The trade war with China has carried over into 2021 and $325 billion in tariffs on imported Chinese goods remain in effect. So far, the Biden administration has not indicated if and when these tariffs will be lifted. This is demoralizing news for all product companies that were hoping for a change in policy from the new administration. However, there is an uncommon loophole in the US tariff code that may help you avoid China tariffs altogether…

China Tariff Loophole

The loophole is Section 321, 19 USC 1321 of the US tariff code. This section is the statue that describes “de minimis”. It states that an importer does not need to pay tariffs on any shipment valued at less than $800.00. It’s typically not cost-effective to import less than $800.00 in product from China, but here’s the trick – you send your inventory to Mexico or Canada first…

Special “floating” terms allow your product to arrive at a warehouse in Mexico or Canada duty-free since it has not arrived at its final destination. By fulfilling customer orders directly from this warehouse across the border, you can take advantage of the Section 321 loophole. This tactic means you completely avoid China tariffs!

Why Don’t All Brands Use Section 321?

The answer to why all brands don’t use this tactic is simple – it’s difficult to manage. Most brands shipping to US customers have a warehouse in the US. Managing a second warehouse or moving to a warehouse across the border requires a lot of work. However, for small and medium-sized brands that are agile, this tactic presents a huge opportunity. Additionally, hiring a trusted logistics partner to manage this process reduces your risk.

If you have questions about this tariff loophole or implementing this process, then Contact Us today!