You might've heard about these Chinese forwarders offering what seems like a great deal – a one-price-fits-all "DDP" deal (Delivery Duty Paid). Sounds convenient, right? But there's a catch.
What's the Big Issue?
Tax Trouble: This "DDP" deal is shady because it skips out on paying taxes and duties at the destination. That's a red flag for potential tax fraud. No proper paperwork or customs entries? That's a major legal concern.
Risky Business: These shipments are like magnets for trouble. Let's take a very common situation as an example:
An Amazon seller, let's call him Johnny, imports a shipment with a value of goods of $50,000, and the item is obligated to pay 10% duties upon import, meaning it ows $5,000
The weight of the shipment is 400kg, and Johnny pays his Chinese forwarder $2.5 per kg = $1,000 for shipping "DDP".
How is it possible that only the duties are $5,000, but Johnny ends up paying just $1,000 to get his shipment moving from door to door?
US Customs and the IRS keep a close eye on suspicious stuff like this. If they catch wind of possible tax evasion, they'll investigate. And that's bad news for everyone involved.
How does this differ from "Real DDP"?
In a legitimate Delivery Duty Paid (DDP) arrangement, the responsibility for paying duties and taxes at the destination falls on the shipper or seller. The shipper is in charge of clearing the shipments with accurate and compliant customs entries, and covers the import duties&taxes, ensuring a smooth passage through customs.
Check in our comprehensive article on Incoterms to read further about DDP and the rest of the incoterms: https://help.gocubic.io/en/articles/8625148-incoterms-in-depth
Why Should You Care?
Serious Consequences: Think audits, investigations, and hefty penalties. Not just for the shipper but also for the recipient. The risk of having your goods confiscated or facing serious legal trouble is sky-high. As far as the US authorities are concerned, you, as the seller, have all the liability
Playing Safe: The last thing you want is your shipment being seized at customs. It's not just about the money lost; it's also about your reputation taking a hit. Plus, dealing with legal messes is nobody's idea of fun.
Due Dilligence Troubles: Dreaming of an exit? Big aggregators and VCs stay away from non-compliant sellers. We've witnessed countless deals that went sideways once the intended buyer found out that the seller has been shipping 'DDP'.
What You Can Do:
Straightforward Declarations: Stick to transparent customs declarations. Make sure everything's documented properly to stay on the right side of the law.
Choose Wisely: Go for trustworthy forwarders who play by the rules. Don't fall for those too-good-to-be-true deals. It's not worth the risk.
Get Advice: When in doubt, talk to a legal expert. They can guide you through the customs and tax maze and keep you out of trouble.
Bottom Line
Sure, the idea of a hassle-free, one-price shipping deal might seem tempting. But steering clear of these sketchy "DDP" arrangements from Chinese forwarders is a smart move. Stay legal, stay transparent, and choose reputable partners to avoid getting caught up in a legal nightmare that can cost you big time.