“The secret of business is to know something nobody else knows” Aristotle Onassis
DDP is one of the most commonly misunderstood and misused terms of the International Commercial Terms of Sale (INCOTERMS). DDP addresses two separate activities; 1) freight movement and 2) Customs clearance. It is the latter where we most often see the lack of understanding and risk.
DDP requires the overseas Seller to be the Importer of Record but often, this burden is shifted to the buyer. This happens when the U.S. agent (freight forwarder) requests a Customs Power of Attorney from the buyer in their favor. Whether or not they invoice the overseas supplier for the Customs duty and clearance services is a moot point. If you read the fine print of the POA carefully you will find you are giving that company authorization to appoint a Customs Broker (of their choice) to handle Customs clearance. This is not only a mistake, it is dangerous, particularly when the U.S. agent is not a licensed Customs Broker. Under DDP terms, the U.S. agent of the foreign freight forwarder has the authority to contract an independent Customs Broker of their choice to handle Customs clearance, with all information between the buyer and broker typically filtered through the freight forwarder. Handled properly, the Power of Attorney is issued directly to the Customs Broker that will clear the shipment.
As the Importer of Record, you are responsible for accurate classification, filing, and timely duty payment. This is a serious responsibility that can be difficult to fulfill when, as is often the case, you have little if any contact or even knowledge of who that Broker is. Failure to perform in any area can result in serious penalties against you from Customs that can surface weeks or months later.
Our advice: If your Purchase Order has specified DDP, and the commercial invoice reflects that, you do not have to provide a Customs Power of Attorney to anyone. Insist that the foreign supplier be the Importer of Record. If you do decide to be the Importer of Record, you have the right to select the Customs Broker of your choice and we would be pleased to represent you. Click here to contact us.