DDP Canada Cargo

At the root of every commercial sale is Incoterms.   Know them and your sale as well as your shipment has one of the vital blueprints in place.  It’s not rocket science but well worth knowing.

DDP, Delivered Duty Paid (named place) is one of the most well used incoterms for companies that are seeking to place their products in overseas location to buyers who do not want to have anything to do with the transportation and customs clearance of that product.

Setting this up right however can be a bit tricky and there are several points to consider.

Sales Tax , GST, VAT etc is not included in DDP terms and is for the account of the buyer. If your buyer is not set up in their own country for direct payment to their own government for these taxes, then the shipment will be held until the payment is made in cash or bank draft to the clearing agent, who should but does not have to be the carrier. The delay then not only annoys the buyer, but storage charges may occur, creating extra costs for the buyer to obtain their product. If the buyer is a regular importer with many suppliers, their direct account with the Customs agency and/or customs broker  is already set up, however they are not as likely to buy on DDP terms unless the seller is inflexible. 

Many international companies therefore elect to pay the sales tax as well to ensure that the goods move smoothly to destination. To do this, they will need to set up a non-resident importer account directly with the government agency. This is quite simple to do but is necessary in order to handle the quarterly GST report. Even if sales tax is for the account of the buyer, you will still need an importer number but not necessarily a non resident’s GST account. This can be set up by yourself or your carrier can apply on your behalf on the first import. 

You will need an international freight forwarder that has a regular service to Canada, their own brand offices as a forwarder and customs broker and set up an account with them. Ensure you as for sufficient credit to cover several DDP transactions. Obtain a quotation from  Door to Door including all freight costs, customs brokerage fee, the HS code, duty rate, any excise taxes, GST before signing on, so that you have an accurate costing factor.

 In Canada and US, a customs broker requires a General Agency Agreement e.g. Power of Attorney to appoint a customs clearance agency, to be signed by the importer, in order for them to effect the clearance. In addition, you will have to sign an agreement to keep records in Canada but do not be dismayed as most agents will do this for you for a small fee. Complete this before despatching any cargo. If this is not done, then the clearing agent will have to contact your buyer to obtain a signed GAA. This will definately delay delivery and /or your buying agent may want to use their own customs broker and bill you throught your carrier. This would not be a good idea since the 3rd party broker can very well use the wrong duty rate and bill you whatever they want.

Your Canada Customs Invoice should be written in such a way that is clear and concise and does not cause you to pay duty on the duty and tax on the tax. Even though the terms are DDP, Canadian duty and tax is payable on the FOB or Ex Works value of the goods, so ensure that the amount of duty, freight and tax if included is clearly shown. The checklist is below:

• Show yourself as the importer /consignee on your commercial invoice and Canada Customs invoice. This can be done by placing your company name, location c/o either your appointed carrier or your buyer.
• no of units, price per unit, description of the goods
• Importers number
• HS Codes for each commodity
• Terms of Sale
• Discounts if any
• Total Gross weight and volume
• no. of pallets and cartons
• Exact amount of duty included in the price
• Exact amount of Freight included in the price
• Exact amount of Tax included in the price
• Delivery name and address of the final destination 

 As a courtesy to your buyer, always ensure that the details of the shipment, e.g.  no. of pcs, weight/volume, vessel or flight no., oceanbill  lading number or house airwaybill, truck bill number ,ETD and ETA as well as the name/address/telephone number of the destination agent is communicated to the buyer at the time of despatch directly from yourself.   This will assure the buyer that their cargo is on it’s way, who is carrying it, and whom to contact if they want to trace it.    After all, as a DDP seller, the carrier selection and mode of transport is yours to determine and the buyer will see the seller as a professional company that  is well worth doing business with.

Gloria Rubaine

Second Review Business Analysts