For nearly a decade, Section 321 of the Tariff Act let importers clear shipments valued at $800 or less without duty, without formal entry, and without a customs broker on the hook. That arrangement quietly underwrote an entire generation of direct-from-factory retail, from Shein hauls to Amazon arbitrage to the small Shopify brand drop-shipping sunglasses out of Guangdong. In 2025 the federal government dismantled it: the China and Hong Kong de minimis exemption ended in May 2025, and the broader suspension of de minimis entry for all countries followed. By 2026 the default assumption has flipped. Your low-value parcel is now a dutiable, reportable import unless you can prove otherwise.
This guide is for the operator who used to treat customs as someone else’s problem and now finds a 30% duty line item where free clearance used to sit. We will be concrete about tariffs and customs mechanics: which entry type replaces the old informal clearance, what it costs in fees and bonds, how the duty math actually works on a $40 unit, and the order in which to rebuild your pricing so you do not discover the damage on a P&L three months late. If you want the foundational framing on how import taxes flow into a retail business, our guide to cross-border tax basics every small retailer should know sets the table for everything below.
In short
- Section 321 de minimis is effectively dead for the volumes most retailers run. The $800 free-clearance pathway ended for China and Hong Kong in May 2025 and was suspended broadly thereafter, so plan as if every commercial parcel is dutiable.
- Your shipments now need a real entry type, usually a Type 11 informal entry under $2,500 or a Type 01 formal entry above it, both of which require an HTS classification, a declared value, and in most cases a customs broker.
- Duty plus Section 301 tariffs plus a customs bond and broker fees can add 25% to 55% to landed cost on China-origin goods, which destroys the margin model that de minimis subsidized.
- The fix is structural, not clerical: reclassify products correctly, consolidate parcels into bulk entries, requalify origin, and reprice before the duty bill compounds.
- You own the compliance risk now. Undervaluation and misclassification carry penalties up to the domestic value of the merchandise, so the era of guessing on a commercial invoice is over.
What was Section 321, and what exactly changed
Section 321 is the statute that authorized de minimis treatment: U.S. Customs and Border Protection (CBP) could admit a shipment free of duty and formal entry if its fair retail value in the country of shipment was $800 or less, with a one-shipment-per-person-per-day limit. The trade calls this an administrative exemption, and for years it was the single most important cost advantage in cross-border e-commerce. A $50 jacket shipped one unit at a time entered the United States at a true landed cost of $50 plus freight, with zero duty and zero brokerage.
The change is not a tweak to the threshold. It is a removal of the pathway for the goods that used it most. The China and Hong Kong exemption was eliminated first, on the grounds that the channel was being used to evade Section 301 tariffs and to move illicit goods. The administration then moved to suspend de minimis broadly across origins. The practical reading for 2026 is binary: do not build a sourcing or pricing plan that assumes any commercial volume clears duty-free under $800. The exemption may survive for genuine gifts and personal one-offs, but not for inventory.
That matters because the old model hid the tax. When duty was zero, classification did not matter, valuation did not matter, and you never met a broker. All three now matter on every box. The companion piece on how tariffs really work for small retailers importing goods walks the underlying duty mechanics if you have never had to think about an HTS code before.
The entry types you now have to file
Answer first: most retail importers will land in one of two buckets, and which one depends on the value of the consolidated shipment, not the value of a single unit. Once de minimis is off the table, CBP wants an entry, and entries come in flavors.
| Entry type | When it applies | Broker required | Typical cost per entry |
|---|---|---|---|
| Informal entry (Type 11) | Shipment value under $2,500 | Often, in practice | $40 to $100 |
| Formal entry (Type 01) | Shipment value $2,500 and above | Yes, plus a customs bond | $100 to $250 |
| Section 321 (legacy) | Genuine personal shipments under $800 | No | $0 |
| Foreign Trade Zone / bonded | High-volume importers deferring duty | Yes, specialist | Setup plus per-entry |
The strategic insight buried in that table is consolidation. If you were shipping 200 parcels a month at $40 each under Section 321, you now face 200 potential informal entries, each carrying a brokerage line. Consolidate those into a handful of formal entries at the port and your per-unit clearance cost collapses, even though the duty itself does not. This is why importers who used to ship one unit at a time are suddenly talking to freight forwarders about pallets.
Formal entries also require a customs bond, which guarantees CBP that duties will be paid. A single-entry bond runs a small percentage of the entered value plus duties; a continuous bond, sensible above roughly $30,000 in annual duties, costs a few hundred dollars a year and covers all your entries. Get the continuous bond if you import with any regularity, because single-entry bond fees stack fast.
There is a timing dimension most first-time importers miss. Under de minimis, duty was never owed, so cash flow was simple: pay the supplier, pay the carrier, sell the goods. Now duty is due to CBP within ten working days of release under the standard periodic monthly statement arrangement, well before most of your inventory has sold through. That gap between paying duty and recovering it from customers is real working-capital pressure, especially for a brand turning inventory in 60 to 90 days. Budget for the carry, and if you are importing seasonal product, model the duty outlay against your sell-through curve rather than assuming the cash recycles immediately.
How the duty math actually works now
Here is the calculation that used to be zero and now is not. Duty is assessed on the customs value, which is generally the price you paid the supplier (the transaction value), not your retail price. On top of the base most-favored-nation duty rate, China-origin goods carry Section 301 tariffs that range widely by product category, and some categories now carry additional reciprocal or national-security tariffs layered on top.
Walk a concrete unit. You import a $40 (supplier cost) consumer electronics accessory from China. Assume a 2.6% base duty and a 25% Section 301 tariff on that HTS line.
- Establish customs value: $40.00 per unit, the price paid to the factory, exclusive of international freight if shipped FOB.
- Apply base duty (2.6%): $40.00 x 0.026 = $1.04.
- Apply Section 301 (25%): $40.00 x 0.25 = $10.00.
- Add merchandise processing fee (0.3464%, with a floor and cap): roughly $0.14 on this value, though it hits the minimum on small entries.
- Allocate brokerage and bond across the entry: a $90 informal entry brokerage split across 100 units adds $0.90 per unit.
- Total added landed cost: about $12.08 per $40 unit, a 30% increase before you have paid for a single ad or warehouse shelf.
That 30% is the number that breaks the de minimis business model. A brand that priced a unit at $40 cost into a $99 retail price was running on the assumption of free clearance. Add $12 of duty and fees and the gross margin contracts by roughly twelve points overnight. The honest move is to recompute landed cost on every SKU, not to absorb the hit quietly and hope volume saves you.
Notice which inputs move the needle. The base duty of 2.6% is trivial; the Section 301 tariff of 25% is the entire story. That tells you where to spend effort: confirming whether your HTS line actually carries a 301 surcharge, and whether the origin can legitimately move it off China. A category at a 7.5% 301 rate behaves very differently from one at 25%, and some lines carry no 301 exposure at all. Two SKUs that look identical on a shelf can differ by twenty points of landed cost purely on tariff treatment, so the per-SKU work is not optional busywork: it is where the margin is recovered or lost.
Classification, valuation, and the compliance you now own
When clearance was free, nobody checked your HTS classification because nothing turned on it. Now the ten-digit code you declare determines the duty rate, and CBP can and does challenge it. Misclassifying a product into a lower-duty heading is not a clever hack: it is the kind of thing that triggers penalties up to the full domestic value of the goods under the customs fraud and negligence statutes. Get a binding ruling from CBP if a classification is genuinely ambiguous, and keep the supplier’s commercial invoice, packing list, and the rationale for your code on file.
Valuation is the second trap. The transaction value must reflect what you actually paid, including certain assists, commissions, and royalties. Declaring a $40 unit as $15 to shave duty is undervaluation, plain and simple, and the parcel volume that de minimis created is exactly what CBP’s data analytics now flag. The agency cross-references declared values against known market prices and supplier patterns. Understanding when a professional should handle this for you is worth real money: our explainer on customs brokers and when you actually need one covers the threshold at which a broker pays for itself in avoided errors.
Origin is the third lever, and the legitimate one. Section 301 tariffs attach to China origin. If your supply chain can substantially transform a product in a third country, the origin can legitimately shift, and the 301 surcharge can fall away. This is not relabeling: substantial transformation has a legal test, and tariff engineering done sloppily is fraud. Done properly, with real manufacturing steps documented, it is the single largest lever an importer has against the new duty stack.
Recovering duty: drawback and first-sale strategies
Answer first: if you re-export goods or use imported components in products you later export, you may be able to recover up to 99% of the duty paid through a process called duty drawback. This is the lever most small importers never touch because de minimis meant they never paid duty in the first place. A brand that imports finished goods, sells most domestically, but ships a meaningful share to Canadian or international customers can file for drawback on the exported portion and reclaim that duty. The filing is technical and the recordkeeping demanding, but on six-figure duty bills the recovery is material.
A second, more advanced approach is first-sale valuation. In a multi-tier supply chain, where a trading company sits between you and the factory, you may be able to declare the customs value based on the first sale (factory to middleman) rather than the second sale (middleman to you). Because the factory price is lower, the dutiable base shrinks. The requirements are strict: the goods must be clearly destined for export to the United States at the time of the first sale, and the transactions must be at arm’s length. Where it qualifies, first-sale can trim the dutiable value by 10% to 25%, which on a stacked 301 tariff is a meaningful saving.
Neither of these is a do-it-yourself project on day one. They are the second-order optimizations you reach for once the basic entry, classification, and pricing work is stable. But they exist, they are legal, and they are precisely the kind of capability that separates an importer who merely survives the new regime from one who rebuilds margin within it.
Common mistakes
The first and most expensive error is assuming de minimis still applies because a single parcel is under $800. The exemption is gone for commercial volume regardless of per-parcel value, and CBP aggregates. Operators who keep shipping single units to dodge entry are stacking informal-entry brokerage fees that cost more than a consolidated formal entry would.
The second is treating the duty as a one-time shock rather than a permanent input cost. Importers who absorb the first few months of tariffs without repricing are simply funding their own customers’ purchases out of margin. Reprice deliberately, and lean on better freight economics where you can: negotiating carrier rates, as covered in our guide to negotiating shipping rates with UPS and FedEx without losing it, can claw back several points of the landed-cost increase.
The third is undervaluing the commercial invoice to reduce duty. It feels like a victory until a CBP audit assesses back duties plus penalties. The fourth is ignoring classification and defaulting to whatever code the supplier or freight forwarder wrote, which is frequently wrong and frequently in the importer’s disfavor. You are the importer of record; the liability is yours, not the forwarder’s.
FAQ
Is Section 321 de minimis completely gone in 2026?
For commercial retail volume, treat it as gone. The China and Hong Kong exemption ended in May 2025, and the broader suspension followed across other origins. A genuine personal gift under $800 may still clear, but inventory shipments no longer qualify regardless of how you split the parcels. Build your sourcing and pricing model on the assumption that every commercial import is dutiable and requires a formal or informal entry.
Do I now need a customs broker for every shipment?
Not legally for every shipment, but practically for most. Informal entries under $2,500 can sometimes be self-filed, but the classification, valuation, and bond requirements make a broker worthwhile once you import with any regularity. For formal entries at $2,500 and above, a broker and a customs bond are effectively required. The brokerage fee is small relative to the penalty exposure from a misclassified or undervalued entry, so the math usually favors hiring one.
How much will tariffs and customs add to my landed cost?
For China-origin consumer goods, expect roughly 25% to 55% added, depending on the HTS line and which Section 301 and reciprocal tariffs apply. The stack is base duty plus Section 301 plus the merchandise processing fee plus allocated brokerage and bond costs. On a $40 supplier-cost unit, a realistic figure is around $12, or about 30%. Run the calculation per SKU, because rates vary enormously by product category and origin.
Can changing the country of origin lower my tariffs?
Yes, if the change is real. Section 301 tariffs attach specifically to China origin. If production substantially transforms a product in another country, with documented manufacturing steps that meet the legal test, the origin can shift and the 301 surcharge can fall away. This is legitimate tariff engineering. Simply relabeling China-made goods as another origin is fraud and carries penalties up to the full value of the merchandise, so the transformation has to be genuine.
What happens if I undervalue the commercial invoice?
CBP can assess the back duties owed plus civil penalties, which scale with whether the error is judged negligent, grossly negligent, or fraudulent and can reach the domestic value of the goods. The parcel-level data that de minimis created is exactly what CBP’s analytics now mine for valuation anomalies, so the practice is far riskier than it was. Declare the transaction value you actually paid, including assists and commissions, and keep the documentation.
How do I find the right HTS code for my product?
Start with the U.S. International Trade Commission’s Harmonized Tariff Schedule, which is the authoritative source, and read the section and chapter notes carefully because they govern classification. When a product could plausibly fall under more than one heading, request a binding ruling from CBP so the classification is settled before goods arrive. Do not rely on the code your supplier prints on the invoice; it is frequently wrong and you, as importer of record, carry the liability.
Should I consolidate shipments now instead of shipping single units?
Almost always yes. Without de minimis, each parcel can trigger its own entry and brokerage fee, so 200 single units a month means 200 potential fees. Consolidating into bulk formal entries spreads the fixed clearance costs across far more units and dramatically lowers per-unit overhead. The duty itself does not change, but the brokerage, bond, and processing-fee burden per item drops sharply, which is why former drop-shippers are moving to palletized freight.
What’s next
The immediate move is a full landed-cost rebuild: pull every active SKU, assign the correct HTS code, layer in the current duty and Section 301 rates, and reprice before the next purchase order ships. Pair that with a structural decision on consolidation and, where the supply chain allows, a serious look at origin diversification. Lean on the foundational framing in our cross-border tax basics for small retailers, and verify your specific duty rates against the authoritative U.S. Harmonized Tariff Schedule before committing numbers to a pricing sheet. The importers who survive the post-de-minimis era are the ones treating customs as a permanent line item rather than a temporary disruption.