Maximizing Duty Savings Series –Section 321 Duty Exemptions Or De Minimis Exemptions – International Trade & Investment

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.

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The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.