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The Alibaba Supplier Scam: Why you shouldn't use DDP shipping - YouTube
Channel: MerchSprout Sourcing
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Hi there, and welcome back to the
official Merchsprout youtube channel.
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Merchsprout teaches people just like you
how to source products from overseas.
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We mainly concentrate on ensuring you gain
the best quality products, but we also discuss
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how you can ensure that your items get to
you not only in one piece but in budgets
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and time scales that you as a buyer
and potential seller need to know.
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Today, we will be talking about DDP
shipping terms, what they are, and
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the problem that I find with them.
So, let's dive straight in.
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Hi, my name is George Tewson; I am
one of the founders of Merchsprout
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and aim to teach you how to gain stock from
overseas. We have been sourcing, buying and
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ensuring robust quality assurance in China for
over ten years. So we have a bit of experience,
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failing, succeeding and everything in between.
One of the biggest things people struggle with
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when first looking to source from China is getting
items to their door. Now, it's not always the most
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complex of topics, but it can put your head
in a spin, trying to understand shipping terms
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and ultimately who is responsible for what.
In our previous video on shipping terms, we looked
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at the differences between DDP, FOB and Ex-Works.
We discussed how DDP was the simplest shipping
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term you could employ as a buyer from China.
So, just as a recap, let's go over DDP shipping.
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Once you have researched, found a supplier, a
product and ascertained that your chosen supplier
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could make your product to your specification
and applicable standard, it's time to ship it.
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There are several different shipping solutions to
employ, and the easiest (on paper) is DDP by far.
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DDP stands for delivery duty paid. Delivery duty
paid is where the seller, your supplier, takes all
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the responsibility of getting the items to you.
The seller must arrange all the transportation and
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associated costs, including export clearance and
customs documentation required to reach the agreed
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destination, usually your door or warehouse. The
risks to the seller, as you can see, are pretty
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broad in spectrum. They can include shipping,
duty, VAT, storage, and any other cost associated
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with getting items from the factory to you.
So, DDP sounds like a perfect way of getting items
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to you. I mean, why would you want to not go with
DDP, right? There is legitimately no risk to you,
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and you know what costs you are going to get
from the start, meaning your profit calculations
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can be more accurate, and you can figure out if a
product will be profitable or not. Sounds perfect.
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Why is everyone not doing this?
As with everything that is China-based,
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there is always a risk. So what are the risks
associated with DDP, and how you can spot them?
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The most significant risk when shipping DDP
are unseen charges. I can almost hear you
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saying – But George, what unseen expenses? If the
supplier holds all the risk to import and export
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charges, how can I be liable for the costs?
So this one is quite astute on the supplier's
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side; it's somewhat of a scam, but for
argument's sake, let's just not cast judgement
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and say that the supplier may have just messed up.
A common way this plays out is the following:
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You have spoken to a supplier, they have
produced your items, and you are ultimately
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as happy as can be. This could be through various
ways; you have seen the product in photos.
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You have samples, and or you have someone on
the ground acting on your behalf as an inspector
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and overseeing the production or stock.
Either way, the product is ready to be shipped,
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you have agreed to DDP sea freight as the
intercoms, and you have gained a fantastic price
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on the delivery cost. Fantastic. So,
your supplier informs you that they have
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shipped the items, and you expect them
to arrive at your door 4-5 weeks later.
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Four days down the line, your items turn up
at your door. Wow, either these ships have
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amazingly sped up, or someone in your supplier
likes you. Either way, winner winner chicken
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dinner because you just got your products at
a steal. DDP, Airfreight and all duties paid.
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You gracefully inform your supplier that all is
good, you have received your items and thanks
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very much for the expedited air freight. They
usually come back and state that it was a problem
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in their companies shipping department, and the
items were included in the air freight shipment.
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Due to the additional expense of air
freight, there is no profit in the deal.
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They have lost out. They may lay it on
thick, puling at your heartstrings. All
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the money has gone from the deal.
But fear not, this kindheartedness
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has a sting in its tale for you. You see, a couple
more days go by; after you have started to ship
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your products out, you get a letter through
the door from the delivery company (Fed-ex,
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DHL, etc) stating that you owe import duties
and VAT. But how can this be? Didn't I pay DDP?
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You see, companies like DHL pay duty on items
on your behalf when shipping via air freight,
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you as the receiver are now liable.
I will just read you the
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exact wording that DHL use:
• To ensure the DHL
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courier can deliver your goods in the shortest
possible time after entering the UK, DHL pays
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any duties and taxes that are due on the goods
to HMRC on your behalf. DHL will apply an Advance
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Payment or Disbursement charge for this service.
So not only do you get stung by the VAT and duty,
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after all, the shipping company charges you a fee.
Potentially some items you are importing into the
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country may have duties on them as high as
100%; this can be a pretty costly expense
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and something that you probably have
not accounted for in your budget.
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So, what do you do? Of course, you tell your
supplier. After all, they have agreed to DDP
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shipping. But a supplier who has lost all profit
from the deal after the air freight mistake will
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be willing to reimburse you more money for
shipping. Unfortunately, it's a no in most
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of the cases that we have seen.
And the real kicker, you are
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personally responsible for the VAT and fees.
So how can you avoid falling into the DDP trap?
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The age-old saying rings true here. As with
many of our videos, we always state if it's too
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