Ignoring Incoterm DDP and instructions, certain customs agents still make the buyer importer or record. Is this allowed? And who needs to pay? Exporter or Importer? What do you think?
DDP INCOTERMS
In a nutshell, under DDP INCOTERMS, the seller is responsible for arranging carriage and delivering the goods at the named place. In International Trade, the seller is often the supplier or exporter. The exported goods must then be cleared for export out of the country and import into import and all applicable taxes and duties paid (e.g. VAT, GST).
Are Incoterms law?
While the rules regarding this are not enshrined in-country law, they are usually enshrined in commercial law between the two partners. This means that where contracts between the seller and the buyer state the INCOTERM to be DDP and there is a clear reference to a particular version (e.g. INCOTERMS® 2020) in the contract, compliance with these stated terms form part of a legal contract between buyer and seller, and can be enforced in a court of law.
So, no, formally, they are just words on a piece of paper, until put into a commercial contract between buyer and seller.
The Amazon of delivery terms
In other words, the rule places the maximum obligation on the seller/supplier/exporter, and, apart from unloading the goods from the arriving means of transport, there is nothing else to do. This is why, often, one can think of DDP as the Amazon term: The goods show up on your doorstep and that’s it. No fees, no money to pay and a nice local, national, invoice, VAT inclusive.
VAT
Under DDP, VAT at the destination will also be included.The buyer/ importer would not expect to be charged VAT and their VAT number should not be included in the customs declaration. The seller may need to register for VAT in the destination country.This could involve the use of a VAT agent or fiscal representative.
Customs Duty
Under DDP, the buyer is not required to pay any applicable customs duty plus and dutiable freight costs (excluding freight after importation). This must be made clear to all parties, including any clearance agents and, especially, fast parcel operators.
Work Around Solutions: Don’t muddle the Incoterms
Some agents advertise “DDP LITE”. This is creative importing. I counsel against this and any modifications. This term does not officially exist. It is a derivation of DDP that is quite commonly used in the UK but not so much in Europe. The duty would still fall on the seller but the buyer/importer would act as the importer of record and account for import VAT directly. In such a case, the seller would not be required VAT registration in the country of destination. The customs broker acts as a direct representative of the buyer (importer) and charges the duty and documentation charges back to the seller exporter)
The importer of record would in such a case be liable for the customs debt, and this would then be charged back to the seller (exporter). In such a case, the importer (buyer) assumes the liability, in essence, this becomes DAP with an agreement to charge the duty and the cost back to the seller. Overall, I recommend not to muddle the Incoterms. Do you agree?
A term suitable for trade within a Single Market or a Customs Union
DDP is a term suitable for trade in a Single Market or a Customs Union, such as the EU-27. This is because, apart from VAT, there is no customs border to overcome, no import declaration to be made.
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Responsibility for import is with the seller/exporter
DDP is the only rule that requires the seller to take responsibility for import clearance and payment of taxes and/or import duty. In other words, the importer of record, the consignee, is not responsible for neither the export nor the import clearance.
Can the declarant make the buyer the importer under DDP?
This is not foreseen, where the Incoterm DDP is applied.
What role for an agent?
Section 21 of the Taxation (Cross-border Trade) Act 2018 (TCTA) 20218 mentions the role of Customs Agents in Section 21. It allows in (1) for the importer to appoint any customs agent to
·may make Customs declarations in the name of the importer as direct agent or
·in the agent's name as “indirect agent”.
The appointment of a direct agent means that, by law, anything done by the agent is regarded as done by the importer.
When is the agent liable for import duty?
In the case of an indirect agent, the agent is liable to pay import duty. If a Customs agent acts as a direct agent, the agent is also liable to import duty if, according to part 6 of Section 21, if
·“the agent acts at a time when the appointment has not been disclosed to HMRC as mentioned in the subsection,
·the agent acts at a time when the appointment of the person as a Customs agent has been withdrawn,
·the agent otherwise purports to act on behalf of the principal when the agent has no authority to do so, or
·a liability to import duty is incurred by reference to the importation of goods declared for a Customs procedure and the declaration was not made by regulations under paragraph 9 of Schedule 1 (simplified Customs declarations)”
This means that where the agent acts without permission of the importer, the agent, regardless of the status, become liable for customs duty.
Conclusion
Customs law does not specify if an importer can be considered the importer of record under DDP INCOTERMS. However, making the importer legally responsible for the import under such terms is clearly against the spirit of the terms. In the UK specifically, a fudge of INCOTERMS seems to have prevailed over the years, dubbed DDP Light. This is not to be encouraged, as it muddles the INCOTERMS and causes more confusion and extra work than it does help. If it is DAP, call it DAP. More importantly, the law is clear, where agents act against instructions or without holding a written authority to act or this has been withdrawn, they are themselves liable for customs duty.
What do you think?
