important
- Determine average shipping cost from Canada for a same size parcel as above. This result may be in Canadian currency, so be sure to convert to USD for proper comparison. The closer to zero difference between Canada and USA shipping costs, the more the value in step 1 above becomes your total saving opportunity
IN SUMMARY
To perform a quick analysis on the opportunity value, there are a few simple calculations to perform to help as a guideline. From there, a deeper analysis should be done for accuracy.
- Consider volumes currently shipping to the USA for e-commerce, and supplement Canadian inventory with similar SKUs/quantities.
- Utilize NRI’s favorable cross-border freight rates with key carriers, either express or ground.
- Either apply for and use Duty Deferral Program or file for drawback for Canadian duties on all orders that went to the USA.
- Maintain or shorten delivery time to customers AND save on all duty costs.
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