Navigating Section 321: Using Mexico to Avoiding Tariffs & Taxes When Importing From China

301 tariffs
  • June 20, 2023

In today's global marketplace, ecommerce companies face the challenge of navigating complex customs regulations and tariffs when shipping products internationally. However, the utilization of a strategic approach to Section 321 provides a valuable opportunity to eliminate tariffs and optimize cross-border operations. This article will look into the regulations of Section 321 and guide ecommerce companies in leveraging this strategy to their advantage.

What is Section 321?

Section 321 is a provision under the U.S. Customs and Border Protection regulations that allows for duty-free entry of low-value shipments into the United States. By taking advantage of this provision, ecommerce companies can significantly reduce or eliminate import tariffs, resulting in cost savings and increased competitiveness.

How Section 321 Benefits Businesses in the United States

Under Section 321, shipments with a value of $800 or less can enter the United States duty-free. This exemption is particularly valuable for ecommerce companies that import finished products from China to do fulfillment from Mexico. By leveraging this strategy, businesses can avoid substantial tariff costs, enhancing their profit margins and pricing competitiveness.

Eligibility for Section 321

To qualify for Section 321, shipments must meet certain criteria, including the $800 or less value threshold. It's crucial for ecommerce companies to accurately calculate the value of their shipments and ensure compliance with customs regulations to take full advantage of this provision.

Various types of shipments can be eligible for the Section 321 customs exclusion, including individual consumer orders, small parcels, and low-value goods. Understanding the eligibility criteria helps ecommerce companies determine which shipments can benefit from tariff exemption under Section 321.

How to Use Section 321 to Eliminate Tariffs

Ecommerce companies can establish partnerships with suppliers in China to buy finished products and send to Mexico. This strategic sourcing enables them to take advantage of lower production costs while ensuring compliance with customs regulations.

To optimize cross-border operations, ecommerce companies can contract with a 3PL warehouse or fulfillment center near the US-Mexico border. This proximity allows for efficient order processing and streamlined shipping to US customers.

The process begins with sourcing products from China, followed by importing the product into Mexico through US or Mexican Ports. The shipment will be classified as “in-bond" so that they are not technically imported into the United States or Mexico.   Once the product is delivered, it is stored in a bonded warehouse on the Mexico side of the border. When an order is placed online from a US customer, the product is labeled appropriately and shipped from the Mexican warehouse across the border into the US.  From there it is shipped to the customer's doorstep, taking advantage of Section 321 to eliminate tariffs.

The Strategic Approach: Import, Manufacture, and Fulfillment

Step 1: Importing products from China to Mexico

The first step is to import products from China to Mexico, ensuring compliance with customs regulations and documentation requirements. By carefully managing the importation process, ecommerce companies can avoid unnecessary delays and complications.

Step 2: Engage a Bonded Warehouse

Engaging with a 3PL in Mexico near the US-Mexico border allows for streamlined fulfillment operations. The warehouse serves as a hub for storing the products and processing customer orders. By strategically locating the warehouse near the border, ecommerce companies can reduce shipping time and costs when fulfilling orders to US customers.

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Step 3: Leveraging Section 321 for tariff elimination

When an order is placed by a US customer, the product is shipped directly from the Mexican warehouse to the customer's doorstep. Since the shipment value is below the $800 threshold, it qualifies for tariff exemption under Section 321. This enables ecommerce companies to offer competitive pricing to their US customers while reducing import costs.

Compliance and Documentation Requirements

While Section 321 offers significant benefits, compliance with customs regulations and documentation requirements is crucial. Ecommerce companies need to ensure accurate and complete documentation, including commercial invoices, packing lists, and customs declarations. Working with experienced logistics partners and customs brokers, such as Visigistics, can help businesses navigate the compliance process smoothly and avoid potential issues.

Visigistics: Your Partner in Logistics Solutions

Partnering with Visigistics provides ecommerce companies with the expertise and support necessary to navigate the complexities of cross-border operations. As a trusted logistics consultant, Visigistics offers tailored solutions and industry insights to optimize supply chain operations, including importation, manufacturing, and fulfillment. With a deep understanding of customs regulations and logistics requirements, Visigistics helps businesses leverage strategies like Section 321 to streamline operations, minimize costs, and enhance their competitive advantage.

Learn More About How to Work in Mexico

If you're interested in expanding your operations in Mexico and want to read more about  working in the Mexican market, we recommend you to visit the following articles:

  1. How to Ensure Successful Freight Shipping from Mexico to USA: Discover the essential considerations and best practices for shipping goods from Mexico to the United States. Learn about key requirements, documentation, customs procedures, and strategies for optimizing your freight shipping operations.
  2. The Importance of Pedimento and Form 7525-V: Gain insights into the significance of Pedimento, the official customs document in Mexico, and Form 7525-V, the U.S. customs form. Understand their roles in facilitating smooth cross-border trade and ensuring compliance with customs regulations.
  3. How to Overcome Issues with Cross Border Logistics: Explore common challenges and potential solutions when dealing with cross-border logistics between Mexico and the United States. Discover strategies for managing transportation, customs clearance, regulatory compliance, and supply chain complexities to overcome hurdles and achieve operational excellence.

In these articles, you'll gain valuable knowledge and practical tips to navigate the intricacies of working in Mexico. Visigistics is here to provide comprehensive logistics consulting services and support you in your journey toward successful cross-border operations. Contact us today to discuss whether your company is eligible for the 321 exemption and unlock the full potential of your ecommerce in Mexico.

If you are interested in learning more about manufacturing in Mexico as an alternative to manufacturing in China, be sure to read our blog post How to Find Manufacturers in Mexico, or download our eBook, The Power of Nearshoring in Mexico.


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