DDP transactions – Who is responsible for duty?

DDP transactions – Who is responsible for duty?

Melissa McCosker, Customs & Excise Specialist, discusses DDP transactions and liability for customs duty.

Director, Tax

KPMG Australia


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In late April, the Department of Immigration and Border Protection (Customs) released two draft notices, outlining its opinion on Incoterms 2010 Delivered Duty Paid (DDP) transactions and the liability for customs duty, revenue recovery and duty demands.

Who is the 'Owner'?

For Australian customs purposes, the definition of ‘Owner’ in the Customs Act 1901 is broad and includes:

“… 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.”

Customs, as outlined in a previously issued notice, is of the view that either a foreign supplier or Australian purchaser could be identified as the ‘Owner’ in a DDP transaction. While the supplier would generally make an import entry under the proper application of DDP terms, either could be issued a demand of payment of any unpaid import duties.

Who is responsible?

This theme has been expanded upon in draft DIBP Notices 2016/12 and 2016/13. Each of which state that the Comptroller-General of Customs has discretionary power to demand duty of any person identified as an ‘Owner’ under the Customs Act. This view means that a liability for duties under a DDP contract is a joint liability between supplier and purchaser.

In practical terms, where the foreign supplier fails to meet its duty obligations, Customs is of the view it has an ability to issue a demand for duty on the Australian purchaser, even where duty is included in the DDP price.

It is important for all importers take this potential risk into consideration when entering into contracts for goods supplied on DDP terms and consider the inclusion of duty recovery clauses in those contracts.

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