Risky Business: Shippers Who Use Delivered Duty Paid Forwarders May Be Setting Themselves Up for Surprise Charges

For many U.S. importers, Delivered Duty Paid (DDP) shipping from China is an easy and inexpensive solution. One price, one provider, and everything – including freight, customs clearance, duties, and final delivery – at prices far lower than traditional shipping options.

Unfortunately, many shippers are now not only discovering that service is “too good to be true,” but that there are also hidden risks that are costing some companies far more than they ever saved – and in some cases it is costing them their businesses.

The reason these problems are surfacing now is increased enforcement by U.S. Customs and Border Protection (CBP), who have caught on to the duty evasion schemes tied to DDP forwarders. That’s because CBP has spent the past several years building an enforcement infrastructure specifically designed to identify the schemes that kept DDP pricing artificially low, including reducing commercial value on invoices to reduce dutiable value, misclassifying products to secure lower tariff rates, and routing shipments through shell companies positioned as fake importers of record. These tactics are not gray-area compliance lapses. They are customs fraud – and CBP is now detecting and coming after the bad actors.

When CBP uncovers fraud, it demands unpaid duties, penalties, and interest, causing many forwarders who built their entire business model on evasion to almost immediately become insolvent.

“When a forwarder’s entire pricing model depends on evading duties, enforcement doesn’t just disrupt shipments – it collapses the business,” said Anthony Fullbrook, president of OEC Group’s North American Region. “Even worse, if it turns out that the DDP Forwarder is actually a shell company, it will virtually take away any legal chance for a shipper to recover duties paid.”

When a fraudulent DDP provider structures its operation through entities with no real assets, shippers pursuing civil recovery have little to pursue. The money is gone, the operator has disappeared, and the importer is left holding the compliance liability. However, the problems for shippers are only beginning as CBP’s response to identified fraud does not end with a single shipment.

Importers flagged through DDP enforcement actions by CBP will likely face expanded audits covering years of prior entries. If it is determined that customs values were systematically understated, the retroactive duty liability can be substantial. Shippers may also find themselves subject to heightened scrutiny on future entries, which could result in additional financial penalties. Finally, having a compliance record flagged for duty evasion – even as an unwitting participant – will put a shipper on CBP’s radar for an indeterminate amount of time, affecting each shipment the company moves.

This is why working with an experienced and knowledgeable U.S. Customs broker is no longer optional – it is essential. A qualified Customs broker ensures that shipments are declared accurately, values are correct, tariffs are paid properly, and the importer of record is legitimate. Just as importantly, a good broker helps shippers identify red flags before cargo ever moves – keeping your supply chain moving freely, legally and safely. In the end, having a customs brokerage professional identify problems before a shipment moves is exponentially less costly than what happens if CBP identifies the problem first.

“A broker’s main role is to protect the importer,” said Robert Um, Global Head of OEC Groups Customs Brokerage Division. “In today’s enforcement environment, inexpensive DDP shipping can come at a very high cost. What started as a low-cost shipping option has become a major compliance liability – one that has caused real financial harm and long-term consequences for importers who believed they were simply getting a good deal.”