Ask a factory owner in Ningbo or Shenzhen how they sell to small U.S. buyers and Amazon, and many will say “DDP, double clearance, duties included” (双清包税). The exporter quotes one price to the buyer’s door. A forwarder handles everything in between, including finding someone to act as importer of record (IOR) and absorbing the risk that a container gets held. That model was built for a world where almost anyone could be the IOR. That world is ending. Executive Order 14411 and CBP’s interim final rule, effective January 5, 2027, put real conditions on who may import and hold the IOR, and everyone around it, to account. Here is how we explain the change to exporters.
What does DDP actually mean under U.S. customs law?
DDP (Delivered Duty Paid) is an Incoterms rule. It decides, between seller and buyer, who pays for freight, duties and risk. It does not decide who is responsible to U.S. Customs. Customs looks only at the importer of record: the party that files the entry, owes the duties, keeps the records and answers for any false statement. Under a DDP sale, the seller has promised to deliver with duties paid, so someone on the seller’s side has to be the IOR, or arrange for one. That is where the trouble starts.
How did “double clearance, duties included” usually work?
Typically, the exporter paid the forwarder an all-in price per kilo or per cubic meter. The forwarder booked the freight, cleared Chinese export, and on the U.S. side filed the entry using an importer number it controlled: the exporter’s own nonresident IOR number, a U.S. shell company with no real business, or a third party that “rented” its name. Because the price was fixed, the forwarder made more money when it declared less. Undervaluation, vague descriptions and favorable classifications were built into the pricing. Most exporters never saw the entry summary.
What changes on January 5, 2027?
- Only “U.S. IORs” keep the old freedom. To be a U.S. IOR, a company must be organized and genuinely located in the United States and either at least 51% owned and controlled by U.S. citizens or permanent residents, or the direct owner of a significant amount of unencumbered U.S. real property. A shell company owned from China does not qualify.
- Foreign IORs need a CTPAT-validated broker. A Chinese exporter importing in its own name, or through its U.S. subsidiary that fails the test, may file entries only through a licensed, CTPAT-validated customs broker. Only about one in five active brokers is validated.
- If you do not own the goods, you cannot be the importer. When the foreign party is neither owner nor purchaser of the goods, the CTPAT-validated broker itself must act as IOR. Renting out an importer name stops working.
- The importer’s identity has to be real. CBP is enforcing the accuracy of Form 5106, the importer registration. The address must be the IOR’s real operating location, not a forwarder’s or broker’s address, and CBP has said the broker’s power of attorney must be signed directly with the IOR, not through a forwarder.
- More is coming. The executive order also calls for minimum assets or bonds for every IOR, a “good standing” test that looks at affiliates’ records, a 50% floor on penalty mitigation, and more data at entry, including the export declaration filed with Chinese customs.
If the forwarder handled everything, is the exporter safe?
No, and this is the most common misunderstanding. If your company is the IOR, you are liable for duties and penalties even if a forwarder filed the paperwork. If someone else was the IOR, you are still the party whose invoices, values and product descriptions were used. Under 19 U.S.C. §1592, penalties can be imposed on any person who introduces goods by means of a material false statement or omission, not just on the IOR. And the Justice Department’s Trade Fraud Task Force, created in August 2025, says it will follow trade fraud through the whole supply chain. Its people have already secured criminal pleas and False Claims Act settlements over undervaluation and false origin. A U.S. competitor or a former employee can also file a whistleblower suit and share in the recovery.
What risks does an exporter face in practice?
- Detention and seizure. Goods can be held for missing documents, suspicious values, forced-labor concerns or origin questions. If the IOR is a shell, nobody with standing may respond, and the goods may be forfeited.
- Customer claims. Under DDP you promised delivery. A seized container is your loss, and your buyer may claim damages for delay.
- Back duties and penalties. CBP can reach back five years for negligence. For a foreign company, CBP may demand payment through your bond, your U.S. subsidiary or your future shipments.
- Losing the market. An IOR that is not in “good standing” may be barred from importing. If your company or affiliates are linked to unpaid bills, that may follow you.
- Criminal exposure for individuals. Knowingly false invoices or “two sets of invoices” can lead to charges under 18 U.S.C. §542 (entry by false statement) or §545 (smuggling), and conspiracy charges for everyone who agreed to the plan, including managers who travel to the United States.
How can an exporter keep selling DDP legally?
DDP is still lawful. What has to change is how it is done:
- Decide who the IOR will be, on purpose. Your own company as a foreign IOR through a CTPAT-validated broker; a real U.S. subsidiary that meets the U.S. IOR test; or your U.S. customer, if you move to DAP, FCA or FOB terms.
- Price honestly. If your margin only works with an undervalued entry, it does not work. Build duties at the real transaction value into your quote.
- Control your own customs data. Approve classification, valuation and origin for each product in writing. Ask to see every entry summary filed for your goods.
- One invoice, the real one. The commercial invoice must show the actual price paid or payable, plus assists, royalties and other additions where they apply.
- Pick logistics partners for compliance, not price. Ask whether they use a licensed, CTPAT-validated broker, who signs the power of attorney, and whose bond covers the entry. Avoid anyone who offers to lend you an importer name.
- Look back. If past DDP shipments were undervalued under your company’s name, get advice on a prior disclosure before CBP finds it. Under the new mitigation rules, waiting gets more expensive.
Should we set up a U.S. company?
Only if it will be a real business. A U.S. subsidiary owned from China is a foreign IOR unless it owns significant unencumbered U.S. real property, and CBP looks at substance: employees, a real office or warehouse, capital, and whether it earns its own profit or simply passes everything back to the parent. For companies with meaningful U.S. sales, a properly staffed and capitalized U.S. company can make sense for customs, tax and customer reasons. A shell set up to hold an importer number will not pass, and may draw attention.
How will the industry reshuffle?
We expect three things. First, small sellers who relied on cheap “duties included” lines will see prices rise or service disappear, and some will leave the U.S. market. Second, exporters with clean data, real pricing and a dependable IOR arrangement will win business, because U.S. buyers and platforms will start asking who the importer is. Third, more large buyers will insist on being the importer themselves and buying FOB, which shifts power toward them but also moves customs risk off the exporter. The middle ground, opaque all-in DDP, will shrink.
What should we do this quarter?
- List every channel where you sell DDP and identify the IOR on each.
- Collect entry summaries for the last year and compare declared values with your real invoices.
- Ask each forwarder in writing about its broker, CTPAT status, bond and power of attorney.
- Decide, channel by channel, who will be the importer after January 5, 2027, and update contracts and quotes.
Sources: Executive Order 14411 (June 3, 2026); CBP interim final rule, Heightened Requirements for Foreign Importers of Record, CBP Dec. 26-19 (Nov. 6, 2026); CBP notice on Form 5106 accuracy (Aug. 2026); 19 U.S.C. §§1484, 1592; 18 U.S.C. §§371, 542, 545; 31 U.S.C. §3729; DOJ Trade Fraud Task Force announcements (Aug. 2025, July 2026). As of November 14, 2026. This article is general information, not legal advice.
