As fashion companies continue to navigate the fallout from ongoing trade tensions, Delivered Duty Paid (DDP) has become a go-to strategy for brands hoping to shield themselves from the volatility of shifting tariffs. On the surface, the approach seems appealing: suppliers take on responsibility for duties and customs paperwork, while importers sidestep the day-to-day risks of tariff spikes. But in today’s enforcement-heavy climate, that perceived safety net may come with hidden dangers.
Government agencies are cracking down on creative invoicing, under-valuation, and misclassification, with a clear mandate to maximize duty collection. For fashion executives, that means DDP is no longer just a logistical choice—it’s a potential compliance trap. From supply chain disruptions to legal exposure, the risks are real, and companies that fail to dig deeper into their sourcing practices may find themselves caught in the government’s widening net.
The following conversation took place during the Hertzman Global Intelligence call on September 11, “DDP & Other Risky Activities,” hosted by HGI founder Edward Hertzman. Panelists Nicole Bivens Collinson, managing principal, Sandler, Travis & Rosenberg, P.A.; and Vincent Iacopella, president of government and trade relations, Alba Wheels Up, broke down why enforcement is priority No. 1 in Washington and what that means for apparel companies doing business in the U.S.
Watch the full video here.
Edward Hertzman: The U.S. trade war has companies looking for ways to reduce their tariff bills, but too often, the numbers aren’t adding up. The concept of fraud is not new, but why is there such a focus on this now, and why is the government looking into DDP, Delivered Duty Paid in particular?
Nicole Bivens Collinson: People are being very creative in how they are structuring their sales and their transactions, and the documentation that they are using when they submit it to customs. A lot of the importers, because they don’t want to have to be the ones who are responsible for these additional duties, have switched their incoterms with their suppliers to a delivered duty paid, DDP.
The problem with that is that while you are absolving yourself of the risks of the tariff going from 7% to 70% overnight. Or you’re absolving yourself of the interaction with customs, as far as if there’s any illegalities, you’re not absolving yourself of what are the potential consequences.
So, let’s say that I say I’m going to do DDP because I don’t want to have to deal with all this stuff, I’m going to let my provider do it. Well, they start bringing in the goods, and they’re using these new terms, and it was $10 in March and it’s $10 in August. How is that happening when we’ve seen tariffs go up exponentially?
Are they using First Sale? Well, I think those in the apparel and footwear business know very well that the margins are this big, and there’s not a 40% margin in there. There’s not a 30% margin. There’s not a 20% margin. So how are they calculating that price if they’re not using legitimate mechanisms like the First Sale to get that in?
And we have seen instances where they issue one invoice that is for the cost of goods, and another invoice for their services. That’s not legal. You cannot do that, and we need to make sure people understand it.
And why is there such a focus on this right now? Because it’s more important than ever that these duties be collected. I think you’re seeing regularly our president bringing to the attention of everyone, ‘we’ve collected X amount of duties today, or today we’ve got this amount of duties.’ They’re using this money that they’re bringing in to help offset the deficit, quite honestly. We’ve never seen that. We’re seeing that now, and as a result, the instructions from the top, from the president, are enforcement. Enforcement, enforcement, enforcement. Collect the duties.
If you look at his executive orders that he’s issued on so many different things, there is a paragraph that says, ‘and I’m instructing the Department of Homeland Security and Customs and Border Protection to implement and enforce this provision to the fullest extent of the law.’ In other words, throw the book at them. If you catch them, if you can do triple damages, do triple. If you can reject the merchandise, reject the merchandise. But use the most stiff penalties that are currently within your regulations to address these fraudsters.
And so, from that point of view, that’s why they’re looking at DDP. If suddenly you switched and you’re [doing it], they’re going to be looking at your shipments, and while you might not be caught today, you’re going to be caught tomorrow. And for you, while you’ve absolved yourself of some of this other risk that I talked about, the risk is if [you] get caught, you don’t get your goods.
“There always was liability outside the importer of record. What’s different now is the focus on revenue and the enforcement.”
—Vincent Iacopella, Alba Wheels Up
EH: Vince, can you clarify for us who exactly is responsible and liable for the goods imported into the country using DDP? Is the importer of record the only one with the exposure here?
Vincent Iacopella: So, the importer of record is by far overwhelmingly responsible for valuation, classification, payment of duties. And by the way, this is not new. If you go back to the old ‘right to make entry’ days, 15 years ago, you go back to all the intellectual property rights violations, there was a lot of talk about moving to DDP to reduce those risks, and even back then there were parties with financial interest—whether it be the retailer or a buyer in the United States—that had liability.
The question then, and I think now, is what’s the extent of the liability? So, only the importer of record can get penalties on duties, or related to duties. But other parties with financial interest are liable. There’s 19 USC 1592. So, there’s definitely liability out there.
I also think, the climate has changed. It’s very revenue-focused. I think that ties to a lot of scrutiny on country of origin and valuation and anything that ties to revenue and enforcement, and then the third pillar of the stool is national security, which I think is right. So, short answer is, there always was liability outside the importer of record. What’s different now, I think, is the focus on revenue and the enforcement.
And I’ll finish with this. We actually have customers, or people we deal with, or buyers, that don’t even want to be part of DDP. They want to buy from a U.S. version of that factory, almost domestically, and not even be the ultimate consignee.
EH: I recently gave a speech in Vegas on this topic, and I had a line of people after asking me this exact same thing: ‘How can we be sure that we’re doing the right thing if we’re working on a DDP basis? How do I know that $10 is being invoiced properly and I’m playing the proper duty?’
VI: On the DDP, I’ll just use a UFLPA analogy. If you go to DDP and it gets stuck and it’s not compliant, you’re not getting to market. So, it’s not only an issue about compliance, it’s also a supply chain disruption issue. That’s one thing to be careful about DDP.
The second thing is that, increasingly you’re going to have to know your chain if you’re responsible. So [DDP] doesn’t absolve you from knowing a lot of the things that determine classification, that determine value, that determine if we go to transshipment and we have regional content versus Chinese content in Vietnam, it’s going to trigger a higher duty rate. So, it’s not a silver bullet. I understand why people are doing it but I think that all the parties, whether you’re the DDP importer subject to it, will have to de-risk and know definitely past the first tier. To Nicole’s point—she mentioned it about value, but I’m talking about risk—it’s not enough just to know the seller in many of these environments now. I think that might be why you see a lot of foreign companies that don’t have U.S. companies standing up companies in the United States and California to open new importers.
EH: The question brings two things to light. There’s two different ways this could be happening. I get a quote from Vince Apparel and Nicole Apparel, and you’re both giving me a quote of $8.50. I decide I like Nicole better, then I buy from you. But little do I know that that $6 jean you’ve invoiced at $4, because that’s how you’re going to make your margin. And now I’m potentially under-invoicing. That’s one way it could happen, I think that’s what the question is.
But there’s another instance where, ‘Hey. Nicole, I need this for $850.’ ‘But Eddie, the price is now $950.’ ‘Nicole, if you don’t give it to me at $850, you lose the business.’ I turn my head, next thing you know, you do it, and we all know how you got there.
I think the government and the law doesn’t really care. They’re both illegal activities. One, you are conspiring in, and the other one you are just, unfortunately, falling into. Is there a difference in that, though?
NBC: This might be a little bit of the mafia rule that I have, which is, ‘Hey, Eddie, see that bank over there? There’s $10 million in that bank. I don’t think they should have $10 million.’ And then you go and you rob the bank, and you bring that $10 million to me. Did I ask you to do that? Did I cause you to do that? I benefited from it. Am I responsible? I didn’t do it. I didn’t break in. So is it really my fault? That’s what some importers are doing, I feel, when they’re going into DDP. They may be saying, ‘Those pants, I need them at $8.50. I’ve got to have them at 8.50. Bring them in at 8.50.’ Am I culpable? No, I’m not the importer of record.
The only entity that Customs has the ability to go after with respect to fines and penalties or jail time, if they have to, is the importer of record. And if you are a non-resident importer of record, it’s kind of easy to not be here when they come knocking at the door.
VI: To feed off Nicole’s example, so even if you’re doing the right thing on DDP, I think whatever scenario where your old value was here, and your new value is here, even legitimately, there’s going to be scrutiny. And there’s AI now, there’s automated tools, you don’t have to rely on operators to make these analyses. I think anywhere where revenue goes down because the value went down, or there was a change in classification, or you make a statement that I don’t have Chinese inputs on my blouses in Vietnam, even though that’s not a rule yet I think anywhere that happens that results in a reduction of revenue, it’s going to be scrutinized.
