DELIVERED DUTY PAID (DDP) TRANSACTIONS
A new Australian Customs and Border Protection Notice provides general guidance on delivered duty paid (DDP) transactions for the purposes of the Customs Act and the GST Act. Section 68 of the Customs Act requires goods that are imported into Australia to be entered for home consumption or for warehousing by the owner of the goods. Section 4 of the Customs Act defines “owner” in relation to goods as:
… any person (other than an officer of Customs) being or holding
himself or herself out to be the owner, importer, exporter, consignee,
agent, or person possessed of, or beneficially interested in, or having
any control of, or power of disposition over the goods.
In a DDP transaction, both the overseas seller/supplier and the Australian purchaser/consignee are “the owner”. Either could enter the goods for home consumption under the Customs Act. However, in a DDP transaction it will usually be the overseas supplier that does.
Under the GST Act, GST is payable on an importation of goods into Australia where
the importation is a taxable importation. In the case of a DDP transaction, the overseas supplier makes the creditable importation and may be entitled to an input tax credit on GST paid on the taxable importation. The overseas supplier will need to be registered for GST in order to claim an input tax credit. In summary, both the parties to a DDP transaction, and any broker or carrier that makes an entry or a SAC to the Australian Customs and Border Protection Service (ACBPS) in relation to that transaction must retain commercial documents for five years. It is an offence to not retain commercial documents. In a DDP transaction, the ACBPS may seek commercial documentation from:
- the overseas supplier;
- the Australian buyer, and/or
- any customs broker or carrier that lodged an entry or a SAC with the ACBPS in relation to that transaction.
It is an offence to fail to produce commercial documents to an authorised officer when required to do so. ACBPS has statutory responsibilities to pursue the recovery of debts, unless it is uneconomical to do so. It is often very difficult and uneconomical to recover debts
from overseas suppliers. It is therefore likely that where duty has been short-paid or entirely evaded by an overseas supplier in a DDP transaction, the ACBPS will seek to recover the duty by issuing a demand against the Australian buyer of the goods. That possibility should, therefore, be taken into account by any Australian buyer before entering into a DDP transaction.