🛃 Tariffs, Duties, and Section 321: What’s Changing in 2026

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📋 Overview

In 2025 and heading into 2026, sweeping changes to U.S. tariff policy, import duties, and the Section 321 de minimis exemption are reshaping the cost structure for thousands of Amazon sellers who source products internationally. These changes affect how goods enter the United States, what fees are owed at the border, and whether low-value shipment strategies that worked in the past will remain viable.

This article explains what tariffs, duties, and Section 321 are, what is changing, and — most importantly — what concrete steps you can take now to protect your margins, stay compliant, and build a sourcing strategy that holds up in the new regulatory environment.

🎯 Who This Is For

🌱 Beginner sellers

  • You are sourcing products from overseas (especially China) for the first time and want to understand your true landed cost.
  • You have heard about tariffs in the news but are unsure how they apply to your Amazon business.
  • You want to avoid unexpected customs bills that destroy your profit margins before your first shipment even arrives.

🚀 Advanced sellers

  • You currently rely on direct-from-China fulfillment models (such as dropshipping from Chinese suppliers or cross-border FBM) that depend on the Section 321 exemption.
  • You have built pricing models around existing duty rates and need to recalculate margins for 2026 inventory orders.
  • You manage a multi-SKU catalog and need a framework for auditing which products are most exposed to tariff increases.
  • You are exploring supplier diversification into Vietnam, Mexico, India, or other countries and need guidance on duty implications.

🔑 Key Concepts You Need to Know

📌 Tariff

A tariff is a tax imposed by the U.S. government on imported goods. It is calculated as a percentage of the declared customs value of the shipment. When you import products to sell on Amazon, tariffs are paid before those goods can enter the country. The rate varies by product type and country of origin.

📌 Duty

Duty is often used interchangeably with tariff in everyday conversation, though technically duties encompass all customs charges, including tariffs, anti-dumping duties, and countervailing duties. For this article, “duty” and “tariff” refer to the same practical cost: money owed to U.S. Customs and Border Protection (CBP) when goods cross the border.

📌 HTS Code (Harmonized Tariff Schedule Code)

Every imported product is classified under an HTS code, a standardized 10-digit number that determines the applicable duty rate. Incorrect HTS classification is one of the most common and costly customs mistakes sellers make. Your freight forwarder or customs broker assigns this code, but you are ultimately responsible for its accuracy.

📌 Section 301 Tariffs

Section 301 tariffs are additional duties imposed specifically on goods manufactured in China, introduced in 2018 under the U.S. Trade Act. These are layered on top of standard duty rates and range from 7.5% to 25% or higher depending on the product category. In 2025, rates on certain categories were raised significantly, with some exceeding 100%.

📌 Section 321 De Minimis Exemption

Section 321 is a provision of U.S. customs law that allows goods valued at $800 or less per person per day to enter the United States duty-free and with minimal customs paperwork. This exemption has been widely used by e-commerce sellers — particularly those dropshipping directly from Chinese suppliers — to avoid paying tariffs on individual, low-value consumer shipments.

The exemption was not designed for commercial importers. Its use at scale by cross-border e-commerce platforms became a major policy concern, and this is precisely what 2026 changes aim to address.

📌 Landed Cost

Landed cost is the total cost of getting a product from your supplier to your fulfillment location, including product cost, shipping, insurance, tariffs, duties, brokerage fees, and any other import charges. Accurate landed cost calculation is essential for setting profitable prices on Amazon.

📌 Customs Broker

A customs broker is a licensed professional who handles customs filings, duty calculations, and clearance paperwork on your behalf. For sellers importing goods in commercial quantities, working with a customs broker is strongly recommended and often required by law for shipments above the formal entry threshold.

📌 Country of Origin

The country of origin is where a product is substantially manufactured or transformed. It determines which tariff rates apply. Products made in China face Section 301 tariffs; products made in countries with which the U.S. has favorable trade agreements (such as Mexico under USMCA) may qualify for reduced or zero duty rates.

📅 What Is Actually Changing in 2026

⚡ The End of Section 321 as a Commercial Loophole

Executive actions taken in 2025 eliminated the Section 321 de minimis exemption for goods manufactured in or shipped from China and Hong Kong. As of May 2025, shipments from China and Hong Kong — regardless of declared value — are no longer eligible for duty-free entry under Section 321. Each package, even if it contains a $15 phone case, must now go through formal or informal entry and have applicable duties paid.

Broader legislative proposals in Congress aim to lower the de minimis threshold for all countries or eliminate it entirely for commercial e-commerce shipments. Sellers should monitor this closely, as further restrictions affecting shipments from all countries could take effect in 2026.

⚡ Escalating Section 301 Tariff Rates

Tariff rates on Chinese-origin goods have continued to increase. Some consumer electronics, solar components, EV-related parts, and apparel categories now face combined duty rates (standard + Section 301) that dramatically exceed 2022 or 2023 levels. Sellers who have not revisited their duty calculations in the past 12 months may be operating on dangerously outdated margin assumptions.

⚡ Increased CBP Enforcement

U.S. Customs and Border Protection has significantly increased scrutiny of low-value e-commerce shipments. Misclassified goods, undervalued shipments, and improperly claimed exemptions are now subject to higher rates of inspection, penalty assessments, and seizure. The compliance bar has materially raised for all importers, not just large enterprises.

⚡ Amazon Policy Implications

Amazon’s terms of service require sellers to comply with all applicable laws, including customs and import regulations. Sellers who source products using non-compliant import strategies — such as misusing the Section 321 exemption for commercial shipments — risk not only customs penalties but also potential account-level consequences if violations are discovered during platform audits or government investigations.

🗂️ Step-by-Step Guide: Auditing and Adapting Your Import Strategy

1️⃣ Pull Your Current Import Data

Before you can act, you need a clear picture of your current situation. Gather the following information for every product you import:

  • Country of origin (where it is manufactured, not just where your supplier is located)
  • HTS code assigned to each product
  • Current duty rate (standard + any Section 301 or other additional tariffs)
  • Average shipment value and shipment frequency
  • Current landed cost per unit

If you use a freight forwarder or customs broker, request copies of your past Customs Entry Summaries (CBP Form 7501). These documents contain exactly this information.

💡 Pro Tip: Use the USITC Harmonized Tariff Schedule database (usitc.gov) to look up your HTS codes and verify the current duty rates. Rates are updated frequently — do not rely on figures from more than six months ago.

2️⃣ Recalculate Landed Cost Under New Tariff Rates

Once you have current duty rates, rebuild your landed cost model for every affected product. Use this simple framework:

  • Product cost (FOB or EXW price from supplier)
  • + International freight (ocean or air shipping cost)
  • + Customs duties (duty rate × customs value)
  • + Customs broker fees
  • + Domestic freight (port to FBA warehouse or 3PL)
  • + Amazon FBA fees
  • = True landed and fulfilled cost per unit

Compare this new figure to your current selling price. If your margin has compressed below your minimum acceptable threshold, you must act — either by raising prices, reducing other costs, or changing your supply chain.

💡 Pro Tip: Build this as a spreadsheet with dynamic inputs for duty rate and product cost so you can run “what if” scenarios instantly. This becomes essential when negotiating with suppliers or evaluating new sourcing regions.

3️⃣ Identify Which Products Are Most Tariff-Exposed

Not all products are equally affected. Prioritize your audit based on exposure:

  • High volume + high duty rate = immediate priority (biggest financial impact)
  • High duty rate + thin margin = critical risk (could turn profitable SKUs unprofitable)
  • Low duty rate + strong margin = monitor only (lower urgency)

Create a tiered list: products that are critical (act now), at risk (plan within 90 days), and stable (monitor quarterly).

4️⃣ Evaluate Supplier Diversification Options

If significant tariff exposure exists on China-sourced products, investigate alternative manufacturing countries. Key considerations for each region:

  • Vietnam: Strong manufacturing base for furniture, footwear, electronics assembly. No Section 301 tariffs, though standard duties apply. Production capacity has grown significantly since 2018.
  • India: Competitive for textiles, apparel, jewelry, and some electronics. Preferential tariff treatment in certain categories. Longer lead times than China for many product types.
  • Mexico: Eligible for USMCA (United States-Mexico-Canada Agreement), which provides zero or reduced duty rates on qualifying goods. Best for products with significant U.S. or Canadian content. Nearshoring advantage: shorter transit times.
  • Taiwan and South Korea: Strong for electronics components and technology products, though unit costs may be higher than China.

Evaluate suppliers in these regions on production capacity, minimum order quantities (MOQs), quality control capabilities, and lead times before committing.

💡 Pro Tip: “Made in Vietnam” does not automatically mean zero tariffs if the product contains Chinese-origin components that have not been substantially transformed. CBP applies specific rules of origin to determine true country of origin. Verify with your customs broker before assuming diversification eliminates all tariff exposure.

5️⃣ Audit Your Section 321 Usage Immediately

If your business model relies on shipping individual orders directly from China or Hong Kong to U.S. customers — either through your own fulfillment or through a Chinese supplier fulfilling Amazon FBM orders — your model is materially broken as of May 2025.

Take these specific actions:

  • Stop treating any China or Hong Kong shipments as Section 321 eligible. Assume all such shipments now require duty payment.
  • Contact your customs broker to confirm your current compliance posture.
  • If you are dropshipping from China, recalculate whether the model is still viable with duties factored in. For many sellers, it will not be.
  • Consider transitioning China-sourced dropship products to a bulk import and domestic fulfillment model (FBA or domestic 3PL), which concentrates duty payments into fewer, larger shipments you control and document properly.

6️⃣ Review and Optimize Your HTS Classifications

HTS misclassification is extremely common and cuts both ways: sellers sometimes overpay duties because of an overly broad classification, and sometimes unknowingly underpay, creating legal liability.

  • Ask your customs broker to conduct a classification review on your top 20 SKUs by import volume.
  • Consider binding ruling requests from CBP for any product with an uncertain or contested classification. A binding ruling gives you legal certainty on the applicable HTS code and rate.
  • Review whether any of your products qualify for exclusions from Section 301 tariffs. CBP has granted product-specific exclusions in the past; a customs attorney can advise on whether to pursue one.

💡 Pro Tip: The difference between two adjacent HTS codes can mean the difference between a 0% and a 25% duty rate on the same physical product. This is one of the highest-ROI areas where working with a qualified customs professional pays for itself immediately.

7️⃣ Adjust Your Amazon Pricing Strategy

If your landed cost has increased due to tariff changes, your pricing strategy must reflect the new reality. Consider:

  • Price increases: Use your landed cost model to set a minimum price floor that preserves your target margin. Check competitor pricing to understand how much room you have to raise prices without losing the Buy Box.
  • Bundle strategy: Bundling products can shift value perception and reduce price sensitivity, giving you more flexibility on unit pricing.
  • Advertising adjustments: If margins have compressed, your maximum allowable ACoS (Advertising Cost of Sale) has also dropped. Recalculate your break-even ACoS based on new margin figures and adjust your PPC bids accordingly.
  • Product rationalization: Products that are no longer profitable at any viable price point should be considered for discontinuation or replacement with alternative products sourced at lower duty rates.

8️⃣ Build Tariff Monitoring Into Your Ongoing Operations

Tariff policy is not static. Rates change, exclusions are granted and expire, and new trade actions can be announced with little warning. Build a monitoring habit:

  • Subscribe to updates from the Office of the United States Trade Representative (USTR) and U.S. Customs and Border Protection (CBP) — both publish free email updates.
  • Set a quarterly calendar reminder to review tariff rates on your top products against the current USITC HTS schedule.
  • Brief your customs broker or freight forwarder to flag any changes affecting your product categories proactively.
  • Follow trade publications and industry associations relevant to your product category for early signals of upcoming policy changes.

💡 Pro Tip: Tariff rate changes sometimes include a 60- to 90-day implementation window. Sellers who monitor closely can place larger inventory orders at existing rates before increases take effect, creating a temporary cost advantage over less informed competitors.

📖 Real-World Examples or Scenarios

🔹 Scenario 1: The Dropshipper Who Did Not See It Coming

Seller profile: Intermediate seller, 18 months on Amazon, FBM model, $200K annual revenue.

The problem: This seller built their entire business around sourcing products from Alibaba suppliers who shipped individual orders directly from China to U.S. customers. Each order was under $800, so the seller assumed Section 321 kept them duty-free. After the May 2025 executive action eliminating Section 321 for China and Hong Kong shipments, every order now carries duties — but the seller’s prices had not changed.

The action taken: The seller worked with a customs broker to calculate the actual duty liability per order. They determined that their 22% gross margin was now a -3% loss after duties. They paused new orders immediately and shifted their top three products to a bulk import model, bringing 500 units of each into a domestic 3PL. They raised prices by 18% and converted those listings to FBA.

The result: Revenue dropped 30% in the short term as price-sensitive customers moved on, but net profitability recovered to 14% within 90 days. The seller avoided a larger financial crisis by acting quickly and stopped accumulating unrecognized customs liability.

🔹 Scenario 2: The Private Label Seller Recalculating Margins

Seller profile: Experienced private label seller, 4 years on Amazon, FBA, $1.2M annual revenue, all products manufactured in China.

The problem: This seller had been importing successfully for years but had not updated their landed cost models since 2022. When tariff rates on their primary category (consumer electronics accessories) increased from 15% to 35%, their per-unit duty cost nearly tripled. They discovered this only when their customs broker sent an unexpectedly large invoice after a new shipment cleared customs.

The action taken: The seller conducted a full SKU-level tariff audit. They identified that three of their eight SKUs accounted for 75% of their duty exposure. For those three SKUs, they requested quotes from suppliers in Vietnam. Two of the three could be manufactured in Vietnam at comparable quality and within 12% of their current China cost — still net profitable after eliminating Section 301 tariffs. The third had no viable alternative and was repriced with a 22% price increase.

The result: Within two product cycles (approximately 9 months), two-thirds of their highest-exposure revenue had been successfully transitioned to Vietnam-origin supply. Annual duty savings exceeded $80,000, partially offsetting the higher unit production costs in Vietnam.

🔹 Scenario 3: The New Seller Who Got It Right From the Start

Seller profile: New seller, preparing first product launch, sourcing from China.

The problem: After reading about tariff changes, this seller was uncertain whether their business idea was still viable. They had been quoted a China supplier price of $4.80 per unit for a kitchen accessory and planned to sell at $24.99 on Amazon.

The action taken: Before ordering, the seller researched the correct HTS code (with help from a freight forwarder), identified the applicable duty rate (12% standard + 25% Section 301 = 37% effective rate), and built a full landed cost model. The true landed cost including all duties, freight, and FBA fees came to $16.40 per unit — still leaving a viable margin at $24.99. They proceeded with confidence, knowing the real numbers.

The result: First shipment cleared customs without surprises. The seller launched with accurate pricing and maintained a healthy margin from day one, avoiding the most common new-seller mistake of underestimating true import costs.

⚠️ Common Mistakes to Avoid

❌ Assuming Section 321 Still Applies to China Shipments

Why sellers make this mistake: The Section 321 exemption worked for years and became standard practice in cross-border dropshipping communities. Many sellers have not updated their knowledge since the 2025 policy change.

What to do instead: Treat all China and Hong Kong origin shipments as fully dutiable regardless of value. Confirm with your customs broker what the current entry requirements are for your shipment types. Do not rely on supplier claims that “they handle customs” — you, as the importer of record, are legally responsible.

❌ Using Outdated Duty Rates in Financial Projections

Why sellers make this mistake: Tariff rates were stable enough for long periods that sellers built multi-year financial models and never updated them. With the rapid pace of tariff changes since 2018, models more than 6 months old may be significantly wrong.

What to do instead: Verify current duty rates against the live USITC HTS Schedule before every new inventory purchase order, not just at initial product launch. Build a “tariff rate last verified” field into your product tracking spreadsheet.

⚠️ Misidentifying Country of Origin

Why sellers make this mistake: Sellers assume that because their supplier is located in Vietnam or another non-China country, the product automatically qualifies as non-Chinese origin. However, if the product is primarily made from Chinese-origin components and only minimally assembled elsewhere, CBP may still classify it as Chinese-origin — a practice called tariff evasion through transshipment, which carries serious legal penalties.

What to do instead: Work with your supplier to understand the full bill of materials and where each component originates. Have your customs broker or a trade attorney assess whether the product meets the applicable rules of origin for the country where final manufacturing takes place.

🚫 Ignoring the Impact of Tariff Changes on PPC Economics

Why sellers make this mistake: Advertising and sourcing decisions are often managed separately, so when landed cost increases, PPC campaigns are not adjusted to reflect the lower available margin.

What to do instead: Every time your landed cost changes materially (more than 5%), recalculate your break-even ACoS and update your campaign target ACoS accordingly. Running PPC at a previously profitable ACoS that is now above your break-even point accelerates losses rather than driving growth.

🚫 Waiting for Certainty Before Acting

Why sellers make this mistake: Tariff policy feels uncertain and politically driven, leading sellers to delay supply chain decisions while waiting to see what the “final” rules will be.

What to do instead: Plan for the current rules as they exist today and build optionality into your supply chain rather than waiting for clarity that may not come quickly. Qualifying a backup supplier in a non-China country costs relatively little and provides enormous strategic flexibility. Waiting costs you margin every day you continue importing at elevated duty rates.

✅ Expected Results

Sellers who work through the steps in this article can expect to achieve the following outcomes:

📈 Restored and Protected Profit Margins

  • Accurate landed cost models prevent the hidden margin erosion that comes from using outdated tariff rates.
  • Supplier diversification or HTS optimization can materially reduce duty exposure without requiring a full supply chain rebuild.

🛡️ Reduced Compliance Risk

  • Correct HTS classification and proper entry filing eliminates the risk of CBP penalty assessments, shipment holds, and seizures.
  • Eliminating improper Section 321 usage removes a significant legal liability that could otherwise result in substantial fines or, in egregious cases, criminal referral for tariff evasion.

🔭 Improved Business Scalability

  • Sellers with diversified supply chains and accurate cost models are better positioned to scale because their unit economics are predictable and their operations are not dependent on a single country or regulatory loophole.
  • Monitoring tariff policy proactively gives you a competitive intelligence advantage over sellers who react only after the financial damage is done.

❓ FAQs

🔸 Does the Section 321 exemption still apply to shipments from countries other than China and Hong Kong?

As of mid-2025, the Section 321 exemption elimination specifically targets goods manufactured in or shipped from China and Hong Kong. Shipments from other countries where the de minimis threshold has not been separately revoked may still qualify — but Congress is actively debating further restrictions. Monitor USTR and CBP announcements regularly, as this is a fast-moving policy area. Do not build a business model that depends on Section 321 remaining available long-term from any origin.

🔸 If I source from a Chinese supplier but have goods shipped to me from a warehouse in a third country, are the goods exempt from China tariffs?

Not necessarily. Country of origin is determined by where goods are substantially manufactured or transformed, not where they were last warehoused or shipped from. Routing goods through a third country to avoid Chinese origin designation without actual manufacturing transformation is considered transshipment and is illegal under U.S. customs law. CBP actively investigates this practice and the penalties are severe.

🔸 My supplier tells me they handle all customs and duties. Am I still responsible?

Yes. If goods are shipped on DDP (Delivered Duty Paid) terms, your supplier handles the customs process — but you are still responsible for ensuring those duties were correctly calculated and paid. If a supplier underdeclares value or misclassifies goods to reduce duties, you, as the buyer and importer of record in some configurations, may share in the legal liability. Understand your shipping Incoterms and verify that your supplier is filing accurate customs entries.

🔸 How do I know if my products are subject to Section 301 tariffs?

Section 301 tariffs apply based on HTS code and country of origin (China). You can look up whether your product’s HTS code is subject to Section 301 tariffs using the USTR’s published lists of affected products, which are organized by HTS code. Your customs broker can quickly confirm whether your products are affected. If you do not know your HTS code, your freight forwarder can assist in identifying it.

🔸 Should I raise my Amazon prices to offset tariff increases, or absorb the cost?

This depends on your competitive position and price elasticity in your category. Start by calculating whether you can absorb the increase without going below your minimum acceptable margin. If you cannot, a price increase is necessary — selling at a loss is never a sustainable strategy regardless of competitive pressure. Use Amazon’s pricing tools to monitor how a price increase affects your Buy Box eligibility and conversion rate. In many categories, tariff increases affect all China-sourced sellers equally, meaning competitors face the same cost pressure — which can create space for industry-wide price increases without significant competitive disadvantage.