In the year since the world locked down due to COVID-19, spending on e-commerce has soared. In 2020, American consumers spent more than $860-billion online, an increase of 44% over the year before1, with food, health and beauty and household goods leading the way. As omni-channel opportunities increased, however, so did competition.
Smart retailers are now looking for ways to take additional cost out of the value chain without sacrificing customer experience. One strategy where our clients are seeing strong results is cross-border shipping using the little-known Section 321 exemption. In addition, most US Online retailers want to have the ability to expand, not only into Canada, but globally.
About Section 321
Under the recent Canada-United States-Mexico Agreement (CUSMA), there is a provision, known as Section 321, that allows small consumer items valued at less than US$800 and weighing under 22.6kg (50lbs) to cross from Canada to the United States duty free.
For direct-to-consumer (DTC) retailers, this offers an opportunity to take advantage of a clause that waives or refunds duties on items that enter Canada bound for U.S. recipients. For many of our clients, the savings are as high as 15 to 20%.
- Retailer orders goods from outside of North America
- SCI receives the goods into one of our secure warehouses
- As American consumers place orders, the items are packed and labelled for U.S. domestic shipping
- Each parcel is scanned and shipped from one our facilities near the U.S. border
- Parcels clear U.S. Customs and are delivered to a UPS facility to be processed as regular domestic shipments
- S. consumers receive their orders as usual
- If Canadian duties were paid, the retailer receives a refund through the Duty Drawback program
Seamless consumer experience
With our partner, ChannelApe, we can support the most complex multi-distribution centre, multi-country strategies, complete with seamless integration into inventory and customer service applications. Regardless of how complex the back-end logistics may be, our clients report their U.S. customers receive their orders in the expected amount of time and, because they are labelled with a U.S. shipper address, customers are unaware the goods started their journey in Canada.
Keeping things moving
The key to getting maximum value out of Section 321 is designing and managing the backend logistics from origin to consumer. For nearly a year, our team has been working with apparel, sporting goods, housewares, consumer wellness and other large volume DTC retailers to design fast, compliant processes for Section 321 shipping.
We leverage our facilities in the Vancouver, Toronto and Montreal areas because of their access to ports of entry and proximity to the U.S. border. When shipments arrive, we work with freight forwarders and customs brokers to quickly clear the items and receive them in our GMP licensed warehouses. In addition, we work with our customers to fully understand product origin, which by understanding duties and tariffs, can make recommendations to reduce costs and complex integrations.
The team quickly unpacks, labels and adds the items to the inventory system ready to ship. As they are received, individual orders are repacked, and a domestic U.S. label is applied for same day shipping. Packages are consolidated and shipped to the border for processing, with proper documentation ready to go. The end consumer who is receiving the package in the USA, isn’t aware its being processed in Canada, as they get a tracking number and can follow the entire delivery life cycle.
Reverse logistics are just as seamless. If a consumer chooses to return an item, they contact the retailer for a return shipping label and the package is consolidated with other returns and sent to our facility for inspection. Saleable items are returned to inventory while damaged items are disposed of responsibly or returned to the vendor.
We’re pleased to work with great partners such as ChannelApe to bring this service to top U.S. online and omni-channel retailers. The ability for ChannelApe to interact with the brand and provide a global experience for fulfilment and SCI’s trade knowledge into certain global markets, gives brands the ability to expand and provide cost take-out.
Together, we’re saving DTC vendors millions of dollars while supporting the complexity of managing a global supply chain with experienced end-to-end logistics strategists.
If you ship more than 500 parcels per month to consumers in the U.S. and if the order size is under US$800 in value, you may qualify for the savings Section 321 can offer. Contact your SCI team for more information.
Is Section 321 right for you? Download our overview.