May 23, 2019 by Andrew Minalto - 12 Comments

WARNING: The DDP China Alibaba scam is REAL!

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Delivered Duty Paid

DDP: Delivered Duty Paid! It sounds like a dream come true for so many Amazon sellers importing products from China! Isn’t it great that you can pay a slightly higher price for the product and get it delivered to you with all taxes already paid for? Perfect! Or… is it?

I’m afraid that when it comes to offers like these, we always come back to the age-old truth that if it looks too good to be true, it probably is. And DDP is no exception.

If you’re importing goods from China using Alibaba.com to sell on Amazon, eBay or anywhere else, you should read this article very carefully, because the chances are you’re currently breaching the law and could be facing severe problems due to tax evasion.

Sounds terrifying? I agree. So, let’s clear the air once and for all and learn about DDP Incoterms and how you CAN and CAN’T use it in your importing business.

DDP Explained

As I have already said, DDP stands for Delivered Duty Paid, and in simple terms, it means that the SELLER covers ALL the costs associated with the goods and the shipment of your order from their door to yours, which includes:

  • Cost of goods
  • Exporting duties/fees
  • Shipping
  • Import duties/fees/VAT/Customs clearance
  • Delivery to the specified address

Sounds great, right? Yes, it does! It’s a great, hassle-free way to import goods from abroad and not have to worry about any of the problems usually associated with importing from China.

Another huge advantage is that you eliminate all the guesswork from the landed cost of the items you buy. The price you pay the supplier is the final price and will be the cost of your landed goods.

This makes it super easy to make P/L calculations, especially for Amazon FBA sellers who have to take into account Amazon seller fees and FBA fees to get their numbers right.

So far, so good—and no signs of any scams! Yes, DDP terms are perfectly legit and used a lot in B2B transactions around the world. The problem is that many Chinese suppliers have a different understanding of what DDP stands for, so they use it illegally. Here’s how…

How DDP Becomes a Tax Evasion Scheme When Importing Goods From China!

Tax Evasion DDP

Here’s how it works: Your supplier will tell you that they can send you the goods via DDP terms for X amount of money, but in reality, they DON’T clear the goods through Customs for your shipment! What happens is your goods are smuggled into the EU without paying all the proper taxes (import duty and VAT).

And they achieve this in various ways:

1) If it’s a tiny package, they will try to pass it through Customs by putting a deficient value on the Customs declaration. If you get caught by Customs and asked to pay taxes, the supplier will come up with some stupid excuse about why it happened, but you will still have to cover those taxes.

2) They will send your goods via ship or train as part of a more significant shipment, allowing them to clear the goods through Customs while paying minimal taxes due to the incorrect classification.

3) They somehow manage to smuggle your goods into the EU without declaring anything. I have heard that the new train shipping method is used extensively for this. I don’t know the exact mechanics behind how they do it, but again, it doesn’t matter. If the appropriate taxes are not paid, you’re essentially taking part in a tax evasion crime and it will come back to bite you.

EU Border Customs

I hope that this information opens your eyes to the potential legal trouble that comes with accepting DDP terms when importing from China.

In my opinion, it is not the smartest move to make. In most cases, you will still receive your goods, but you won’t have any documents or proof to show that the correct taxes have been paid on them. This means you can’t even correctly document these orders/stock on your books! And if HMRC does check your books, you will certainly be in trouble.

There’s a small chance that some Chinese suppliers use legit DDP shipping terms. Perhaps they have a contract in place with the courier/shipping company to make this happen. It is possible, yes, but in those cases, they won’t have any problem showing you the proof/documents that the correct taxes have been paid for the goods you are importing (and you will need these for accounting anyways).

However, it will be rare that you will find genuine DDP terms on Alibaba.com. A super simple way to tell that supplier is NOT offering genuine DDP terms is to look at the price. For example:

If the cost of goods with the “normal” shipping is £3000, but they offer you DDP terms for an additional £200 (total £3200), it’s 100% a clear sign that it is a scam!

The VAT alone on a £3000 order will be £600 (at 20%), PLUS there’s import duty, Customs clearance fees, etc. The additional cost should be a minimum of 25% of the total (£750 in this example).

It’s just common sense; you can’t waive the VAT on imported goods because you use DDP terms, that’s not how it works.

Sometimes suppliers are smart and will add a premium of say 25% or 30% if you choose DDP terms—but they still won’t pay the taxes with it! They still try to smuggle the goods in and keep the difference for themselves.

So, what can you do? What is the solution to this problem? In which cases can we still use DPP terms to make importing life easier? Let’s find out…

Conclusion

Freight Forwarder

My advice is to completely stay away from using DDP terms when dealing with suppliers on Alibaba.com.

It’s not worth the risk when you know that 99%+ of suppliers will scam you this way. I’m sure that Chinese suppliers don’t even see this as a scam—they think that they’re helping us! Just like they do when they continuously undervalue smaller shipments so that they get them through Customs without fees.

The ONLY time that DDP terms should be used is with US-based suppliers and legit companies who have contracts in place with the courier companies. These people will be happy to provide you with all the appropriate paperwork for all the taxes paid on your goods.

For example, Amazon offers DDP terms when you buy from Europe on the Amazon.com website. eBay also provides a very similar feature via their Global Shipping program (which also has plenty of weaknesses when used across the EU).

If you plan on importing goods from China, Alibaba.com, or any other website, stick with simple shipping terms where you are in control of how your products are processed through Customs:

1) With small shipments, it will usually be a courier company.
2) With larger purchases, you will want to use sea freight or air freight handled by a freight-forwarding company (such as Woodland Group).

As long as you ask the supplier to write down the correct VALUE on the Customs declaration and get a proper invoice from them showing all the goods, the amount paid, etc., you will have no problems clearing your goods through Customs, paying the taxes and getting the relevant documents that prove those payments were made.

Have you been using DDP terms and been scammed? I would like to hear your story! Leave your comment or question below the post, and I will personally get back to you within 24h, Monday to Friday.


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12 Comments
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  1. Hi Andrew,

    I just discovered your blog, it’s great and full of info. You have a new reader 🙂

    This post on DDP is somehow spot on for my situation. I am a quite new FBA seller and have just imported my third stock via sea shipment. I use a freight forwarder separated from my supplier. I have requested DDU for this shipment.
    I have to say that I am not Vat registered, however I have been told that I can claim back the VAT paid on this import once I will register for VAT (hopefully in 3-4 months).
    Few days ago my freight forwarder sent me the custom and vat bill, which was just a PDF showing the breakdown of VAT and Custom fees. In this document my company name shows up as “Importer”. The FF said that they had already paid it on my behalf. The PDF doesn’t not show the VAT number used to import. A few seller friends told me that it should show the FF’s VAT number, so that when I will claim this vat back, HMRC can track who paid it. Obviously in this scenario my FF is not authorised to claim it.

    My FF refuse absolutely to provide me with the same document showing their VAT number for several reasons which sound all kind of BS. I was going to pay anyway fearing that my goods would be held at custom, however the good news is that the goods have actually been shipped and are now at the amazon FC. In this scenario now I have more leverage as I am already in possession of my goods.

    what do you think I should do? I think I will refuse to pay until they prove that they have paid the right VAT and Custom amount. I am afraid they might have paid less than the due amount and just pocket the difference. Do you think that if I dont pay the FF and arrange payment with HMRC, the FF has some legal way to sue me?

    Thank you so much for your help Andrew I really appreciate the support you give to your community!

    1. Andrew Minalto

      Hi Mike,

      Thanks for your comment.

      Hmm, hard to say what is going on there… In my mind, they should have no problem in showing their VAT number on the invoice. On the other hand, I don’t know ALL the legalities of this…

      Can they show you the Customs declaration or something that proves that they have paid all the taxes?

      Thanks,
      Andrew

      1. Hi Andrew, thank you so much for your prompt reply. No, they refuse to show any kind of Custom receipt or any proof that they have actually paid. I think I would just rather avoid paying the freight forwarder and arrange things directly with HMRC…

        thanks a lot mate – appreciate your help 🙂

        Have a great day!

        Mike

        1. Andrew Minalto

          Yeah, that sounds very scammy to me….

  2. Melodee Lucido

    Andrew, thank you so much for being such an amazing, brilliant person. You put so much value into all you do. I heard about you thru Dylan at flipflip. I am a brand new reseller and my head is spinning with info 🙁 I am 67 yrs young and starting over after getting wiped out by hurricane Michael—business and all. So it will be a bit til I can jump into your course. I was so excited after watching all the intro video (yes, it was loooong; I stayed til the last breath) I couldn’t sleep at all . . so I got up and re-watched it hahaha. I look forward—so very much—to being in your program. It is never too late to start all over again. Thank you more than words can say. I believe that the Uni brings just the right teacher when we are ready—-if we are showing up to life daily. I will implement the things in the video and have new joy and excitement at my j.o.b. Mannny blessings to you.

    1. Andrew Minalto

      Thank you so much, you made my day! 🙂

      and best of luck with the new venture!

      Andrew

  3. Hi andrew, i have just started shipping from china so very new to importing and im guessing my supplier has used the DDP as he hasn’t sent me any tax or duty documents so i have now asked for these, i would like to do the process properly and would like to use a freight forwarder, would you recommended using the company that you mentioned above? I will be using sea freight mostly all of the time due to the weight of product. Thanks

    1. Andrew Minalto

      Hi Craig,

      Thanks for your comment.

      Yes, absolutely – Woodland Group is a great company to work with.

      Andrew

  4. Marcin Kozlowski

    Hi Andew,
    Thanks for a great article. How do you think when you use a courier for a smaller orders for example up to 60 kg.

    It’s best to organize a courier company from my end and let them to collect an orders from the chinese factory or let to organize my chinese supplier but choose exw service and tell them to use a real value of the goods on the declarations?

    Thanks for your support
    Martin

    1. Andrew Minalto

      Hi Martin,

      Thanks for your comment.

      Let Chinese supplier organise courier delivery, yes. They will get a much better price than you.

      Just make sure they declare full value of the goods, include REAL invoice with the shipment so that everything goes smoothly at Customs. If you have a tracking number on hand, you can contact courier company directly on your own and say that you will need to declare goods, send them invoice etc. so that they have REAL numbers on hand.

      Thanks,
      Andrew

  5. Very interesting!!
    I have used DDP and challenged my supplier to provide proof of tax payment. They failed to show any documentation hence I am very certain I have been scammed. This was my very first shipment from China. Is there any action I would need to take to rectify this error and pay my tax accordingly? How can I do this? Or should I hope this one-time “offence” won’t be recognised by HRMC and I will ensure for future shipments that everything will be paid correctly? Thanks!!

    1. Andrew Minalto

      Hi Alicia,

      Thanks for your comment.

      Yes, you need to contact HMRC and ask them for a special form – so basically you need to do the Customs clearance procedure now, after the goods have been already delivered to you.

      You can of course hope that no-one will notice this one transaction, but I personally wouldn’t do that.

      Thanks,
      Andrew

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