Section 321 & Mexico Tariffs: How to Adjust Your Shipping Strategy

How Section 321 Policy Changes will Affect Apparel Importers (And How to Adjust Your Shipping Strategy)

The "Section 321 loophole" is closing, and businesses must adapt quickly. Mexico’s new trade policy changes are disrupting cross-border shipping and adding costs to imported goods.

Are you ready to adjust your strategy?

For years, Section 321 programs of the U.S. Tariff Act have been a lifeline for many companies. It allows shipments worth $800 or less to duty-free entry to the U.S. under the de minimis threshold.

This approach has been especially valuable for ecommerce companies, which rely on cost-effective shipping solutions. Many companies have used fulfillment centers in Mexico to take advantage of Section 321.

However, recent updates in Mexico’s trade policy have raised textile tariffs and tightened rules under the IMMEX program. These changes are creating challenges for businesses that depend on Section 321 imports.

Now is the time to rethink your fulfillment strategy and ensure your operations remain competitive.

What is Section 321?

Section 321 imports allow de minimis shipments (excluding goods like cigarettes, cigars, and alcoholic beverages) valued at $800 or less to avoid import duty. The total value threshold used to be $200 until amended to $800 by the Trade Facilitation and Trade Enforcement Act of 2015. This provision offers several benefits:

• Cost Savings: Businesses avoid paying tariffs, reducing their overall expenses.
• Faster Customs Clearance: Customs and Border Protection (CBP) clears low-value shipments more quickly.
• Simpler Logistics: It reduces the burden of customs regulatory requirements, making cross-border fulfillment smoother and more predictable.

For years, companies have used this U.S customers process to bring goods from China into Mexico. From fulfillment centers in Mexico, shipments could then cross the U.S. border under Section 321.

This strategy has been especially effective for goods like apparel and finished products. But with recent changes, this model is becoming harder to sustain.

What Changes have been made to Section 321?

Mexico’s government has introduced two significant changes targeting the textile industry. These updates are part of a broader effort to grow the local economy and reduce dependence on imports.

1. Higher Textile Tariffs

Mexico has increased textile tariffs on raw materials and finished products. This raises costs for businesses importing these goods into Mexico. The additional expense could make using Mexico as a hub for ecommerce fulfillment less attractive.

2. IMMEX Program Restrictions

The IMMEX program allows manufacturers to import raw materials duty-free if they re-export the goods. However, stricter rules now limit this program for textiles. Businesses relying on the IMMEX program for cost-effective manufacturing will need to find new ways to stay competitive.

These changes are designed to boost Mexico’s economic growth by encouraging local production. However, they also disrupt supply chains for companies that depend on cross-border shipping.

Why These Changes Matter

The effects of these policies go beyond Mexico. They are reshaping global supply chains and forcing businesses to rethink how they operate. Here’s why these changes are significant:

• Rising Costs: Higher textile tariffs and stricter rules under the IMMEX program increase expenses for businesses. These added costs can affect pricing and profitability.
• Complex Customs Entry Requirements: The new policies create more red tape, slowing down processes and making cross-border fulfillment harder.
• Reduced Cost Savings: Companies lose the de minimis benefits of duty-free imports, cutting into their margins.

For many companies, this is a critical moment. Adapting quickly will be essential to protect the bottom line and maintain a positive customer experience.

Section 321 Recommendations to Avoid Tariffs

Businesses can take action to reduce the impact of these changes. Here are some practical steps to consider:

1. Diversify Fulfillment Centers

Relying solely on Mexico as a hub country of shipment is now riskier. Consider spreading your operations to other regions, such as Canada and Mexico, or domestic U.S. locations. Diversifying your fulfillment centers can reduce risks and improve resilience.

2. Optimize Inventory Management

Efficient inventory management is key to reducing costs. Use tools to forecast demand and avoid excess stock. Consolidate shipments where possible to lower shipping expenses.

3. Explore New Sourcing Options

Look for suppliers outside China in countries with fewer international trade barriers. Nations like Vietnam, India, or Bangladesh may offer better alternatives for textiles and finished products.

4. Work with Customs Brokers

Experienced customs brokers can help you navigate the complex customs regulations. They can ensure compliance with trade laws, reduce delays, and help avoid penalties from government agencies.

5. Rethink Your Fulfillment Strategy

Evaluate your current fulfillment solution to identify opportunities for improvement. Consider consolidating shipments, optimizing shipping routes, or partnering with new carriers to reduce costs.

Finding the right logistics partner can make all the difference in offsetting rising expenses. With Fulfill.com’s matchmaking service, you can connect with a 3PL provider tailored to your specific needs, streamlining your fulfillment 2operations and boosting your efficiency.

Industries Most Affected

While these changes will impact many businesses, some industries are particularly vulnerable:

Ecommerce Businesses
Companies built on the online shopping model that rely on cross-border shipping through Mexico will face higher costs and delays. This could reduce profits and affect the customer experience.

Textile Importers
Businesses importing textiles or finished products into Mexico will need to adjust to the new textile tariffs. Higher costs could disrupt their operations and affect pricing.

Manufacturers Using IMMEX
Companies relying on the IMMEX program for duty-free imports will face stricter rules. This could make their manufacturing processes more expensive and less efficient.

Export Services Industry
The broader export services industry will feel the effects of these changes. Increased tariffs and more complex customs regulations could slow growth and add costs.

Section 301 Tariffs and the Bigger Picture

On top of Mexico’s new policies, U.S. businesses are still dealing with Section 301 tariffs on imports from China. These tariffs were introduced to address trade imbalances but have added significant costs for importers. Together with Mexico’s changes, these measures make it even more important for businesses to adapt their supply chains.

Long-Term Strategies for Success

While these adjustments create challenges, they also present opportunities to improve operations – and help your business stay prepared for any new proposed changes that might arise in the future. Here are some ways businesses can succeed in the long term:

• Build Resilient Supply Chains: Diversify suppliers and reduce reliance on single regions like China or Mexico.
• Focus on Customer Experience: Streamline ecommerce fulfillment processes to maintain fast and reliable delivery times.
• Support Local Growth: Align with local trade policies to build stronger partnerships and create sustainable solutions.
• Enhance Technology Use: Invest in tools for inventory management, predictive analytics, and logistics optimization.

Partner with Trusted 3PL Providers for Seamless Fulfillment

Finding the right third-party logistics (3PL) partner can make or break your fulfillment strategy. The right 3PL ensures efficient operations, reduced costs, and enhanced customer satisfaction. Here are some of the most trusted 3PL providers we recommend for their proven track records:

Canadian Section 321 Fulfillment

Businesses aiming to bypass high tariffs while maintaining fast delivery can rely on these Canadian 3PL providers for efficient cross-border logistics:

ShipBob

ShipBob combines cutting-edge technology and a robust fulfillment network to offer Canadian and domestic solutions.

• Seamless Canadian Section 321 fulfillment for fast and reliable cross-border shipping.
• Recently helped a 9-figure company transition operations to Canada with minimal disruption.
• Offers scalable solutions for both Canadian and U.S.-based fulfillment, with real-time inventory tracking and platform integrations.

Ecom Logistics

Ecom Logistics delivers customized Canadian fulfillment solutions, focusing on speed and precision for eCommerce businesses.

• Specializes in fast Canadian Section 321 fulfillment for cross-border shipping.
• Tailors services to meet the unique requirements of Section 321 compliance.
• Offers a client-first approach with integrated technology solutions for order tracking.

GoBolt

GoBolt stands out for its eco-friendly approach and efficient fulfillment operations in Canada.

• Pioneers sustainable logistics with carbon-neutral fulfillment practices.
• Offers reliable Canadian Section 321 solutions for environmentally conscious brands.
• Provides end-to-end fulfillment services with a focus on timely cross-border delivery.

CBIP

CBIP simplifies cross-border logistics with transparent pricing and adaptable solutions for Canadian Section 321 fulfillment.

• Provides flexible Section 321 fulfillment to optimize supply chains.
• Offers a centralized platform for visibility into inventory and order management.
• Ideal for dependable, tariff-free operations across Canada.

Eeko

Eeko is a leader in eco-conscious fulfillment, supporting brands with sustainability-focused Canadian Section 321 services.

• Helps businesses align logistics with environmental goals.
• Maintains cost efficiency and speed while adhering to Section 321 regulations.
• Specializes in reducing carbon footprints while ensuring smooth cross-border operations.

True North Fulfillment

True North Fulfillment specializes in reliable and cost-effective Canadian Section 321 operations.

• Focused on smooth cross-border fulfillment across North America.
• Scales solutions to fit growing business needs.
• Offers dependable, cost-effective logistics support for expanding companies.

Dominican Republic Section 321 Fulfillment

As Mexico becomes a less favorable option for Section 321 fulfillment, businesses can turn to this standout provider in the Dominican Republic:

Larimar Logistics

Larimar Logistics offers a unique Section 321 solution from the Dominican Republic, avoiding the challenges posed by Mexico’s trade policies.

• Provides efficient and compliant cross-border Section 321 fulfillment services.
• Tailors logistics to help businesses navigate new trade restrictions.
• Among the few providers offering reliable operations south of the U.S. border.

Domestic Fulfillment Options in the U.S.

For businesses transitioning fulfillment back to the U.S., these 3PLs provide cost-effective and scalable domestic solutions:

ShipBob

ShipBob offers a powerful domestic network paired with advanced technology to optimize fulfillment.

• Operates an extensive U.S.-based fulfillment network for seamless domestic logistics.
• Recently helped a 9-figure company transition fulfillment operations domestically.
• Real-time inventory tracking and robust platform integrations for streamlined operations.

Nimble

Nimble leverages robotics and automation to deliver flexible and cost-efficient domestic fulfillment.

• Robotics-forward technology optimizes order picking and packing processes.
• Scalable solutions tailored to small and mid-sized businesses.
• Reduces operational costs while improving fulfillment efficiency.

Cart.com

Cart.com integrates fulfillment with a full suite of eCommerce tools, offering an all-in-one solution for growing brands.

• Supports low-cost domestic fulfillment alongside inventory and marketing services.
• Tailored solutions for fast-growing brands, integrating technology with logistics.
• Provides seamless scalability for businesses expanding operations in the U.S.

Quiet Platforms

Quiet Platforms leverages advanced logistics technology to deliver robust and efficient domestic fulfillment.

• Combines advanced technology with a nationwide fulfillment network.
• Proprietary algorithms improve inventory placement and speed up delivery times.
• Ideal for businesses transitioning back to U.S.-based operations.

Each of these providers offers unique strengths, so the right choice depends on your specific business needs, whether it’s fast shipping, global reach, or specialized inventory handling.

Find Your Perfect 3PL Partner Today!

Choosing the ideal 3PL partner can feel overwhelming, but we’re here to make it easy. Our matching service connects you with the best 3PL for your business, tailored to your unique requirements.