DDP Shipping Risk When Shipping from China

Dec 05, 2021 Chapter 5. Shipping

DDP shipping: Delivered Duty Paid!  For so many Amazon sellers who import products from China, it sounds like a dream come true! Isn’t it good that you can pay a slightly higher price for the product and deliver it to you with all the Taxes and Tariffs paid? It’s perfect! Still is…… Is it?

 

What is DDP Shipping from China?

DDP shipping from China

In a Duty Paid Delivery – DDP shipping terms, the seller delivers the goods to a place designated by the buyer’s country and pays import duties, including inland transportation from the point of entry to the buyer’s location.

I’m afraid when it comes to such offers. We always go back to the old truth that if it looks too good to be true? Suppose you want to use Alibaba to import goods from China for sale on Amazon, eBay, or elsewhere. You should read this article very carefully because you are likely to be breaking the law and may face serious problems due to Tax evasion.

Does that sound scary? I agree. Let’s look for all about DDP Incoterms and how you use it and can’t use it in your import business.

 

Who is The Importer of Record on a DDP Shipment?

In DDP freight, the importer is recorded as the foreign shipper of the goods. For US example, Foreign shippers must obtain foreign entity customs bonds from US customs brokers through freight forwarders or surety companies (single or annual/continuous).

 

DDP Price

As all DDP freight brokers are independent and each charge a different fee structure, the DDP pricing differs for every shipping agent. DDP shipments are a little more expensive upfront because couriers will process the payment to customs on your behalf, but for an additional fee.

 

Why DDP Shipping from China?

As I’ve already said, the DDP shipping representative “paid taxes,” which simply means that the seller bears all the goods related to transportation costs from their home to your home, including:

    • The cost of the product
    • Export duties/fees
    • Shipping
    • Import duties/fees/VAT/VAT
    • Shipping to the specified address

 

That sounds good, doesn’t it? Yes, it is! This is a convenient way to import goods from abroad without worrying about any problems usually associated with imports from China.

In fact, widely using DDP to ship from China is begins at Amazon. “Amazon will not be responsible for or charge any duties, taxes, or shipping costs associated with FBA inventory. All shipments are required to use Delivered Duty Paid (DDP), or sometimes referred to as “Free Domicile,” shipping terms. Any shipment to an Amazon fulfillment center The goods for which fees are charged, including any duties, taxes or freight, will be rejected without further concessions.”

With more and more Amazon sellers, many shipping companies had launched low-priced DDP shipping from China services.

Another huge advantage is that you can eliminate all guesses about the CIF cost of your purchase. The price you pay the supplier is the final price, including the cost of shipping goods in China. This makes profit and loss calculations very easy, especially for Amazon FBA sellers who must consider seller fees and FBA fees to calculate their profit correctly.

 

Seller’s Responsibilities

EXW (EX Works) represents the seller’s minimum obligation, and DDP represents the maximum obligation. The responsibility, cost, and risk all fall entirely on the shoulders of the seller.

As mentioned above, the seller (exporter) is responsible for all costs involved in delivering the goods to the designated destination and clearing customs in the importing country. 

The seller may also need to obtain import licenses, permits, or specific payment methods and customs. If the seller cannot obtain an import license, DDU (Delivered Duty Unpaid) shall be used instead of DDP (Delivered Duty Paid).

Buyer’s Responsibilities

The buyer’s liability is minimal in a DDP shipping from China agreement. These are the unloaded goods at the pre-arranged transshipment point and their final destination.

The buyer does not need to provide assistance or advice regarding import responsibilities or any other documents, and the buyer also does not accept any risks during transportation.

Seller’s Benefits

Like any general international trade terms in transportation where the seller controls the export of goods, the DDP allows the seller to control logistics costs and adjust them accordingly to maximize profits.

It also allows the seller to choose which transportation service is willing to provide the largest profit for the contract. 

Buyer’s Benefits

For inexperienced or busy buyers, the DDP shipping from China is numerous. Since the full responsibility for cargo transportation and paperwork mainly falls on the seller, the buyer can only focus on arranging sales. Before the goods arrive, the buyer enjoys a trouble-free situation because they have almost no responsibility.

Comparison of DDP and DAP

DAP (Delivered At Point) is different from DDP. Under DAP, the buyer is responsible for customs clearance, duties, and taxes. Under DPP, the seller is obliged to clear the goods and pay import duties and taxes. DAP is more suitable for situations that do not require customs clearance at the border or customs during the import process. 

 

At the moment, everything is fine, and there is no sign of an illegal! Yes, DDP shipping is used a lot in global B2B transactions. The problem is that many Chinese suppliers have different understandings of what DDP shipping means, so they use it illegally. 

 

 

 

I don’t do DDP shipping regularly, only occasionally for smaller shipments. It can be fine, but the Sea/UPS combo shipping is sketchy as hell. You have no idea where your freight is, who the importer is, if they are lying about shipment contents, reboxing your stuff with other customer items, etc. No one is accountable if your freight is lost, misplaced, damaged, crushed, etc.

There’s a difference between standard DDP shipping and the Sea+UPS DDP shipping option all the Chinese forwarders are offering now. DDP shipping is just an incoterm for who is responsible for the freight (the factory). But for these small shipments, often it’s no longer a transaction between you and your factory, but between two other middlemen. Also, if the DDP shipping cost is significantly lower than LCL cost + tariff, the shipper is 100% lying about value. A lot of these forwarders offer DDP shipping for lower than the actual tariff cost alone. How can they possibly be declaring the correct value? Also, your supplier is probably working with another forwarder, so even if you trust them, you’re extending that trust to an unknown. I have only heard of issues anecdotally, not sure how often shipments are flagged/seized/etc, or what the consequence of under-declaring value actually is.

Honestly though, freight is so complicated and can be so frustrating. I try to simplify as much as possible. Full container is my favorite when we can swing it – faster, safer for the goods, unlikely anything goes missing/broken (as long as your container doesn’t fall in the ocean). If you go LCL – we always pallet the goods, make sure to put company name on everything so the dolts at the warehouse don’t lose your pallets (ask me how I know this…). If DDP shipping, cross your fingers and hope nothing goes wrong.

 

To my points DDP shipping from China:

  • We pay less?  A big plus for small shipments. Last time I tried DDP we had 100 units out of 1000 missing, and no recourse. Factory/forwarder claimed it was the right amount. I think a box ripped and was repackaged somewhere.

  • Your shipments arrive faster? Definitely a good thing.

  • Our shipments don’t show up on websites like ImportYeti when you search for your company name? You can request Vessel Manifest Confidentiality and not be included on these sites for LCL/FCL.

  • Doesn’t really require any work related to shipping. We don’t have to contact a freight forwarder or provide any information to anyone other than your shipping address to our supplier? Definitely a plus. Also no one to call if there is an issue, and no one accountable for problems.

  • Final delivery is always by UPS or FedEx which you prefer? As long as you have solid boxes this should be fine. If not, be prepared for box damage. These days we try to only ship palleted freight.

 

 

 

DDP Shipping Risk when Shipping from China

Your suppliers will tell you that they can send you goods through DDP shipping, but in fact, they won’t clear your goods through customs!” What happens is that your goods are smuggled into your country without paying all taxes (import duties, duties, and VAT).

They achieve this in a variety of ways:

 

  • Low-value customs declaration

If it is a small package, they can try to pass it through customs by placing a low value on the customs declaration form. If you are arrested by customs and asked for a tax, but you must pay the tax.

 

  • Use the wrong HTS code 

I hope this information will open your eyes to U.S. companies that accept DDP shipping when you import from China because in most cases, you will still receive the goods, but you will not have any documentation or evidence that the correct taxes have been paid. This means that you can’t even record this inventory correctly on your books! And if someone/HMRC checks your books, you’re bound to be in trouble. 

Some Chinese suppliers use legitimate DDP shipments. Perhaps they have a contract with the courier/freight company to achieve this goal. Probably, but in that case, they won’t have any problems showing you proof/documents (ii) that the correct taxes have been paid on the goods you imported. You will need these for accounting processing).

If you think that your product Tariff/Duty payment has nothing to do with the legitimacy of your business, you can safely use cheap DDP(NOT Cheapest)

 

However, true DDP terms are rarely found on Alibaba.com. An easy way to tell if a vendor isn’t providing true DDP shipping is to look at the price. For example:

 

If the price of a “normal” mode of transport is $2000, but they give you a DDP shipping $2200 ( then 100% indicates that this is a risk!)

 

So, what can you do? What is the solution to this problem? Under what circumstances can we still use DPP shipping? Let’s find out…

I suggest buying from Alibaba’s website, completely avoiding DPP delivery.

When you know that more than 99% of suppliers will deceive you in this way, it’s not worth the risk. I’m sure Chinese suppliers won’t even put it in a scam. They think they’re helping you! Just as they keep underestimating small items, the package can pass through customs for free.

Only suppliers and legitimate companies that have a contract with the courier company may use the DDP shipment. These people will be happy to provide you with all documents relating to the taxes paid on your goods.

 

If you intend to import goods from China, Alibaba or any other website, please follow the simple DDP shipping from China to control the way products are processed through customs:

    • When shipping in small quantities, it is usually a courier company.
    • If the purchase volume is large, you will need to use the air freight or Ocean freight handled by your freight forwarder.

 

As long as you ask the supplier to write down the correct value on the customs declaration form and get the valid invoice from them showing the value of all goods, the number of customs duties paid, etc., you can definitely can choose DDP shipping and successfully clear the goods through customs. 

Many buyers now use DDP Freight from China because many cross-border taxes are not perfect now, but it does not mean that this service will continue to be available in the future. As I said, if you think that your product Tariff/Duty payment has nothing to do with the legitimacy of your business, you can safely choose cheap DDP(NOT Cheapest). 

 

 

 

Considerations for Importers and Exporters

A DDP shipping agreement is more beneficial for buyers who have little knowledge about shipping and want a hassle-free experience. Experienced sellers can also benefit from this system because they can fully control costs, including factors that maximize profits.

 

Importers/buyers with more experience are more likely to avoid this type of shipping agreement because they are more likely to have a more cost-effective way to import their goods. These companies will have a network of responsible agents that can handle the buyer’s needs. The DDP shipping agreement is more suitable for buyers who have not yet managed to form these relationships or do not import very often, so go to the most troublesome free shipping system.

Generally speaking, we do not recommend using DDP by the ocean. However, DDP shipping from China is more common and meaningful for air express or parcel transportation. If you need DDP shipping from China service, please feel free to contact us

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What is the customs clearance process and how to make it much easier? - Supplyia
13 days ago

[…] can choose DDU (Delivered Duty Unpaid) or DDP (Delivered Duty Paid). The customs officer will check which Incoterms apply to your shipment. If you have already paid, […]

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