Article is up to date as of 12:00pm 2/4/2025.
In recent weeks, the US government has implemented changes to the de minimis threshold for imported goods, particularly impacting businesses that fulfill orders from China to the US. These changes focus on Section 321 and the value threshold that determines whether duties are applied. For companies fulfilling directly from China, these shifts present both challenges and opportunities. In this blog, we’ll break down what the changes are, how they affect businesses fulfilling orders from China, and why partnering with a US fulfillment center might be the solution to adapting efficiently to the new landscape.
What is Section 321 and the De Minimis Threshold?
Section 321 refers to a provision under US law that allows the duty-free importation of low-value shipments into the US The threshold for de minimis—goods that are exempt from customs duties and taxes—was traditionally set at $200 per shipment. In simpler terms, if the value of a shipment was under this amount, US Customs and Border Protection (CBP) would not assess tariffs or taxes, making it easier for businesses to fulfill smaller orders without facing expensive import duties. On top of this, formal customs entry was not required, so there was limited paperwork involved and fast customs clearance.
In 2020, the US Trade Representative (USTR) enacted a significant change to the Section 321 de minimis rule, increasing the threshold to $800 with the Trade Facilitation and Trade Enforcement Act (TFTEA). This meant that shipments valued at $800 or less, regardless of the number of items, could enter the US duty-free. This change was initially seen as a win for eCommerce businesses, as it allowed for faster and more affordable shipping, particularly for companies sourcing from overseas, such as China.
However, there have been additional changes to this rule in recent days that companies need to be aware of to stay compliant.
Recent Changes to Section 321 and De Minimis
In late 2024, the US government announced further updates to the de minimis provisions that would significantly impact orders shipped from China. The most notable change is that shipments from certain countries, including China, will now face stricter scrutiny under Section 321. Specifically, the increased value threshold of $800 still applies to many countries, but shipments containing goods originating from China may now face restrictions or additional requirements if they fall under this threshold.
More recently, on February 1, 2025, President Trump issued an executive order halting the Section 321 customs de minimis process. The executive order goes into effect on February 4, 2025. All shipments which had previously been exempt from tariffs, will now be subject to duties. This change is expected to create major challenges, particularly for global eCommerce brands that will have to quickly adapt their international fulfillment strategies.
The executive order also specified a 25% tariff on imports of goods originating from Canada and Mexico, and a 10% tariff on imports from China. However, shipments that are already in transit prior to February 4, 2025, will not be impacted by these new tariffs. As of February 3rd, both Canada and Mexico had worked out a temporary 30-day delay with the US on those tariffs, so you can see it is a very dynamic situation.
Impact to Companies Using a Chinese 3PL to Fulfill US Orders
Over the past decade, Section 321 has been used and abused by eCommerce brands looking to lower fulfillment costs on DTC sales. According to U.S. Customs and Border Protection (CBP), de minimis shipments accounted for 92%Â of all cargo entering the country. The suspension of Section 321 changes this, however.
Here’s how these adjustments impact companies shipping from China:
Slower Shipping: While the $800 threshold still applies to many regions, for goods coming from China, this means longer wait times at customs, increased inspections, and tariffs being applied to shipments that previously qualified for duty-free entry. Greatly increased delivery times can kill conversion rates for brands who previously shipped from China.
Complex Compliance Requirements: US Customs will require more formal documentation for low-value shipments from China, complicating the process for businesses that were previously able to ship goods with minimal oversight. This means that businesses will need to allocate more resources to ensure compliance with the new regulations, adding to their operational costs and administrative burdens.
Increased Duties: Previously, low-value shipments from China could easily qualify for duty-free status, reducing shipping costs for businesses that deal in small orders or retail goods. With these changes, small businesses will see an increase in customs fees and taxes, making it harder to offer competitive pricing on products that fall below the $800 threshold. With customs scrutiny and potential duty increases, the overall cost of fulfilling orders from China will rise. This may lead to price increases for US consumers or require businesses to absorb higher costs, both of which could impact profitability.
The changes to Section 321, will thus force businesses to reevaluate their fulfillment strategies, as slower shipping and increased costs will make fulfilling from China less appealing.
How a US Fulfillment Center Can Help
We’re already seeing many businesses that previously relied on the de minimis exemption pivoting toward US-based fulfillment solutions for faster delivery and lower costs. This will be essential for businesses to figure out in order to keep their DTC shipping experience profitable and seamless for their customers.
Here’s how a fulfillment center like OTW Shipping can help companies adapt:
Avoiding Customs Delays and Lowering Duties: By leveraging a US-based fulfillment center, businesses can import products in bulk, avoiding customs delays and variable duties paid by customers on individual shipments which is not the best customer experience. By importing in bulk, the cost of the goods, rather than the retail value can be used when declaring your goods, which lowers the total duties paid significantly. Always consult a customs broker though to make sure you are declaring shipments accurately.
Consolidating Shipments: Instead of shipping small individual packages from China to the US, companies can consolidate their goods into a larger shipment to the fulfillment center. By doing so, they can better manage the de minimis threshold and avoid incurring additional duties for multiple small packages.
Faster Delivery to Customers: Fulfillment centers located in the US allow for faster delivery times, since goods are already on US soil. This helps improve customer satisfaction by reducing delivery times and ensuring that goods can be shipped quickly to consumers across the country. OTW Shipping has multiple locations to make delivery even faster.
Scalability: If your business grows, a fulfillment center provides the scalability you need to meet increasing demand without the overhead of managing logistics yourself. With more changes to Section 321 and de minimis likely to happen in the future, having a reliable partner who understands the landscape can help businesses remain agile and competitive.
Summary
The recent changes to Section 321 and the de minimis threshold are making it more challenging for businesses fulfilling orders from China to the US to stay compliant, minimize costs, and avoid delays. While the increased scrutiny and potential duties for small shipments can be burdensome, US fulfillment centers provide a strategic advantage in navigating these challenges. By consolidating shipments, avoiding customs delays, and ensuring compliance, fulfillment centers help businesses streamline their logistics operations and maintain smooth order fulfillment processes. As international shipping regulations continue to evolve, partnering with the right fulfillment center will be a key factor in sustaining success in the competitive eCommerce space.
Talk to OTW Shipping about US Fulfillment
At OTW Shipping we’re ready to move quickly to help you transition your fulfillment from China to the US, all while improving delivery speed and decreasing fulfillment costs.
And why us? Most 3PLs treat client relationships like transactions. We designed our business to feel like in-house fulfillment for your business. We want to give your growing ecommerce brand the same service large brands receive every single day!
When you ship with OTW, you get:
99.99% order accuracy
Transparent rates and custom quotes to fit your needs
2-day ground shipping to over 90% of the US
Access to a Slack-like channel where you can chat with our team directly
State-of-the-art warehouse management software
And much more
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