Is Section 321 Dead? Navigating Tariff Changes in 2025
Tara Daly
·February 14, 2025
At Loop, we work with more than 5,000 ecommerce brands in the US and abroad—and we’ve seen growing concern from many of them around the business impact of major changes to Section 321, an exemption that allows brands to eliminate taxes and customs on many forms of low cost cross-border shipments.
To help you make sense of the issue and how it might impact your shop, we’ve been getting some expert guidance from some of our partners who work closely with cross-border logistics. You can see our previous pieces in the series here and here. This week, we’re featuring an article by Hannah Storrs, Senior Content Strategist at FlavorCloud, a solution dedicated to optimizing the cross-border commerce journey.
Brands have been using Section 321 – a lot. Products allowed under Section 321 have grown from 139 million a year in Fiscal Year (FY) 2015 to over 1 billion a year in FY 2023. This 321 exemption allowing imports of less than $800 to enter the US without any duty or tax is now at risk. How can brands prepare?
It’s good to start off with the reminder that at this time, no changes have officially been made to Section 321, but as of January 14th, 2025, there is a new proposal from the US Customs and Border Protection CBP to change Section 321. Additionally, this informal entry method is at risk to any country that has tariffs applied, which in 2025 is changing week to week. Global fashion retailers like SHEIN and Temu have leveraged Section 321 to sell into the United States without the added import costs of duties and taxes. This has put them at an advantage over brands that import into the US, pay the duties and taxes, and then ship out orders to consumers.
Section 321 was established in the United States Tariff Act of 1930, which has meant US consumers have only known an eCommerce checkout experience free from additional duties and taxes unlike the rest of the world. This has reduced friction and driven the acceleration of eCommerce growth in the United States from 10% of all retail sales in 2018 to 18% in 2025.
What a checkout with duties and taxes looks like:
As of January 14th, the CBP has proposed significant changes that will no longer allow brands to import certain products without duties and tax. We are already seeing similar affects: On Tuesday, March 4th 10% tariffs on China Country of Origin goods began. While enforcement is currently paused, these goods will no longer be eligible for de minimis entry as soon as US Customs and Border Protection has the tools to be able to handle the volume. With other countries threatened with proposed reciprocal tariffs, this could effect most goods importing into the US. Having to pay duties, tax and fees on imports will hit merchants and/or buyers in the wallet. So, what can brands do to prepare? Let’s get into it.
Understanding Section 321
In essence, Section 321 of the United States Tariff Act of 1930, US Customs and Border Protection regulation allows for someone to import products with a retail value of $800 or less per day. This $800 threshold is called a “de minimis” in customs terminology. Not all products are eligible for this, but most common consumer goods qualify. Under these regulations, these de minimis shipments can ship through the border under a simple entry process with less administrative burden and are generally free of duty and taxes, essentially allowing products to come into the country cheaper and faster. DTC retailers and brands have adopted this to import products informally and without import cost.
Previous Benefits:
• Informal Importation - Brands can import eligible products into the United States without going through a formal clearance process. Traditional clearance processes are complex, time-consuming, and require leveraging external customs brokers. A slow and expensive process. Section 321 only requires a small set of information to be provided during processing. Products imported under standard formal clearance require a much larger and extensive number of data points which take longer to identify, confirm, transmit, and be accepted by US CBP.
• Avoid import costs – Import costs include import duties, taxes, and fees. Brands can use this to increase profit margins and open up global sourcing opportunities. They can ship to consumers without maintaining costly domestic fulfillment centers or manufacturing lines.
• Faster Deliveries – With faster customs clearances, Section 321 enabled brands to directly ship from factories and warehouses where the products were manufactured. Leveraging Cross-Border Logistics service providers, merchants can now keep their inventory at optimal levels (no safety stock!) while also meeting high consumer expectations by delivering directly to their doorsteps.
Section 321 has opened the door to cheaper products being shipped directly to US buyers from global manufacturers. With the proposed changes, products shipped into the US will see an increased cost for the merchant or the buyer – and most likely both.
What is changing with Section 321?
Short answer: These low value shipments will no longer be allowed into the US without duties and taxes. Additionally, they will be hit with penalty tariff amounts which were previously waived under Section 321. We expect the de minimis of $800 USD to be dramatically lowered, possibly down to $0 for certain products. Buyers will pay more for imported goods or merchants will lose margin if they choose to offset the increase in duties and taxes costs. For most products, both merchant and buyer will feel the impact.
Why do we believe this? Because on January 14th, the US Customs and Border Protection proposed significant changes significantly limiting imports allowed under the 321 program and changing the de minimis. Additionally, the 1930 Tax Act for years was interpreted in a way where Congress owned approving new tariffs. The new US administration is using old foreign trade Acts alongside the 1930 Tax Act giving the President more power to change trade laws, bypassing Congress. The US has already imposed tariffs on goods manufactured in China, and there are proposals to tariff any country that has existing tariffs in place against the US. Consumers and merchants are facing potentially higher costs that can be enacted ‘overnight’ or in an unpredictable way.
The new administration has stated they are proposing these measures for 3 reasons:
• Border security & consumer safety: Close the loop on current exemptions that inadvertently facilitate unlawful shipments of narcotics (including fentanyl), dangerous goods, counterfeits, and products made with forced labor into the borders.
• Increased Revenue: If imports were subject to an ad valorem tariff as proposed under Section 232, 201 and 301 (which includes apparel, textiles), the total amount of additional revenue to be collected is between $5.9 billion and $7.8 billion in 2025. Additionally, these changes will impact the cost of processing helping CBP save money and process more efficiently. Of note: US CBP low value shipment (LVS) has grown from 139 million a year in Fiscal Year (FY) 2015, to over 1 billion a year in FY 2023.
• Protect domestic industry: These trade or security actions are designed to protect domestic industries, and to address the harm to domestic industry and the American public and unreasonable or discriminatory trade practices, and may in turn encourage foreign governments to eliminate policies that gave rise to the action.
What this means for brands like you
For DTC eCommerce brands importing into the US, these changes will mean increased costs, stricter compliance requirements, and potentially slower clearance times. Not to mention the risk of lowering conversion rates when consumers see the increased costs. The proposals remove eligibility to bypass duty, taxes and fees while also enforcing penalties that previously were avoided. This will see an increase in tariff amount that ranges from 7.5% to 50%!
It also means these changes can ‘pop up’ at any time.
Specifically, this is going to hit brands that import goods from China the hardest. Currently, 64% of Section 321 imports are Chinese-origin goods. 70% of those goods would no longer be eligible for Section 321 under the new proposed regulations. US Customs and Border Protection has paused actioning the current tariffs, but only until they have the proper systems in place to handle the volume. This could change at any day. Instead, all Chinese manufactured goods would have to go through formal entry and be hit with all duties, fees and costs previously waived.
After the tariff announcement, brands are moving quickly to get ahead of the potential changes. There have been increases in importing in bulk to move products quickly. They are trying to get products across the border before the regulations – and additional fees – are put into place.
Additionally, brands are looking into other options. If Mexico and China are being hit hard, some brands are looking to move their sourcing to India, Vietnam or other Southeast Asian countries. Others are moving to fully domestic operations.
Preparing for tariff changes in 2025
Look at your supply chain – NOW.
Is it compliant? If not, get there. Not only are changes coming, but the changes are not clear. De-risk today to ensure you don’t get penalized if and when tariffs get enacted.
Strategies that you can enact today:
• Build out your supply chain and sourcing strategies – More traditional logistics and warehouse solutions that do not rely on de minimis or similar trade programs will be more stable in the coming year.
• Do the math – understand your end-to-end supply chain costs and potential risks if tariffs are increased. Where possible, optimize for resiliency: The risk of global trade wars is high.
• Work with trusted cross-border partners like FlavorCloud, which guarantee duties, taxes, fees, and shipping costs and own the full liability for moving freight (parcels through pallets) around the world – anywhere to anywhere.
Conclusion
Big changes are coming to Section 321 that will impact brands and buyers alike. Higher import costs, stricter regulations, and shifting supply chain strategies are all on the horizon.
The key takeaway? Don’t wait. Start assessing your sourcing, logistics, and compliance strategies now. Secure your supply chain, explore alternative markets, and work with trusted partners to navigate the new landscape.
Act now. Regulations are evolving fast—stay ahead, stay compliant, and protect your margins.
Need help navigating these changes? Loop and FlavorCloud are here to help. Reach out to Loop’s Partner team at partnerships@loopreturns.com if you need recommendations for trusted experts, consultants, and logistics partners in the international trade space.
In this article
Stay in the loop
Subscribe for product updates and Loop's biweekly newsletter.
Retain more revenue with Loop today
With Loop, your brand can offer everything from refunds to direct exchanges to shopper incentives and more. Even better? These exchanges build your business.