Sunday, 30 January 2011

DDP shipments - product liability issues

It has been reported that during a recent ICC Masterclass on the Incoterms 2010 set the question of using DDP came up in discussion. We have a list of warnings about using DDP for both a seller and a buyer but this was a new one - product liability. To quote: They did mention that seller's should consider under DDP that as "proper importer" you might have product liability insurance issues in other countries that one might otherwise not be aware of.

Not being lawyers or experienced with product liability, we can see that this is something to consider but do wonder how it would be enforced - ie: product liability being placed in a country outside the authorities normal jurisdiction. How would someone in the buyer's country go about enforcing that product liability matter? We suppose this could work because of the need to be registered as an importer (EORI in the EU). Like lots of contractual things product liability is actually outside the scope of Incoterms.

Other concerns relating to DDP are:
1. Can the seller act as importer in an overseas country? Many countries, including the EU, have a registration system for importers (EU one is called EORI) and import entries must have a valid EORI before they can be made.
2. Paying local taxes, eg VAT - if the seller is not registered for the local tax scheme then, at best, it will take a long time for them to recover their money but normally they will never be able to recover it.
3. DDP named place excluding local taxes (eg VAT) - though this is acceptable under Incoterms 2010 in practice it either means the buyer getting involved in customs issues (which they obviously didn't really want to do or they won't buy DDP) or the seller/ freight company "using" the buyer's VAT/tax ID ... I once heard this called "technically illegal" by a customs officer.
4. Customs duties - for sellers: can you be sure you know the correct amount and recover it from the buyer? for buyers: how do you know the seller is paying the right amount and that you couldn't have used a procedure that meant no duty paid?
5. "Legal importer" - if seller's are not set up in the receiving country and use the buyer's details then the buyer becomes the legal importer and is therefore legally responsible for everything, including errors made on import entries by freight companies they have no control over.

I could go on, but I won't.

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