Toronto Mike

Section 321: A Competitive Advantage for Canada

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It's hard to believe that the introduction of import tariffs in America would serve the Canadian economy, but that is exactly what happened.

The 2016 trade war between the Trump administration and China was well publicized.

A battle of wills and words that led to the development of several import duties and tariffs placed on Chinese goods -- all of which acted to increase the cost of getting overseas goods onto American soil.

Now, the reason as to why this was of benefit to the Canadian economy takes a bit of digging, but it quickly becomes apparent when we look at the American De Minimis threshold, and the Section 321 shipping clause that was associated.

The De Minimis Value

The same year that these import duties and tariffs were introduced in America by Trump, the De Minimis value for imported goods also happened to be increased from 200 to 800 USD.

The “De Minimis” value describes the maximum dollar value an overseas shipment can be imported into the US without incurring any of the aforementioned importation costs.

Then, in what was a huge stroke of luck for the Canadian economy, as the De Minimis value was increased to 800 USD, it was also published within a list of Section 321 exemptions by US customs and border control.

The Section 321 Shipping Clause

Section 321 is a specific type of overseas shipment that sits below the 800 dollar De Minimis value.

Which means that American consumers who can get their imported goods classified as a Section 321, no longer have to face import costs -- even if those goods are coming directly from China.

Now, the caveat here is that for a shipment of overseas goods to gain Section 321, it must be below 800 USD, and it must fall under a single order number.

This is a BIG consideration, because it would be extremely unlikely that any e-commerce company would import a shipment of overseas goods valued less than 800 dollars because the cost of shipping would make it unfeasible.

Which is where Canada came to the rescue.

Canadian Fulfillment: The Helping Hand

After the development of the Section 321 shipping clause, a number of Canadian fulfillment companies entered the market.

These companies make a living by receiving shipments of stock on behalf of American businesses, storing them in warehouses located on Canadian soil, and then shipping them to customers across the border when those American businesses receive an order.

They ultimately act like a middleman between American e-commerce entrepreneurs and their customers.

And while this might seem like an odd method of conducting business, it has become increasingly common across America because it can eliminate the cost of importation.

Simply put, because each time an order is shipped to an American consumer from a Canadian warehouse it gains a unique order number. This allows it to gain Section 321 classification and completely avoid US import tariffs.

Section 321 Increases Exponentially

Section 321 and Canadian fulfillment allowed the continuation of e-commerce across America -- but many thought it had an end date.

With Biden taking over the US administration in 2020, most thought that the import duties and tariffs introduced by Trump would be removed -- thus paving the way for the more traditional  e-commerce environment to return to the US.

But that's not what happened.

All duties and tariffs were upheld by the Biden administration, making Section 321 more essential than ever.

Online retail sales in the USA increased from 598 billion dollars in 2019 to 792 billion dollars in 2020.

More importantly, US Customs are thought to be receiving more than 1.8 million packages per day under Section 321 classification. This is a whopping 50% higher than the 1.2 million they were receiving in 2017.

Canada Reaps the Rewards

Looking at Section 321, it is easy to see how it benefits American businesses.

They spend less on importation, they save money on warehouse space, and they even save time on order fulfillment.

It is a no-brainer for them.

But it is important to highlight how beneficial this new method of conducting online business is for Canada.

In the last 12 months the number of Canadian Fulfillment companies has increased at a rapid rate. This has come with the purchase of more land, more warehouse space, more equipment, and with the hire of more staff.

In short, it is creating more jobs in Canada.

This has, in turn, come with heightened demands for freight and domestic shipping, increases in corporate tax, as well as more work required across the entire supply chain, with a heap more overseas cargo entering ports across the nation.

All of which has led to substantial economic growth.

With this in mind, the news of a nationwide increase in Canadian Fulfillment business should be seen as a huge positive. It not only means more jobs in a variety of industries, but nationwide economic growth.

Section 321 has truly become a competitive advantage for Canada.

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