The Truth About DDP Shipping from China: What Freight Forwarders Won't Tell You
Introduction
DDP (Delivered Duty Paid) shipping has been a hot topic among importers, especially with the new tariffs imposed by the U.S. government. Many sellers and businesses choose DDP as a hassle-free shipping method, believing that all costs, including duties and taxes, are covered upfront. However, the reality of how DDP works is far more complex.
This guide will explain the entire DDP clearance process, its pros and cons, and some hidden risks that freight forwarders (FFs) might not disclose.
Understanding the DDP Clearance Process
1. How HTS Codes Are Used in DDP Shipments
The Harmonized Tariff Schedule (HTS) code determines the duty rate for imported goods. While regulations require accurate classification, many FFs in China strategically declare a different HTS code with a lower duty rate.
How does this work?
If a product has multiple applicable HTS codes, FFs will choose the one with the lowest possible tariff.
In cases where the duty is high, product descriptions are modified to fit a different, lower-tax category.
This is a common but risky practice. If customs suspects misclassification, they can impose fines or block shipments.
2. Declared Value Adjustments in the Clearance Process
Another major factor in customs duties is the declared value. Many DDP FFs under-declare the value of goods to reduce duty payments.
Key Facts:
The declared value to U.S. Customs is often lower than the actual sales price.
China Customs and U.S. Customs operate independently, meaning the value declared in China doesn't necessarily match what's claimed in the U.S.
If an exporter declares a higher value in China (to get tax rebates), this does not impact the FF's under-declaration in the U.S.
3. The Role of the Importer of Record
Under DDP, the importer of record is NOT the buyer. Instead, the FF or its associated entities act as the importer.
FFs purchase multiple import entities to handle DDP shipments.
Maintaining these entities, including IRS numbers, EINs, and customs bonds, costs around $20,000- $50,000 annually.
The buyer does not appear in U.S. customs records as the importer, meaning no official import history is created for their business.
Differences Between FCL, LCL, and Air Shipments in DDP
LCL & Air Shipments: Lower Risk
LCL (Less than Container Load) and air shipments are easier to manipulate because multiple products are consolidated. Customs agents find it difficult to verify the actual value of each item.
FCL Shipments: Higher Risk
FCL (Full Container Load) shipments are high-risk for inspections because:
Containers with a single product type make it easier for customs to compare prices and flag discrepancies.
If customs suspects under-declaration, additional duties or fines may be applied.
Workaround: Some FFs mix high-value products with lower-value items in a single LCL shipment to reduce the total declared value.
Why Doesn't Amazon Offer DDP Shipping?
Amazon's logistics service, Amazon Global Logistics (AGL), does not offer DDP shipping. Why?
Legal liability: Amazon does not want to risk customs fraud.
Transparency issues: A major retailer cannot afford to be involved in under-declaration practices.
Regulatory compliance: Amazon prefers to comply fully with customs laws to maintain credibility.
This raises an important question: Wouldn't Amazon offer it as a service if DDP was genuinely risk-free?
Risks of Using DDP Shipping
1. Customs Inspections and Penalties
If customs flags a DDP shipment for inspection and finds discrepancies:
The FF is responsible for additional duties and penalties.
The importer (you) faces delays and potential shipment confiscation.
In extreme cases, the FF's import entity can be banned from future imports.
2. Lack of Import Records for Your Business
Because the FF acts as the importer, your business does not appear in the import records.
If your company plans to go public, auditors may question why no import transactions are linked to your name.
Large companies require import records for compliance; missing data could affect financial transparency.
3. Hidden Risks for U.S. Companies
For U.S. businesses using DDP, the risks include:
Dependence on FFs: Future shipments could be blocked if your FF's import entity is flagged.
No customs broker involvement: You have no visibility into how duties and taxes are handled.
Legal exposure: While rare, improper declarations can disrupt the supply chain.
Should You Use DDP for Your Shipments?
When DDP Might Be a Good Option:
• If you are a small business without customs clearance knowledge.
• If time is critical, you want a "door-to-door" service.
• If you do not need an official import record in the U.S.
When You Should Avoid DDP:
• If you are a large-scale importer and require compliance for audits.
• If your goods are high-value and need accurate tariff classification.
• If you are importing full containers—FCL is risky under DDP.
Alternative Shipping Options
1. DDU (Delivered Duty Unpaid):
The buyer is the importer of record.
Duties and taxes are paid upon arrival.
2. Freight Forwarder + Customs Broker:
A trusted broker ensures accurate classification.
You maintain full control over your import records.
3. Amazon Global Logistics (AGL) or Third-Party 3PLs:
If you sell on Amazon, using AGL ensures compliance.
Third-party logistics providers handle storage and distribution with legal transparency.
Conclusion: Transparency is Key
DDP is not a scam, but it carries hidden risks. Understanding how FFs manipulate HTS codes and declared values is essential for making an informed decision.
If you choose DDP, work only with reputable FFs that disclose their declaration practices. If compliance and transparency matter to your business, explore alternatives like DDU or direct importation.
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