I’m sorry but this just shows CBP’s lack of understanding on how a supply chain really works using different Incoterms. Under a common DDP scenario the U.S. party making the purchase is not the IOR for CBP purposes; they are however the “Ultimate Consignee” in the transaction. In this role as a DDP purchaser and Ultimate Consignee the company has little or absolutely no control over the vendor/supplier, origin drayage or forwarding, carrier selection or U.S. customs broker.
While CBP has privately indicated their distaste for DDP shipments, they are completely legal and frequently used by many U.S. companies. Personally, I also dislike DDP shipments because I would rather have that freight moving in our transportation program to potentially get better rates and more visibility. I also believe that DDP shipments are significantly more expensive than a direct purchase. But that’s just me; today many companies can make a good business case for purchasing foreign product on a DDP basis. So, in the case of a DDP purchase, the U.S. company simply issues a Purchase Order typically to a middle man who will relay that order to the factory or supplier. In many cases the name of the factory used is a closely guarded secret and the middle man will not share such information fearing circumvention. Likewise, the origin factory or supplier has no relationship with the U.S. DDP Purchaser; so it is very unlikely they will cooperate or agree to a CBP Validation. The U.S. DDP purchaser is blind not only to the factory, but to all other carriers and service providers in the transaction. It is unfair and unreasonable then for CBP to put pressure on DDP purchasers to include DDP shipments in their C-TPAT program. C-TPAT participants should only be held accountable for shipments that they are the IOR for and can control. Conversely, when a U.S. company purchases foreign goods using a Free Carrier (FCA) or Freight on Board (FOB) Incoterm, that U.S. company has full control over the selection of all business partners.
At the end of the day C-TPAT is a “partnership” program in the very complex world of global trade. The CBP SCSS needs to be more reasonable and better trained on selecting overseas factories for Validation. C-TPAT participants may also use this opportunity to review your company’s DDP purchases and consider converting some to FCA/FOB for better control and savings.
If you’d like to discuss good reasons and methodologies for converting your company to FCA/FOB purchases or any other aspect of the C-TPAT program, we invite you to contact us at email@example.com. To view our upcoming webinars on C-TPAT please follow this link: Global Training C-TPAT Webinars
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