In a sweeping policy decision that marks the definitive end of the Section 321 era, the US government has officially ended the de minimis exemption (also known as Section 321) for all countries effective Aug 29, 2025. This means that low-value imports under $800 will now be subject to duties and customs scrutiny, regardless of their country of origin.
This final elimination represents the culmination of a series of restrictions that began in February 2025 and have progressively tightened throughout the year. What started as targeted restrictions on Chinese goods has now expanded into a complete overhaul of US import policy, fundamentally altering the cross-border commerce landscape for Canadian and US businesses.
The announcement also coincided with new trade agreements, including a completed EU-US trade deal featuring 15% tariffs on EU-made goods and essentially 0% on US-made goods, while China’s 30% tariffs received a 90-day extension. These developments signal a broader restructuring of international trade relationships that extends far beyond the Section 321 changes.
For Canadian and US businesses that have relied on the Section 321 de minimis exemption for cost-effective cross-border shipping, these changes represent the most significant trade policy shift in a generation.
Understanding Section 321: What It Was and Why It Mattered
Section 321, 19 USC 1321 is the statute that describes de minimis. De minimis provides admission of articles free of duty and of any tax imposed on or by reason of importation, but the aggregate fair retail value in the country of shipment of articles imported by one person on one day and exempted from the payment of duty shall not exceed $800.
This seemingly simple provision became the backbone of modern e-commerce between Canada and the United States. In the years since these changes, e-commerce has changed the trade landscape. Today, CBP processes over four million imports every day under the de minimis exemptions, totaling over one billion packages annually, accounting for over 90 percent of the number of shipments entering the US annually.
For Canadian businesses, Section 321 offered a strategic advantage in reaching US consumers. Many companies developed sophisticated fulfillment strategies, using Canadian warehouses to break down larger shipments into smaller packages under the $800 threshold, enabling duty-free entry into the US market.
The Timeline of Change: From Targeted Restrictions to Complete Elimination
The transformation of Section 321 has been a progressive dismantling that accelerated dramatically in 2025. Here’s how we reached the complete elimination announced in July:
February 1, 2025: President Trump signed an executive action that included a clause to suspend the Section 321 customs de minimis entry process (originally effective February 4,2025, currently delayed), which previously allowed shipments under $800 to enter the US duty-free.
February 4-6, 2025: Initial implementation faced immediate challenges, with the Chinese goods restriction being briefly suspended due to processing limitations.
May 2, 2025: Full enforcement began for Chinese restrictions. For Chinese sourced goods and those imported from Hong Kong, the sub-$800 duty-free de minimis rule no longer applies from May 2, 2025, meaning these items now attract the defined tariff of between 20-145% (depending on classification).
July 30, 2025: The decisive moment – The US government is officially ending the de minimis exemption (also known as Section 321) for all countries effective Aug 29, 2025, meaning low-value imports under $800 will now be subject to duties and customs scrutiny. This marked the complete elimination of a provision that had been the backbone of modern cross-border e-commerce.
August 2025: Implementation of the universal elimination begins, with new trade agreements simultaneously taking effect, including the EU-US trade deal and extended China tariff measures.
Impact on Canadian Businesses: The End of the “Canada Strategy”
Canadian businesses face particularly acute challenges from these changes. Many companies had developed what became known as the “Canada strategy” – importing goods (often from China) to Canadian warehouses, then shipping them in smaller quantities to US customers to qualify for Section 321 exemptions.
Immediate Financial Impact
Cost Increases: Exclusion from Section 321 exemptions will raise duties and taxes for Canadian businesses moving Chinese-made goods to the US. For businesses that built their pricing models around duty-free shipping, this represents a fundamental disruption to their competitive positioning.
Sector-Specific Challenges
Certain sectors are particularly vulnerable to these changes: Apparel: Many Canadian retailers use Section 321 to ship Chinese-made clothing to US customers. These businesses now face the double challenge of existing Section 301 tariffs plus the loss of de minimis benefits.
Compliance Complexity
Canadian businesses must now navigate:
- Enhanced customs documentation requirements
- Formal entry procedures for all shipments
- Potential delays at border crossings
- Increased administrative costs for compliance
Impact on US Businesses: Reshaping Domestic Commerce
US businesses are experiencing their own set of challenges and opportunities from these changes:
Supply Chain Restructuring
22.5% are shifting more inventory to U.S. and Canadian warehouses for domestic fulfillment. 19.4% are exploring new 3PL or warehousing options to minimize cross-border shipments. This data from recent surveys shows how businesses are actively adapting their operations.
Cost Management Pressures
U.S. households are expected to face an additional $2,600 in annual costs, primarily due to increased retail prices passed down from importers. US businesses must decide whether to absorb these costs or pass them to consumers.
Operational Changes
Once fully enforced, all shipments will be subject to tariffs and require full customs documentation irrespective of their value, which is expected to increase paperwork processing times by 30–50% and raise administrative costs for businesses.
Strategic Adaptations: How Businesses Are Responding
Nearshoring and Reshoring Initiatives
Analysts predict that companies will likely pursue diversified sourcing strategies, blending reshoring with nearshoring and global supplier diversification. Businesses are increasingly looking to Mexico, Central America, and domestic suppliers as alternatives to Chinese manufacturing.
Inventory Strategy Overhauls
Many companies are consolidating shipments and moving to bulk importation strategies, accepting upfront duty payments in exchange for operational predictability. With this shift, many brands that previously relied on Section 321 will likely transition to US-based fulfillment providers to maintain efficiency and cost control.
Technology Investments
Companies are investing heavily in compliance technology and inventory management systems to handle the increased complexity of customs requirements and tariff calculations.
What This Means for Different Business Models
E-commerce Retailers
For direct-to-consumer businesses, the changes require fundamental operational restructuring. The suspension of Section 321 de minimis privileges represents a pivotal moment for e-commerce businesses that have historically relied on this provision to optimize their cross border operations.
Small and Medium Enterprises
SMEs face particular challenges due to their limited resources for managing complex compliance requirements. Many are seeking partnerships with larger logistics providers or considering market exit from cross-border operations.
Large Enterprises
Larger companies have more flexibility to adapt, but the scale of required changes is substantial. Many are using this as an opportunity to fundamentally reevaluate their global supply chain strategies.
Future Outlook: What to Expect
Continued Uncertainty
The situation remains fluid. It’s possible that affected countries may respond with their own trade measures, leading to further shifts in policy. Canadian and Mexican retaliatory measures remain a possibility.
Technology Solutions
Customs and Border Protection is developing enhanced processing systems. Enhanced Entry Process: Would create a new streamlined electronic filing process for entering de minimis shipments, which it calls the “Enhanced Entry Process.” These systems may provide some operational relief once fully implemented.
Industry Consolidation
The increased compliance burden is likely to drive consolidation in the logistics and fulfillment industry, as smaller players struggle with the costs of maintaining compliance capabilities.
Strategic Recommendations for Businesses
For Canadian Businesses
- Supply Chain Audit: Conduct a comprehensive review of current sourcing and fulfillment strategies
- Duty Planning: Work with customs experts to understand the full impact of new tariff structures
- Alternative Markets: Consider expanding into other international markets less affected by these changes
- Partnership Strategies: Explore partnerships with US-based fulfillment providers
For US Businesses
- Domestic Sourcing: Evaluate opportunities for nearshoring or domestic sourcing
- Inventory Optimization: Implement systems for bulk importing and domestic distribution
- Price Strategy: Develop plans for managing increased input costs
- Compliance Investment: Invest in systems and expertise for enhanced customs compliance
For Both Markets
- Legal and Tax Consultation: Engage specialists in international trade law and customs compliance
- Technology Adoption: Implement robust inventory and compliance management systems
- Scenario Planning: Develop contingency plans for further policy changes
- Industry Engagement: Participate in industry associations and policy discussions.
Conclusion: Adapting to the New Reality
The changes to Section 321 represent more than a regulatory adjustment – they signal a fundamental shift in North American trade policy toward greater scrutiny and control of cross-border commerce. This is a significant shift in global trade policy signaling greater oversight by the U.S., meaning all merchants should prepare for uncertainty, ensure accurate customs valuations, and take care with product documentation/classifications.
While these changes create immediate challenges for Canadian and US businesses, they also present opportunities for companies that can successfully adapt. Businesses that invest in compliance capabilities, diversify their supply chains, and optimize their operations for the new regulatory environment will be best positioned for long-term success.
The era of easily accessible cross-border e-commerce may be ending, but the fundamental demand for international trade remains strong. Success in this new environment will require greater sophistication, better planning, and more robust compliance capabilities than ever before.
For businesses seeking guidance on navigating these changes, consulting with customs specialists, trade lawyers, and supply chain experts is essential. The regulatory landscape continues to evolve, and staying informed about policy developments will be crucial for maintaining competitive advantage in this new era of cross-border commerce.
How EcomExp Can Help Your Business Adapt
At Ecom Logistics, we understand the complexity and urgency of adapting to these Section 321 changes. Our team of ecommerce fulfillment experts are helping Canadian and US businesses navigate the new regulatory landscape with confidence. Whether you need assistance with supply chain restructuring, customs compliance optimization, or developing new fulfillment strategies for the post-Section 321 era, we provide the expertise and support you need to maintain your competitive edge.
Don’t let regulatory changes disrupt your business growth. Contact our team today to discuss how we can help you develop a customized strategy for thriving in this new trade environment.
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