How to Use Entry Type 86 for Your Business

2020 was a record-breaking year for e-commerce transactions worldwide, with United States consumers spending $861.12 billion last year alone — up 44% from 2019. Due to so much digital spending occurring in American households, international merchants are ramping up shipments to their U.S. customers.

For international merchants, increased sales to the U.S. also means increased tariffs on high-value goods. But for merchants trading in low-value goods, Entry Type 86 is a crucial tax exemption businesses need to be aware of to avoid paying unnecessary duties on their goods.

This guide to the new Entry Type 86 will help international sellers understand how to take advantage of this designation and pass on the savings to their customers.

What Is Entry Type 86?

Part of global trade is navigating the extensive regulatory requirements of the various customs agencies of different countries. Merchants that ship to other countries often have to pay import taxes, also known as duties or tariffs. While the U.S. has trade agreements with several countries to reduce or eliminate duties that international sellers pay, many international merchants are typically required to pay taxes on goods they ship to U.S. consumers.

U.S. Customs and Border Protection (CBP) agents are responsible for determining the duty amount each seller pays. International sellers declare the total value of goods they want to import — a value that CBP agents use to determine the duty payment. Packages don’t clear customs until the shipper pays the duty.

While duty-collection is a vital part of U.S. economic revenue, it’s also a time-consuming process, requiring numerous resources to administer and manage. To streamline the customs process, the CPB introduced a voluntary designation for importers to register under when their goods enter the U.S. CBP Entry Type 86 gives sellers the option to have their goods enter the country informally, provided they meet the de minimis value of less than $800 per item.

Sellers can apply for Entry Type 86 at any port of entry, making it convenient for international distributors who use air and sea cargo brokers to benefit from this loophole. In other words, retailers who ship goods worth less than $800 to their U.S. customers have fewer obstacles to navigate. They can quickly and efficiently clear customs without having to pay additional duties and tariffs. This entry option applies to each item, rather than the whole container, meaning as long as the product being shipped amounts to less than $800, the business qualifies for Entry Type 86.

Entry Type 86 offers both businesses and border officials an advantage by helping them save enormous amounts of time and money. Businesses that take advantage of Entry Type 86 save on import fees, duties and taxes, opening them up to greater economic opportunities. With reduced import fees, sellers are free to ship in higher volumes and do so more frequently, making the U.S. an even more attractive place for international retailers to do business.

Entry Type 86 has extensive global economic benefits. By making it easier for small businesses to sell to Americans, economic sectors in nations worldwide can expand by making trade with the U.S. far more accessible.

Entry Type 86 Regulations

For businesses looking to take advantage of Entry Type 86, it’s critical to understand the regulations involved in having goods enter the U.S. under this designation. As of September 2019, all e-commerce retailers are eligible for informal entry of goods into the United States by filing for Entry Type 86.

Entry Type 86 is subject to Section 321, which describes the de minimis value for shipments. This term means “minimal things,” and in trade, it refers to a monetary value threshold on goods considered too minimal to warrant customs fees collection. In the case of Entry Type 86, the current de minimis threshold is $800.

Previously, the de minimis value was only $200, meaning it significantly limited retailers. With the Trade Facilitation and Trade Enforcement Act (TFTEA) passing in 2016, the de minimis increased to help reduce financial barriers to international trade. In addition to an increase in the de minimis value, Entry Type 86 was also expanded to include all modes of transport at all ports of entry, rather than the previous regulation that limited admission to air and highway modes only. As a result, most online retailers are now eligible for Entry Type 86.

However, Entry Type 86 also has limitations. Retailers are only eligible for one Entry Type 86 shipment per day, meaning if you tend to ship in higher volumes from different locations, you’ll need to plan your shipments accordingly. There are some other eligibility requirements that retailers must be aware of when applying for this Entry Type. The following types of shipments are not eligible for Entry Type 86:

Goods that require safety inspections as a condition of release, such as alcohol, firearms and tobacco
Products subject to approval by other agencies, such as the Food and Drug Administration (FDA) or the U.S. Department of Agriculture (USDA)
Items subject to specific duties such as the Anti-Dumping Duty (ADD) or Countervailing Duty (CVD)

To ensure retailers are following eligibility requirements, shippers will need to provide their Section 321 paperwork to customs officials upon request.

Benefits of Entry Type 86

Many retailers worldwide want to conduct international trade in a U.S. marketplace in the most efficient and economical way possible. Screening incoming shipments at customs is a necessary safety measure for all sovereign nations, and the U.S. is no exception. However, with the sheer volume of e-commerce packages flooding the U.S. border, it’s necessary to constantly improve and refine processes to avoid deterring global trade.

Entry Type 86 is designed to promote free trade between international retailers and the U.S. and has numerous benefits for both parties.

1. Reduced Shipping Costs

The most immediate benefit of e-commerce Type 86 for your business is the reduced shipping costs you earn by entering customs informally. Previously, traders shipping goods to the U.S. first needed to calculate the total amount of customs fees owed — a combination of tariffs, duties and taxes. Businesses would then need to factor this cost into the total price charged to their customer to recoup the expenses.

Businesses shipping goods that qualify for the de minis amount can now pass on the savings to their customers. Reduced shipping or free shipping is now a possibility for businesses to offer to their customers, who will be more likely to purchase from them again.

2. Speeds Up Clearance Process

One of the major goals of Entry Type 86 and raising the de minimis to $800 is to speed up customs processes. Informal entry is an authorized way for businesses to clear customs faster and for border agents to process entries at greater rates.

While packages still need to undergo approval, they don’t need to be bonded, which leads to additional time and cost savings for shippers. Additionally, specific eligible shipments previously subject to lengthy Partner Government Agency (PGA) requirements can now expedite their shipments using Entry Type 86.

3. Allows for Remote Processing

With the new Entry Type 86 for international e-commerce businesses, one of the most convenient aspects of shipping to the U.S. is the new Automated Commercial Environment (ACE) portal. The CBP established the ACE portal to allow international traders to file for Entry Type 86 electronically and remotely. It’s a secure portal that allows shippers to provide their shipment data well ahead of the shipment arriving at customs to help further expedite the process.

By filling out the digital paperwork ahead of time, retailers are guaranteed their shipment will be eligible for informal entry without delay, further fast-tracking their shipment to their customers.

4. Improves Customer Service

One of the largest advantages of using Entry Type 86 is how it improves customer service. Companies shipping large volumes of goods can fast track their deliveries through Entry Type 86, speeding up the time it takes for packages to arrive at customers’ doorsteps.

Online consumers today expect lightning-fast deliveries, and taking advantage of Entry Type 86 is a legitimate and cost-effective way to ensure customer satisfaction. Retailers no longer need to inform their customers their package will be delayed due to a hold-up at customs. Using Entry Type 86 for your business allows you to fulfill your promises to your customers and earn their repeat business.

5. Encourages Global Trade

Ultimately, the change in de minimis of Section 321 is designed to facilitate global trade. With the massive volume of e-commerce goods being shipped to America due to the online retailing boom, it’s too time-consuming for border agents to handle the massive quantities of shipments. Because the vast majority of these low-value retail shipments are legitimate goods, Entry Type 86 allows both the retailer and the customs agents to allocate their resources in the most economical and efficient way.

Entry Type 86 gives agents the needed resources to focus their attention on finding and controlling illicit shipments. The result is a safer, more open trading economy for all.

How Much Can You Save With Entry Type 86?

How much you can save by using Entry Type 86 depends on the value and quantity of goods you ship to the U.S. For small retailers, Entry Type 86 allows you to save on duties, tariffs and taxes on one-off or sporadic shipments to U.S. customers.

International retailers that want to expand their business to the U.S. can save the most. Entry Type 86 allows you to freely serve and grow an American customer base. You no longer need to worry about passing on the costs of customs fees to your customers, which can deter them from purchasing your goods.

The amount Entry Type 86 can save your business will only grow as you continue to serve an American customer base for years to come.

Who Is Eligible for Entry Type 86?

Virtually all online retail businesses are eligible for entry through Type 86 provided they meet the following basic requirements:

The goods must hold a retail value of less than $800.
The seller can only ship one shipment per day via Entry Type 86.
The shipment must come from only one seller, meaning you can’t ship from more than one seller location on the same day.

Previously, the Section 321 de minimis on Entry Type 86 didn’t apply to any goods requiring approval or regulation by the FDA. However, as of July 2017, certain FDA-regulated goods are now eligible for Section 321 de minimis, including:

Biological samples imported for laboratory testing
Cosmetics
Dinnerware
Food, with the expectation of various types of seafood and shellfish
Radiation-emitting non-medical devices

There may be other exceptions to the types of goods shipped via Entry Type 86, so it’s essential to verify with an experienced customs broker before using this clearance type.

How to Apply for Entry Type 86

As an e-commerce retailer shipping to the U.S., the CPB requires the retailer or the broker to file for entry using their Automated Commercial Environment (ACE) portal. ACE streamlines imports and exports, giving businesses and brokers a way to report their shipments and a way for the agents to determine admissibility. It also ensures the safety and security of the public by selecting which goods are being shipped and how.

To get started with your ACE portal access, visit the CBP’s website to learn how to create your account. Once you’ve created your ACE account, you’ll electronically enter important data into the system to make you eligible for CBP Entry Type 86. The data required include:

Consignee name and address
Country of origin
Importer of Record (IOR), such as the owner or broker
Seller information (name and address)
Fair retail value of the goods in USD
Quantity of goods
Harmonized System (HS) code
Planned port of entry
Waybill or bill of lading number
Entry number (Type 86)

Shippers must submit that information to CBP officials on or before the day the cargo arrives at customs but no later than 15 days after arrival at the port of entry. Working with an international fulfillment service, like Kesco Logistics, can help take care of all customs paperwork, including ensuring your eligibility for Entry Type 86 de minimis savings.

Save Money on Entry Type 86 With Kesco Logistics

The new Entry Type 86 marks a massive improvement to international trade. As e-commerce transactions continue to skyrocket, small retailers want to take advantage of a booming U.S. consumer marketplace. Entry Type 86 reduces trade barriers, speeds up the customs process and saves time and money, which results in reduced costs passed on to consumers. It’s a huge opportunity for countless businesses.

If you’re wondering how to benefit from Entry Type 86, the answer is to work with an international logistics and customs brokerage solution like Kesco Logistics. Grow your e-commerce business by partnering with Kesco Logistics and taking advantage of our expertise to help you reach more U.S. customers. In addition to critical knowledge, such as how to take advantage of Entry Type 86, Kesco Logistics can help you save time and money through our extensive network and advanced logistics technology.