U.S. tariffs evasion tactic employed by China revealed.
Chinese Companies Outsmart Tariffs with Delivered Duty Paid Scheme
In a crafty move, Chinese manufacturers are utilizing a novel tactic to evade U.S. President Donald Trump's tariffs. This evasion strategy involves undercutting prices and manipulating product descriptions, fittingly termed DDP, or delivered duty paid. This scheme was uncovered by Financial Times after logistics corporations exposed it while working with Chinese exporters.
Under DDP, the seller shoulders the entire expense of customs clearance, tariffs, taxes, and logistics until the goods reach the buyer's specified location. This clever ruse allows factories in China to understate the value of goods and alter their descriptions, thereby skirting around the full tariff amount.
The financial implications of this scheme for Chinese sellers are twofold. On one hand, they shoulder the impact of hefty tariffs upfront (such as Section 301 tariffs), customs duties, VAT/GST, and compliance costs. On the other hand, to preserve their profit margins, sellers might opt to pass these expensive costs onto buyers via inflated product prices. However, this strategy may jeopardize their competitiveness.
When it comes to risk and compliance, DDP requires Chinese sellers to navigate complex U.S. customs regulations, including accurate HS code classification and duty valuation. It's worth noting that shipments exceeding the $800 de minimis threshold necessitate full compliance to avoid tariffs, which isn't always the case with lower-value shipments.
DDP also poses operational challenges, like straining cash flow due to the need to prepay tariffs and duties, particularly for high-volume shipments or goods subjected to high tariffs. Additionally, managing end-to-end shipping, clearance, and last-mile delivery increases administrative burdens and potential delays.
In contrast, DAP (delivered at place) and DDU (delivered duty unpaid) schemes place tariff-related financial and operational risks on the buyer, offering Chinese companies an alternative way to operate in the U.S. market but with a different set of advantages and disadvantages.
Beijing, Zoya OskolkovaApril 2, 2025, RIA "Novy Day"
Chinese manufacturers in Beijing commit to bypassing President Donald Trump's tariffs through the deployment of the DDP (delivered duty paid) scheme. This strategy, uncovered by Financial Times, allows Chinese exporters to dodge tariffs by understating the value of goods and manipulating product descriptions.
This tactic necessitates Chinese sellers to shoulder the cost of customs clearance, tariffs, taxes, and logistics until the goods reach the buyer's specified location. However, these costs may subsequently be passed onto buyers through inflated product prices, potentially impacting business competitiveness.
Operational challenges arise due to the need to prepay tariffs and duties, particularly for high-volume shipments or goods subjected to high tariffs. Additionally, managing end-to-end shipping, clearance, and last-mile delivery increases administrative burdens and potential delays.
In general-news, such practices highlight the intricate dance between business, politics, and finance, as Chinese companies continually seek innovative ways to circumvent tariffs in the volatile global trade landscape.
The implementation of DDP also necessitates compliance with complex U.S. customs regulations, including accurate HS code classification and duty valuation. Shipments exceeding the $800 de minimis threshold require full compliance to avoid tariffs, posing a risk for non-compliance.
On the other hand, DAP (delivered at place) and DDU (delivered duty unpaid) schemes distribute the tariff-related financial and operational risks to the buyer, offering Chinese companies an alternative route to the U.S. market, but with its own advantages and disadvantages.
