Understanding Why Domestic Freight Invoices Under DDP Terms Are Excluded from Customs Valuation Released

We understand your curiosity regarding why a customs broker would not request a freight invoice charged to an importer under DDP (Delivered Duty Paid) terms. This treatment is based on the core principles of customs valuation and the specific characteristics of Incoterms.

The Nature of DDP Terms in Incoterms 2020

Under DDP, the seller bears the maximum level of obligation. The seller is responsible for transporting the goods to the named place of destination, completing import customs clearance, and paying all duties, taxes, and other charges. Ideally, the importer receives the goods at their premises without any additional cost burden or involvement in the clearance process.

Why Importers May Receive Separate Freight Invoices

Despite the DDP agreement, if an importer is billed for freight, it usually pertains to domestic transport or additional logistics services occurring after the initial arrival at the port or airport of the importing country. These costs may arise due to:

• Special delivery requirements from the importer
• Unexpected terminal handling charges, storage fees, or demurrage
• Services exceeding the scope of the original sales contract

Customs Valuation Principles (WTO/GATT Article VII)

The principle for determining Customs Value in South Korea follows the WTO Valuation Agreement. Generally, the dutiable value is based on the CIF price, which includes freight and insurance costs incurred only up to the port or airport of entry into the importing country. Costs incurred beyond this point are not considered part of the dutiable value.

Exclusion of Post-Arrival Costs

If the freight invoice issued to the importer represents costs incurred after the goods have arrived at the port/airport of entry (i.e., domestic transport), these expenses are excluded from the customs value. According to Article 20, Paragraph 1, Item 1 of the Enforcement Decree of the Customs Act, "transportation costs, insurance premiums, and other expenses related to transport after arrival at the port or airport of entry" shall not be added to the customs value.

Why the Customs Brokerage Did Not Request the Document

Customs brokers only request documents that impact the calculation of the dutiable value to ensure accurate reporting of customs duties and VAT. Since the domestic freight invoice for a DDP shipment does not influence the dutiable customs value, it is not a required document for the import declaration. This exclusion is a legitimate procedure aligned with clear customs valuation principles.

Summary

While DDP implies the seller covers all risks and costs, any separate invoice charged to the importer for domestic logistics is legally excluded from the customs valuation process. Therefore, you do not need to submit such invoices to your customs broker for declaration purposes.