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A Founder’s Guide to Importing with Canadian Fulfillment

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A Founder’s Guide to Importing with Canadian Fulfillment

Since the year 2010 when it overtook the United States, it is no longer news that China has become the world’s leading nation in terms of manufacturing. The United Nations Statistics Division (UNSD) released data that estimated China’s contribution to global manufacturing in 2019 at a massive 28.7 percent. This has turned the attention of many ambitious entrepreneurs to the East where the most populous nation on earth presents itself as an irresistible manufacturing market.

On the other hand, the trade war between the US and China – which has seen both parties slap heavy tariffs on each other’s goods has made it economically difficult to import goods directly from China, and by extension frustrating the efforts of American businesses that are trying to explore the Chinese market.

So, how can the American entrepreneurs that want to take advantage of the booming Chinese market beat the harsh economic demands of direct importation from China? The answer is in taking Canada as a smart China-to-US route and leveraging Section 321 and Canadian Fulfillment.

What is Section 321 and how does it work?

Section 321 is one of the most common US Customs and Border Protection (CBP) statutes known by ecommerce businesses. Introduced in 2019, the section authorizes low-value merchandise below the minimum of $800 to be exempted from paying custom duties or taxes.

What does Canadian fulfillment mean?

Canadian fulfillment companies are third-party companies in Canada that receive and provide warehousing and logistic services, as well as handle the shipping processes, checking in imported stock for business organizations, and helping them to deliver orders directly to their customers. Their delivery service makes sure the processing and shipping of orders to the US are carried out on the same day just as would be the case from a store in the States.

How do you take full advantage of Section 321 through Canadian fulfillment?

As mentioned above, Section 321 is a bridge for direct importation from China to the US. It is important to note, however, Section 321 alone, is not enough. There are certain conditions and best practices that could make the process tedious and difficult for business owners to ship their goods through the border. These conditions, if not complied with, may also lead to serious punishments and delays in shipment.

Here is how you as an entrepreneur that has an ecommerce business can take advantage of Canadian fulfillment, maximize the benefits of section 321 and bypass its constraints:

1. Importers are only allowed to claim Section 321 once daily. If you are going to be importing goods that are worth above the $800 value threshold (which is very likely), this means you will not be able to ship your entire goods through the US border all at once. As an entrepreneur, using the services of a Canadian fulfillment company will aid in maintaining business-to-customer and business-to-business delivery operations across the border at an economy-friendly cost, and without having to worry about the import duty and tax.

2. Apart from the daily limit, the logistic effort of receiving very large ecommerce shipments from China, shipping them to the U.S., and the cost of transporting them to your warehouse could be very overwhelming and unnecessary. E-commerce business owners have settled with using the warehousing services of Canadian fulfillment to save cost and prevent stress.

3. An entrepreneur that does not have to worry about the logistic and warehousing aspect of their business would have the opportunity of focusing on other things.

Summarily, leveraging on Section 321 through Canadian fulfillment can help entrepreneurs conveniently maximize their exploits in the Chinese market without feeling the economic heat of the trade war.

section 321

How Your Business Can Benefit from Importing Under Section 321

Import taxes often have a huge impact on businesses, especially U.S. e-commerce companies that rely heavily on goods made overseas. Many of these companies are drastically lowering their import costs by taking advantage of a little-known U.S. customs statute, Section 321. Let’s look at how these businesses are benefiting.

Section 321 Cuts the Costs of Chinese Imports

What you’re importing and where you’re importing from can considerably affect the duty rates you have to pay. While this applies to lots of countries around the world, China is a central focus for many U.S. businesses. In 2020, Chinese exports to the United States topped a whopping $430 billion! And shipping directly from China to the U.S. can often cost around 20% in import taxes.

The high price of bringing goods from China to the United States was exacerbated by recent trade tensions between the U.S. and China, respectively the world’s largest consumer of goods and the world’s largest manufacturer of goods. Over half of the overall trade between the U.S. and China has been negatively impacted. The affected U.S. businesses report that the increased tariffs have considerably raised their operating costs, and many of these companies turned to Section 321 and Canadian fulfillment companies for economic relief.

How Does Section 321 Work?

Section 321 allows for the duty-free importation of qualifying goods into the United States that are valued at $800 or less. But most companies buy from China and other countries in much higher quantities at much higher dollar values. A problem, right? There’s a simple workaround to that: bring the goods to Canada, where import tariffs are much lower than they are in the United States.

A company can, for example, buy a shipment of Section 321-eligible goods valued at, say, $8,000 from China, and have them sent to Canada. Then they can have those goods brought to the U.S. in ten separate $800 shipments, on ten separate days, without paying about $1,600 in total U.S. tariffs they would otherwise incur if they imported in bulk directly from China to the United States.

Who Handles Section 321 Goods on the Canadian Side?

That’s where a Canadian fulfillment company comes in. Using a “pick-n-pack” process, Canadian fulfillment companies receive bulk shipments at a Canadian warehousing facility that’s usually strategically located close to the U.S. border. The “picking” part includes pulling items from large shipments and readying them for smaller orders that often go to multiple locations. The “packing” gathers these items according to customer needs and requirements.

From receiving the goods to final delivery confirmation, a good fulfillment company will have the ability to handle and electronically track every shipment. A good fulfillment company is also skilled in “kitting,” taking items from multiple SKUs and bundling them together under one SKU for a more economical and streamlined shipping process.

Section 321 is a Speedy Solution

Can anybody bring goods into the U.S. under Section 321? Technically, yes, but not everyone can do it with the same speed and efficiency as fulfillment companies. The detailed documentation that U.S. customs requires has to be perfect and delivered before the shipment gets to the border if you want to get the goods through smoothly. How? Fulfillment companies enjoy participation in the Section 321 Data Pilot Program, allowing them to submit the needed documentation electronically to ensure their clearance is ready before the shipment arrives at the border crossing.

And the closer to the border the better. Many Canadian fulfillment companies are close enough to the U.S. border to guarantee same-day fulfillment, bringing products into the United States that are then handed off to U.S. carriers including FedEx, UPS, and DHL for swift delivery to their ultimate destinations.

It’s been famously said that the only two certainties in life are death and taxes. But that may not be entirely true. At least not the second part if you’re taking advantage of Canadian fulfillment and Section 321.