Ecommerce Retailers: If you are shipping in bulk to the U.S. and fulfilling orders domestically, you may be missing out on a big cost-saving opportunity.
Type 86 Entry is a simple way that retailers can avoid duties by shipping “B2C” orders directly from the point of origin (e.g., China) to their consumers in the U.S. and bypassing the need for any warehousing or handling stateside.
How does it work?
Realizing the opportunity presented to ecommerce sellers by Type 86 Entry starts first with understanding the difference between Formal and Informal entry.
There are two types of entries recognized by U.S. Customs and Border Protection (CBP) that importers may need to file. One is known as “Formal,” which is any standard entry for commercial purposes that exceeds $2,500 in value. These entries are noted by the code 01 within field 3 of the entry document, CBP form 3461, and field 2 of the entry summary document, CBP form 7501. Formal entries are subject to bonding requirements and remain open for about one year until it is liquidated. Such entries are also subject to the full merchandise processing fee of 0.3464% with a minimum amount of $26.22 and a maximum amount of $508.70.
The second type of entry is “Informal,” which are administratively simpler than Formal entries, and primarily for shipments valued at $2,500 or less. Also, unlike a Formal entry, the importer does not have to post a bond, and CBP approves the declaration and liquidates it upon entry. And, technically an entry form 3461 is not required, and the entry summary form 7501 can perform as both entry and entry summary. An Informal entry is denoted by the code of 11 in the entry type filed. Informal entries are typically less expensive and require a comparatively smaller $2 merchandise processing fee (if filed electronically), and customs brokers usually charge less to file them.
Section 321 and de minimus
The key to the savings opportunity for ecommerce retailers is defined in Section 321, 19 USC 1321, which the statute that describes de minimis. De minimis is the total value of retail goods an individual can import from a single country of origin in one day free of duty or any tax imposed on or by reason of importation. This amount stands at $800, although the de minimis threshold was previously $200, having increased on March 11, 2016 with the passage of the Trade Facilitation and Trade Enforcement Act (TFTEA).
Type 86 and Electronic Entries
The relatively recent “Type 86” entry allows self-filers and customs brokers to submit de minimis entries electronically through ABI, including those subject to PGA data requirements for clearance. CBP deployed a test of this new informal type of entry on September 28, 2019. Type 86 covers entry for low-value Section 321 shipments and is designed to improve security and safety for imports by offering the agency better visibility into low-value shipments. Lastly, while a broader implementation is expected, the current deployment is not mandatory for users
What’s in it for Ecommerce Retailers?
The reason Type 86 Entry should be of interest to online retailers is that almost any B2C seller can eliminate 100% of their duty cots by taking advantage of this option. Other soft- and hard-davings can be found when leveraging the solution by shipping inventory directly from China to Consumer vs bulk shipping to U.S. fulfillment center.
Traditional Retail Supply Chain Path
1 to 6 Months
Reduced Cost, Direct Shipments via Section 321
1 to 6 Days
How can Kesco help?
Kesco provides three services that help ecommerce sellers maximize the benefits of Type 86 Entry. Our customer brokerage solution help to facilitate clearance and ensure proper Type 86 entry processing. Kesco’s Foreign 3PL Fulfilment with locations across Asia ensures your orders are fulfilled accurately and cost-efficient at their origin. And finally, Kesco Logistics will ensure your ocean and air freight shipments will move at the best price and the service level you need.
