.png)
October 2022. A warehouse in Texas. An employee opens packages of finished furniture that have just cleared customs. Everything as usual — goods from China, DDP terms, the Chinese supplier took care of all transport and duties.
But something bothers him. The value declared on the customs documents is significantly lower than what the company pays the supplier. Significantly lower.
He picks up the phone and calls a lawyer.
A year later, Homestar North America LLC paid the U.S. Department of Justice $798,334 to settle a case concerning the deliberate undervaluation of goods imported from its Chinese parent company. The supplier issued two sets of invoices — one with the true value, and another, falsely lowered, intended solely for customs declaration purposes. Homestar benefited from lower duties and continued to place orders.
Homestar was not the importer of record. It did not file customs declarations. It did not falsify documents.
It paid almost $800,000.
Three letters that sound like a guarantee
DDP. Delivered Duty Paid.
In the world of Incoterms, this is a rule that looks ideal on paper, especially from the buyer's perspective. The seller arranges transport. The seller clears export. The seller pays ocean freight. The seller clears import. The seller pays duties and taxes. The seller delivers the goods to the specified address.
The buyer opens the warehouse door and receives the completed order. No documents, no customs clearance, no surprises. One price, one commitment, zero stress.
That's the theory; in practice, it looks different, with millions of dollars lost annually and, in extreme cases, the freedom of those managing imports.
Who is the real importer?
To understand the DDP trap, one must first understand the concept of: Importer of Record.
IOR is the entity legally responsible to customs authorities for the accuracy of the import declaration. It is the one who submits documents, declares customs value and country of origin, classifies goods under the correct tariff code, and pays the due duties. It is this entity that will face the consequences if something goes wrong in this process.
In a DDP transaction, the IOR should be the seller. After all, they took on the import clearance. But this is where the problem begins.
Foreign suppliers from Asia — Chinese, Vietnamese, Bangladeshi — very often cannot be the formal IOR in the USA or Europe because they lack a local legal entity, tax number, or required registration. To solve this problem, they use one of several methods: they establish a subsidiary, hire a customs agent, use a broker's services — or, more often, list the buyer as the IOR.
At this point, the formal structure of a DDP transaction diverges from legal reality. The buyer, who is not the Importer of Record (IOR) according to the contract, suddenly becomes the IOR according to customs documents. And all the IOR's obligations — including responsibility for the accuracy of declarations — become his responsibilities.
A separate complication of using DDP is VAT settlement: a foreign exporter without a tax representative in the importing country cannot settle it independently, and the buyer — since they are formally not a party to the import transaction — most often cannot deduct input VAT incurred during another party's clearance. The result: a tax that is neutral in a normal supply chain can become a cost in a DDP structure, which neither party can recover.
Three Cases, One Mechanism
Case One: The Disappearing Supplier. A US fabric importer buys from a Chinese supplier on DDP terms. For several months, everything goes smoothly. Then CBP blocks the shipment — unpaid duties after a tariff rate increase. The Chinese supplier collected the full DDP price and stopped answering calls. The warehouse charges storage fees. The importer pays the overdue duties himself to release the goods, and calls a lawyer. The lawyer's answer: recovering money from a Chinese company with no assets in the US is practically impossible. The importer loses once on duties, a second time on storage costs, and a third time on losses due to delays.
Case Two: The Double Invoice. Homestar North America imported furniture from its Chinese parent company. The scheme lasted four years: two sets of invoices — one with the true value for internal accounting, the other with an understated value for customs declarations. The incentive was the Section 301 tariff increase in 2018, which jumped to 25% for many furniture categories. A warehouse employee noticed the discrepancies and reported them. The DOJ initiated proceedings under the False Claims Act. Homestar paid $798,334 (case no. 4:21-cv-00148, E.D. Tex.). The whistleblower received a $151,000 reward. Homestar did not file customs documents, nor did it falsify invoices. It paid.
Case Three: A Verdict for Feigned Ignorance. Byer California imported apparel from a foreign supplier on DDP terms. The customs values were suspiciously low. Employees saw this. At one point, the supplier tried to bribe them to drop the issue. Byer dropped it. The DOJ initiated proceedings under the FCA. The company paid $325,000 and admitted that it failed to act despite having knowledge of the false declarations. There was no need to falsify documents. Ignoring warning signs was enough.
A Trap That Sets Itself
The DDP mechanism is designed in a way that makes the trap almost inevitable — at least for a buyer who doesn't ask questions.
First: The Buyer Doesn't See the Documents. In a DDP transaction, the seller or their agent files the customs documents. The buyer receives the goods. They don't see the customs declaration, the tariff code, or the declared value. They don't know if everything is in order — until US Customs comes knocking.
Second: A Price That's Too Good Is a Warning Sign. If a competitor offers DDP at a price that seems unrealistic given production costs, freight, and standard customs duties — they probably aren't paying duties in full. The duties are their 'savings'. And your legal exposure.
Third: Customs Liability Is Non-Transferable. You can write in the contract that the seller is responsible for duties. You can get a written assurance from them. You can have an email where they confirm payment of all dues. None of these documents will absolve you of responsibility towards customs authorities if duties have not been paid correctly. A customs officer doesn't read your contracts — they collect payment from the entity legally obligated to pay it.
Fourth: There Is No Shield, Only the Illusion of a Shield. This is exactly the pattern we saw with EXW in Dark Stories #3. Three letters on an invoice that sound like full protection — but which are in reality just an agreement between parties, not binding on customs authorities, courts, or liquidators.
Why This Is More Important Now Than Ever
From 2018, the United States gradually increased tariffs on goods from China under the so-called Section 301 tariffs — first to 25%, and by 2025, with escalation under the Trump administration, rates for many categories of Chinese products reached 145% or more.
At such levels, the incentive to evade duties is enormous. A single container of electronics worth $100,000 can generate $145,000 in duties. A seller offering DDP "without a problem" almost always does so at the expense of something — either by sourcing goods outside China, falsifying documents, or using illegal transshipment through third countries.
The DOJ and CBP openly admit that DDP transactions are treated as a high-risk category. In fiscal year 2025, the Department of Justice established a special Trade Fraud Task Force, focusing on prosecuting customs fraud and import undervaluation. In the same year, FCA recoveries from customs fraud exceeded tens of millions of dollars.
For Polish importers purchasing from Asia on DDP terms — including for trade within the EU, where the mechanism is analogous though based on different regulations — the risk is real and growing. Customs authorities are not concerned with what the contract between the buyer and the Chinese seller states. They are interested in who is designated as the importer on the customs declaration and whether duties have been paid correctly.
What you should check now
If your company imports on DDP terms, three questions require immediate answers:
First: who is the formal importer in the customs documents? Request a copy of the customs entry summary (CBP Form 7501 in the US or SAD/H1 declaration in the EU). If your company is listed as the importer — and not the supplier or their agent — you are formally responsible for the accuracy of the entire declaration.
Second: does the declared value match the price you actually pay? Compare the value on the commercial invoice with the value on the customs documents. If there are discrepancies — you have a problem that you need to understand and document. Ignoring discrepancies is precisely what the court in the Byer California case deemed a basis for liability.
Third: is the DDP price realistic given current customs rates? Calculate it yourself: the value of the goods plus sea freight plus applicable duty according to the official tariff rate. If the DDP price from the supplier is lower than this sum — someone somewhere is not paying full duties. And there's a high probability that, from a legal standpoint, that someone is you.
Summary
DDP is an Incoterm that sells itself on convenience. "You don't have to worry about anything — we deliver it ready."
The irony of DDP is that the more convenient it is to use, the greater the risk hidden beneath. Convenience stems from a lack of control. A lack of control means a lack of awareness. And in customs law, unawareness is not a mitigating circumstance — it is the definition of negligence.
The ruling in the Trek Leather case stated it plainly: if you benefited from a transaction and should have known that its parameters were incorrect — you are liable. Regardless of whether you were the formal importer or not.
DDP can only be a shield if you know exactly what is written in every customs document for your shipments. And when you have a written guarantee that the supplier will bear the consequences of their own declarations — in a jurisdiction where you are able to enforce that guarantee.
OUR PREVIOUS PUBLICATIONS FROM THE "DARK STORIES" SERIES
- Why do we need FOB? - dark stories #1
- Really CIF? - dark stories #2
- EXW my shield? - dark stories #3
- Ticking time bomb in cargo hold number 4 - dark stories #4
- Copper or not to have? - dark stories #5
- Your container is intact. You'll pay anyway - Dark Stories #6
Sources:
Dark Stories is a series based on real events, judgments, and court records. Cases discussed: U.S. ex rel. Larry J. Edwards, Jr. v. Homestar North America, LLC, case no. 4:21-cv-00148 (E.D. Tex.), settlement announced November 13, 2023 — DOJ Press Release; United States v. Trek Leather, Inc. and Harish Shadadpuri, 767 F.3d 1288 (Fed. Cir. 2014), en banc judgment of September 16, 2014; Byer California case — DOJ settlement under False Claims Act (U.S. ex rel. Patrick v. Byer California, announced by DOJ March 26, 2019). Fabric importer scenario from: Harris Sliwoski LLP, "Buyer Beware: The Hidden Risks of Unpaid Tariffs Under DDP". IOR liability mechanism from: 19 CFR § 141.1 (eCFR). Context of FCA enforcement in DDP transactions: StoneTurn / NYU Law "Beware the Tariff DDP Trap" (2025); DOJ FY2025 False Claims Act Report.