The solution is not to avoid DDP altogether, but to establish robust contractual protections, effective oversight controls, and data-driven monitoring. This article unpacks the hidden risks and offers a roadmap for mitigating them. We begin with background on DDPs, Importer of Record (IOR) role and responsibilities, and reasons DDP attract DOJ, CBP, and FCA relators’ scrutiny.  The article follows with ten practical steps DDP buyers should take to mitigate financial, legal, and reputational risks.

What Are DDP Transactions?

Delivered Duty Paid is one of several Incoterms®, internationally recognized shorthand references to contract terms that define the responsibilities of buyers and sellers in cross-border trade, specifying who handles transportation, insurance, customs clearance, and the risk of loss.

Suppliers market DDPs as a turnkey import solution. The supplier arranges logistics, pays shipping costs, prepares and files Customs Border Protection (CBP) documents, calculates the tariff, and pays the duty.

But don’t confuse convenience with compliance. It is the buyer left holding the bag when the supplier submits false information and underpays tariffs, particularly when the DDP designates the buyer as the Importer of Record (IOR). Importers must stay vigilant because regulatory liability remains firmly with them, regardless of who handles logistics or even physically pays duties.

What and Who is the IOR ?

The Importer of Record (IOR) is the owner, purchaser, or designated licensed customs broker of imported goods and the person or entity legally responsible for ensuring that imported goods comply with all customs-related laws and regulations. IOR responsibilities include filing entry documents, declaring tariff classification, value and country of origin, paying duties and maintaining import records.

In DDP transactions, the seller conducts these activities and presumably should be the IOR. However, foreign suppliers often do not qualify because IORs must be a U.S. company, an individual resident, a U.S. subsidiary of a foreign supplier, or a licensed customs broker (LCB) acting on behalf of the supplier or buyer.

What are the Consequences of Being (And Not Being) the IOR?

Buyers can be held accountable as the ultimate beneficiary of a DDP transaction. Buyers in these circumstances are particularly vulnerable to suppliers applying lower-tariff Harmonized Tariff Schedule (HTS) codes, submitting false country-of-origin claims, and undervaluing the imported goods.

The CBP doesn’t care who paid the duty — it assigns the importer of record accountability for tariff miscalculations and unpaid duties. Nor is anyone found accountable left off the hook for not knowing. Negligence alone can result in significant CBP penalties for accountable buyers: twice the revenue loss or 20% of the value of goods for ordinary negligence, and four times the revenue loss or 40% of the value for gross negligence.

Ultimate buyers are not insulated from regulatory scrutiny or enforcement risk. Buyers who know the truth or agree to falsify information may face criminal prosecution and FCA claims. In other words, looking the other way does not help. The DOJ has made clear that ultimate buyers can be held accountable.

Why Do DDP Transactions Attract Government and FCA Relator Scrutiny?

CBP and DOJ  have stated publicly that DDP transactions pose inherently high risk arising from the disconnect between the seller controlling the information and calculations relating to tariffs and the ultimate importer remaining  responsible for the accuracy of customs declarations, classification, and tariff payments.

This disconnect between the seller and buyer creates fertile ground for fraud: undervaluation, misclassification, false country-of-origin claims, and duty underpayment. Ultimate importers often don’t see the paperwork or filings, which creates a blind spot that CBP has stated can equate to failing to exercise ‘reasonable care.’

From the government’s perspective, DDP transactions are red flags. They combine hidden compliance risks, lost revenue exposure, and a frequent misconception by importers that liability has been shifted to the seller. That combination makes them a natural focus for audits, investigations, and enforcement actions.

What Practical Steps Should Buyers Take to Mitigate DDP Liability?

Purchasing goods through DDP transactions carries a high likelihood of a CBP audit and increases exposure to FCA whistleblower allegations and related DOJ investigation. Here are ten practical suggestions.

1. Assess & Test the Tariff Management Program. Given the government’s current priorities, companies that regularly purchase foreign goods should assess their tariff management program against a universally accepted management system, such as a COSO controls framework. Be sure to test operating effectiveness (i.e., how controls work in practice and the competency of individuals performing the controls).
2. Identify and Assess DDP Transaction Risks. Tariff risk assessment is the foundation of strong controls. The process is straightforward: (i) identify reasonably likely schemes and scenarios, (ii) link mitigating preventive and detective controls, (iii) assess residual risk, (iv) develop and execute a risk response for out-of-appetite risks, and (v) document the company’s good faith efforts.
3. Be Aware of DDP Fraud Red Flags and Controls. DDP fraud schemes may involve misclassification of goods, undervaluation/transfer pricing games, false country-of-origin declarations, improper use of duty relief programs (e.g., duty/drawback, first-sale, bonded warehouses), invoice/recordkeeping fraud (e.g., “off-books” invoicing) and failure to remit collected duties to CBP. Each scheme comes with a set of red flags to watch for, along with controls designed to prevent and quickly detect misconduct. More generally, be wary of “too good to be true” prices.
4. Avoid Serving as the IOR. Asking the buyer to be the IOR in a DDP transaction is a red flag in itself. Foreign-based suppliers can serve as the IOR by establishing a U.S. subsidiary and employing a licensed customs broker as their agent.
5. Meet CBP “Reasonable Care” Expectations. The Customs Modernization Act expressly places the duty of reasonable care on IORs. The CBP has issued guidance for meeting reasonable care expectations. The guidance is in the form of questions, not a checklist. To avoid running afoul, non-IORs follow the guidance even though it does not technically apply to them.
6. Demand Compliance and Indemnification Clauses in Contracts. Secure representations and warranties that the seller will comply with U.S. customs laws, pay duties, and maintain accurate documentation. Obtain indemnities requiring the seller to cover any duties, penalties, or damages arising from false or erroneous declarations, tariff calculations, and payment of duties.
7. Know Your Supplier and Supplier’s Broker. Conduct investigative diligence of suppliers and their brokers just as banks follow “know your customer” rules. Consider the need for on-the-ground resources for vetting suppliers from high-risk markets. Also consider financial diligence if the contract includes indemnification or a right of return.
8. Obtain Pre-Import CBP Rulings Where Issues are Ambiguous or Questionable. Require the supplier to seek a binding pre-import ruling from CBP’s Office of Regulations and Rulings (ORR) for ambiguous or questionable issues regarding, among other topics, tariff classification, valuation, country of origin, import marking requirements, and trade agreement eligibility.
9. Train Procurement, Compliance, Finance/Accounting, and Legal Teams. Ensure buyers, compliance officers, in-house lawyers, and supply chain managers understand DDP risks and red flags.
10. Consider Escalation and Voluntary Disclosure. Consult with counsel about the pros and cons of self-disclosure if the company becomes aware or suspects misstatements or misconduct. At a minimum, conduct a root cause analysis and implement remedial measures to prevent recurrence.

DDP transactions are not inherently unlawful, but they are inherently risky. The key is not avoidance but proactive management. The path forward is clear. Build strong contracts. Vet suppliers and brokers. Train procurement, compliance and legal teams. Seek CBP rulings where doubt exists. And when problems arise, consider self-disclosure and take remedial action. By embedding these practices, companies can mitigate hidden dangers with DDPs and replace them with predictable, controllable trade outcomes—protecting financial, legal, and reputational interests before risks take root.

Reach out to Jonny Frank or Jerry McAdams to discuss these topics and how StoneTurn can help.

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