DDP Shipments to Thailand look easy and convenient, but have some dark corners…
DDP shipments to Thailand (Delivered Duty Paid) might look easy and convenient, but they have some dark corners. When Thai companies purchase goods using DDP terms—especially from countries like China where this method is common—it often appears to be an efficient and cost-saving option. On the surface, DDP simplifies the process: the supplier handles everything, including customs clearance, duties, and delivery to your door. But beneath this convenience lies a series of hidden issues that can harm your business in the long run.
1. Lack of Proper Documentation
One of the most critical issues with DDP shipments to Thailand is the lack of proper customs documentation, particularly the customs bill. A customs bill is a formal declaration of the duties and taxes paid during the import process, along with a detailed breakdown of the shipment’s contents and their value. This document is crucial for ensuring compliance with Thai tax laws and for keeping your accounting in order.
Without this customs bill, your company cannot prove that the goods passed through proper customs channels. This lack of proof becomes especially problematic when it comes to VAT (Value Added Tax). Since the VAT is paid during customs clearance, and no customs bill is provided with the DDP arrangement, the Thai company is unable to claim a VAT refund. The payment made to the foreign supplier is recorded, but without the customs documentation, the VAT cannot be deducted, increasing the overall cost of the product.
In addition, because there is no customs declaration, the transaction cannot be properly recorded as an expense in your financial books. This can lead to complications during tax audits, as the product lacks the necessary documentation to be legally recognized as part of your business expenses.
2. DDP Shipments to Thailand: Stock Management Problems
Another serious issue that arises with DDP shipments to Thailand is inventory management. Without proper import documentation, such as the customs bill or invoice, the imported goods cannot be legally added to your current inventory. This creates a gap in your stock records, making it appear as though you are selling products that do not officially exist in your warehouse.
When you sell a product that is not recorded in your stock, you are essentially engaging in “phantom sales.” This discrepancy between your actual stock and your recorded inventory can lead to problems during financial audits, exposing your company to fines or penalties for poor bookkeeping. Additionally, this mismanagement of stock could cause confusion in supply chain operations, leading to under-ordering or over-ordering of goods.
3. Legal Risks for Regulated Products
The situation escalates when the goods being imported require a license, such as medical devices, cosmetics, or food products. Under Thai law, regulated products must go through rigorous import controls, and failing to comply with these requirements constitutes a serious criminal offense.
For example, importing a medical device without the proper import license can result in heavy fines, confiscation of the product, or even imprisonment. The sale or distribution of these unlicensed goods can also harm your reputation and damage relationships with regulatory authorities, making future imports more difficult. For medical devices and foods, the Thai FDA (Food and Drug Administration) imposes strict guidelines, and violating these laws can have devastating legal and financial consequences.
In fact, Section 12 of the Medical Device Act B.E. 2551 (2008) and Section 15 of the Food Act B.E. 2522 (1979) clearly outline penalties for importing or selling unlicensed goods. Non-compliance could lead to fines of up to 30,000 baht or imprisonment for up to three years, depending on the severity of the offense.
Conclusion: Beware of Short-Term Gains
Although DDP shipments to Thailand seem like an attractive way to save time and reduce costs, the lack of proper documentation can have severe consequences for your business. Failing to receive a customs bill means you cannot deduct VAT, properly account for expenses, or add products to your inventory. For regulated products, the risks are even higher, as improper importation can result in criminal penalties.
To avoid these issues, it is essential that Thai companies verify that the full set of import documentation is provided by the supplier. If obtaining these documents is not possible with a DDP arrangement, it is far better to opt for CIF (Cost, Insurance, and Freight) terms, where you, the buyer, handle the customs clearance process yourself. While this may seem more complex and time-consuming, it ensures that your business stays compliant with Thai laws and avoids future problems.
In the end, the short-term benefits of DDP shipments to Thailand may come back to haunt you. Always prioritize receiving proper documentation and take control of the customs clearance process to ensure your business’s long-term success and avoid costly legal and financial pitfalls.
