Paper Title
Buyer’s Practical Risk in DDP (Delivered Duty Paid) of Incoterms 2010 and Import Clearance Procedures and Customs Regulations
Abstract
Incoterms(international trade rules) is revised every 10 years and Incoterms 2020 is currently under revision. Because of the convenience like a domestic transaction and reduced risk of import customs, buyers prefer to choose DDP terms. As we know, sellers generally have to carefully choose DDP terms because of the risk of import customs clearance, but in recent Australian case showed that the buyer faced with a trouble with DDP terms. In short, Chinese supplier (Sheng Fa) and Australian buyer(SFA) made a contract under DDP terms and Sheng Fa didn’t pay duties and VAT, so ACBPS(Australian Customs Border Protection Service) charged unpaid duties and taxes to the Australian buyer based on Customs Act Article 167. Thus, unlike our knowledge that DDP terms are advantageous to the buyer, the buyer also may have such a problem in practice. Because the import clearance is very strict in the U.S., so the U.S. buyers prefer DDP or LDP terms in order to avoid the customs risk. However U.S. CBP(U.S. Customs and Border Protection) doesn’t like the U.S. buyers use DDP term due to problems caused with DDP term such as mis-classification of goods, under valuation, under reporting, no contact with IOR, foreign IORs fail to exercise reasonable care, foreign IORs change identities frequently, difficulty in enforcing the law and so on. This study suggests precautions when using DDP terms.
Index Terms - Incoterms 2010/2020, DDP (Delivered Duty Paid), Import Clearance, Customs Regulations