Delivered Duty Paid or DDP, is the only Incoterm that requires the seller to act as the importer of record in the buyer’s country. Buyer’s typically opt to trade on this term when they want a risk free or hassle free experience. In general, it is the accepted practice in most countries that the buyer has no responsibilities or obligations towards Customs procedures when using DDP. In some countries, it is impossible to use DDP terms, as the foreign seller is not allowed to act as the importer of record.
However, buyers who prefer to use DDP in order to avoid liabilities such as duties, taxes and licensing requirements with Customs should be aware that in some cases, the authorities can make them liable regardless of whether they acted as the importer or record or not.
It all depends on how the legislature is worded and how far Customs is willing to go to present their case.
For example, if the legislature is worded to an extent that allows the interpretation that Customs duties and taxes are leviable on:
- Any party that caused the importation to occur
- Any party that colluded with another party to cause the importation to occur
- Any party for whom the goods is intended
- Any party that has knowledge of the importation and for whom the goods are intended
Then Customs may be able to pursue a case against the buyer for unpaid duties even when the buyer did not act as the importer of record.
Let’s look at a scenario that many consumers would be familiar with:
- Imagine you purchase something from an online seller
- The online seller arranges the shipment to you and sends the item using express parcel post
- The buyer at no time explicitly agreed to be the importer of record
- In fact, in many cases the buyer has no idea what importer of record even means
- In some cases the courier service may declare themselves as the importer of record for consolidated shipments
- However, if the item is eventually found to be a prohibited item for import, Customs can take the buyer to task, even though the buyer never filled in an import declaration form
This same approach can be reapplied by Customs to a commercial shipment – where they pin the liability of unpaid duties and taxes or unmet import license requirements on a buyer who is purchasing on DDP.
A final note
It is important to understand that buyers cannot hide behind Incoterms as a form of defense. At most, the DDP Incoterm can be a mitigating factor if problems do arise. For example, it may be prohibited to import cannabis into your country. You cannot arrange for a shipment of cannabis from an overseas supplier then expect Customs and narcotics department to let you go scot free because you purchased the product on DDP terms. If you genuinely and truly had reason to believe that the seller had approval from the relevant authorities to import the product into the country – you may try to present that as a mitigating factor to authorities. However, in most countries such a defense would not go very far. Under DDP the seller is responsible for the cargo until it reaches the end customer, including any liabilities arising from general average claims.
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