Welcome to the second installment in our series on duty-saving strategies. After discussing the utilization of Foreign Trade Zones and Bonded Warehouses in our previous article, we now turn to Section 321, a topic of significant importance and, as you’ll see, considerable debate.
Under 19 USC 1321, known as Section 321, importers can avoid paying duties on goods if the total fair retail value does not exceed $800 per person per day. This so-called de minimis exemption, significantly expanded by the Trade Facilitation and Trade Enforcement Act (TFTEA) in 2016 from $200 to $800, now also applies to Section 301 tariffs on imports from China. This change has notably increased flexibility for businesses, particularly in the e-commerce sector, by streamlining the import process and reducing costs for low-value shipments.
E-commerce businesses, in particular, find this exemption highly beneficial. The de minimis exemption simplifies the logistics of small, direct-to-consumer shipments, offering a speedier and less burdensome route than the traditional entry process—thereby facilitating potential savings and expanding consumer choice.
However, the benefits of the de minimis exemption are not limitless. Goods subject to antidumping and countervailing duties, quota restrictions, and certain federally taxed items like alcohol and tobacco are ineligible. Importers must exercise due diligence to ensure the correct application of the de minimis exemption to eligible entries.
The rising popularity of the de minimis exemption has sparked a policy debate, weighing the merits of trade facilitation against the needs of enforcement. Proposals to lower the de minimis threshold or to exclude goods from countries with which the U.S. has sizable trade deficits underscore the complexities of maintaining a balanced approach.
A recent audit, revealed at the CBP’s Trade Facilitation and Cargo Security Summit in March 2024, showed that about 9% of de minimis shipments failed to comply with Customs laws, with misclassification, inadequate documentation, and smuggling cited as frequent issues. Moreover, the summit highlighted an explosive growth in de minimis shipments—exceeding 1 billion in the last fiscal year, with projections of reaching 1.3 billion in the current year.
Amidst active lobbying for revisions to the de minimis rule, we may anticipate regulatory changes that heighten compliance duties for small businesses and individual importers. Such adjustments could elevate costs and necessitate a more rigorous commitment to regulation compliance.
Despite the challenges, de minimis exemptions remain an invaluable tool for minimizing import expenses and enhancing operational efficiency. Our team specializes in navigating the complexities of trade regulations and devising strategies to optimize business operations. Our extensive experience spans a variety of trade scenarios, enabling us to offer customized solutions to meet your specific needs. Contact us today to explore how we can help you capitalize on duty-saving opportunities and enhance the efficiency of your international trade activities.
