DDP TERMS : WHO IS THE IMPORTER OF RECORD (IOR) IN THE EU ?
In order to be able to reclaim import VAT paid in an EU country, your company’s name must be mentioned as the Importer of Record (IOR) on the customs clearance document issued in the country of arrival. A foreign company cannot act as the Importer of Record within the EU until it has obtained an EORI number from the Customs Authorities of one of the 27 EU Member States.
Brexit notice : Following the withdrawal of the United Kingdom from the European Union, as from 1 January 2021, UK companies willing to act as Importer/Exporter of Record in the EU must apply for a specific EU EORI number allocated by a Member State of the European Union (e.g. France, Belgium, Germany, Netherlands, Spain, etc.). An EORI number starting with “GB” and issued by the British customs authorities (HM Revenue & Customs) is no longer valid for customs clearance purposes in the EU and vice versa.
1. Can a non-EU company act as “Importer of Record” in Germany ?
While a company established in the European Union can act as ‘Importer of Record’ in Germany by simply giving its EORI number to the appointed carrier, we have noticed that non-EU companies are experiencing serious difficulties to make their goods cleared for customs when importing directly into Germany. Indeed, even when a non-EU company has duly communicated its EORI number to the freight forwarder acting as customs broker in Germany, the latter usually refuses to proceed with customs clearance, wrongly stating that the EORI number provided is not valid.
This attitude of many German freight forwarders may be difficult to understand, but it can be explained by the risks underlying an indirect customs representation. The most plausible cause of this refusal to clear goods on behalf of non-EU companies is that the German carriers are not willing to be jointly and severally liable with their customers established outside the EU in the event of omission or inaccuracy in the import declaration.
In France, by contrast to Germany, several carriers and specialists of logistics agree to act in the frame of indirect customs representation in order to clear goods on behalf of companies established outside the EU. However, let us remind that the reliability of the non-EU company and the frequency of its import flows are likely to be taken into account by the French customs brokers.
For British companies specifically, due to the geographical position of the United Kingdom, it can be suggested to those who wish to sell “DDP – (Delivered Duty Paid)” to Germany to carry out the customs formalities in France when the truck crosses the Franco-British border. After the clearance in France, the goods are released for free circulation in the EU’s single market and can thus be delivered in Germany exempt from VAT in the case of B2B transactions. The advantage here is that the UK sellers can offer to their German customers a sales price without VAT while recovering import VAT paid in France. To find out more about this procedure, we invite UK businesses to read our article: Exporting to EU countries via France | Corintax Consulting
2. Example of a DDP shipment from the United States to France
In addition to obtaining an EU EORI number, you must also pay a special attention to the details entered in the commercial invoice or the international shipping document. Here after is an example to help you to understand better how you should complete the shipper and the consignee details.
Seattle Microprocessors Inc., a company established in United States* sells some electronic components to Durand Machines SA, a French company. The terms of delivery as agreed in the sale contract are DDP – Paris. This means that the goods will be delivered at the customer’s premises in Paris, already cleared for importation. Seattle Microprocessors Inc is the party bearing import duty and taxes in France for this shipment.
Note : The United States have been chosen as the country of exportation only for the purpose of this example. Therefore, the reader should understand that a company located anywhere in the world can export goods to EU countries under DDP terms.
2.1. How to enter the details of the consignee in France ?
The EORI number is a unique Customs identification number allocated to each company importing goods into the EU single market. In the above example, the EORI number to be used to clear goods in France should belong to the US exporter (i.e. Seattle Microprocessors Inc). It is not correct to use the EORI number of the French client Durand Machines SA because the latter is not acting as the Importer of Record. If your company does not yet have an EORI number, you can apply for one here: Get an EU EORI number in France
It is the company actually paying import duty and taxes which should appear here as the “Importer of Record” (IOR) or “Consignee”. Entering here the name of another company as IOR, even if it is the name final client, may result in the loss of the right to recover import VAT. In this example, when the name of Seattle Microprocessors Inc. has been correctly enterred as the Importer of Record in France, and assuming that the other conditions to exercise the right of deduction are fulfilled, he can reclaim VAT charged in France by appointing a local fiscal representative.