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Sellers subject to the Trump administration’s tariff regime are allegedly engaging in criminality in an effort to reduce the hit from the new duties.
Flexport president Sanne Manders told The Loadstar there had been increasing instances where sellers are offering a value proposition to buyers in which they amend the incoterms from ‘free on board’ (FOB) to ‘delivered duties paid’ (DDP) to halve the rate of the tariff.
Mr Manders said that under FOB, the seller is absolved of responsibility for transport, duties, and customs costs, leaving this in the hands of the buyer.
Under DPP, the seller retains responsibility for the good until delivery, meaning they cover the costs and assume liability for transport, duties, and customs fees, leaving open an opportunity to declare the value of the good at a lower rate, before selling at a higher value.
“This is illegal, as you need to import at the agreed commercial invoice (CI) value, and pay duties on that amount,” said Mr Manders.
“Before 2025 this was not much of an issue as duty rates were low, so the DDP arbitrage had limited upside. Now it has lots of upside, so importers are considering this and exporters are selling this value proposition.”
To exemplify this, per FOB, a seller sells for $100 CI to the buyer, costing the buyer $100 on the good, $5 on logistics and an illustrative tariff rate of 25%, for a total landed cost of $130.
Per DDP, the seller sets the CI at $50, reduce the dollar duty rate to $12.50, on top of this they pay $5 on the logistics and thereafter sell the good to the buyer at the agreed upon $100, for a total cost of £117.50, saving the buyer $12.50 per unit.
“The seller is liable, but as a foreign importer of record (IOR) it is hard for US Customs to go after them, because they can just liquidate their foreign IOR,” Mr Manders continued.
“As such, nobody ends up paying a large penalty or in jail. Customs will, as a next step, go after the buyer, but there have been very limited cases where this has been done – there was not all that much of a need because it didn’t happen.
“The conclusion of buyers is that they do not run much risk, because they are technically not the IOR and are a degree of separation away from it by just being a buyer.”
Asked what sort of response this would provoke from US authorities, Mr Manders said he expected US Customs and Border Protection (CBP) to crack down and “start to enforce this really hard, because it is an obvious (illegal) loophole to avoid duties”.
One way of doing this, he said, would be to require higher bonds, leaving open the possibility for CBP to pursue the surety companies that provide the bonds to get repaid on duties.
He also suggested that it was likely that Customs would go directly after importers that are complicit in this scheme, adding “something will happen, otherwise the whole market will move to DDP and raising duties makes no sense”.
Nor does this appear to be the only scheme developed to avoid full duty rates levelled at some 90 countries by the Trump administration.
A shipper source said they were aware of sellers removing transport, duties and customs costs from FOB valuations on commercial invoices to reduce the full value of the good for the purpose of calculating duties owed.
“This is not actually illegal, as long as you state that this is the FOB value,” the shipper told The Loadstar. “On top of which, if you ship goods under FOB, the seller will not have any information related to these costs, as the seller did not organise the transport, nor the process of going through customs.”
Sources warned that while forwarders would not be implicated or liable in the case of the schemes uncovered by The Loadstar, customs brokers would.
Mr Manders added: “What we see is that the overseas suppliers use customs brokers that are willing to play this cheating game. And those are typically like LLCs that fold very quickly. They spin up, and then they fold very quickly.”
Comment on this article
Alexander Kozij
October 07, 2025 at 4:13 amThis article does a poor job of articulating the legal ways this is actually done.
Failure to understand the legal ways and focus on the illegal ways. Prevents companies from understanding why they are losing business. And it gives them the impression that by waiting out for the illegal ways to be clamped down, one day get back things to ‘normal’.
A Chinese factory can set up a USA legal entity for less then $2K through a lawyer.
A Chinese factory can legally bring in their goods under their own USA EIN at their factory costs. Their legal obligation to customs is to comply to the HS Code ‘cost range’ of what the product they import to the USA must/can be.
The Chinese factory under DDP terms can build into their pricing whatever number they feel is necessary to cover their import costs. Which will be lower than a USA business (because they are importing at their cost, from their Chinese entity to the their USA entity. And their USA entity can be ‘responsible’ for ‘delivering’ the product to their final USA customer.
This what all muti-nationals have done for decades, and what they have known to always do.
Although this was a nice to have during normal trade conditions. This less then $2K expenditure has now become a requirement for survival.
A USA importer, can easily cover $2K to persuade their Chinese supplier to set up a USA corporation, in order to make their ongoing trade conditions as optimal as possible.
It is this very frame work, that creates more advantages conditions for all overseas E-commerce sellers, selling in the USA have.