DDP Terms in U.S. Export Contracts and Entitlement to IEEPA Tariff Refunds
- 1. Overview of the IEEPA Tariff Refund Process
- 2. Tariff Burden under DDP Terms
- 3. Importer of Record and the Right to Request Refunds
- 4. Entitlement to Refunds and Interest
- 5. Key Clauses in Refund Cooperation and Settlement Agreements
- 6. Tariff Change Clauses in Future DDP Contracts
- 7. Frequently Asked Questions (FAQ)
- Q1. Can an exporter file a refund request directly?
- Q2. Who is entitled to the refund if the contract has no refund clause?
- Q3. Are tariffs imposed under other legal bases also refundable?
- Overall Review of Refund Entitlement and Settlement Agreements
- Related Advisory Services of DECENT Law Firm
Now that refunds of U.S. tariffs imposed under the International Emergency Economic Powers Act (IEEPA) have begun, exporters that bore tariffs under DDP terms should review the importer of record, entitlement to refunds and interest, settlement agreements, and contract amendment clauses. This article summarizes those points.
1. Overview of the IEEPA Tariff Refund Process
Following the U.S. Supreme Court's ruling, the U.S. Court of International Trade ordered U.S. Customs and Border Protection (CBP) to establish a refund process for all IEEPA tariffs. CBP has created the CAPE function within its electronic customs system and is refunding duties together with interest.
The refunds cover reciprocal tariffs and other duties imposed under IEEPA. Tariffs imposed under Section 232 of the Trade Expansion Act or Section 301 of the Trade Act are not covered by this process. Companies should first identify the legal basis of the tariffs imposed on their products.
Refunds are not paid automatically. The process begins only when the importer or its customs broker files a request.
2. Tariff Burden under DDP Terms
Under the Incoterms rule DDP (Delivered Duty Paid), the seller delivers the goods after bearing import clearance and duties in the destination country. As a result, exporters selling on DDP terms are likely to have absorbed tariff increases without passing them on in their prices.
In practice, however, some transactions name the U.S. customer as the importer of record, have the customer pay the duties, and then have the exporter reimburse the customer. This means the DDP term in the contract and the actual customs filing party may differ.
Even if the contract states DDP, the importer of record on the customs entry must be checked separately.
3. Importer of Record and the Right to Request Refunds
According to materials from the Korea Customs and Trade Development Institute, the party entitled to request a refund is the importer of record or the customs broker it designates, not the exporter. The materials also explain that if the importer designates a separate refund recipient using a CBP form, that party may receive the refund.
If the exporter cleared the goods directly as the U.S. importer of record, it may consider filing its own request through a customs broker. Conversely, if the U.S. customer was the importer of record, the exporter needs the customer's cooperation in filing and a commitment to transfer the refund.
If the customer receives the refund but does not pass it on, the exporter will have to dispute the matter based on the contract, so it is important to reach an agreement now.
Korea Customs and Trade Development Institute — Key Issues in U.S. IEEPA Tariff Refunds (Korean)
4. Entitlement to Refunds and Interest
If the contract specifies only which party bears the duties and contains no clause on refunds, the key evidence will be which party actually bore the duties. Companies should document whether the duties were included in the invoice price or whether a separate duty reimbursement was paid.
If the customer raised its prices after the tariff increase or the parties shared part of the burden, they may disagree on the allocation ratio. It is also advisable to agree separately on which party receives the refund interest, apart from the principal.
Without evidence that the exporter reimbursed the duties, it may become difficult to demand that the refund be returned.
5. Key Clauses in Refund Cooperation and Settlement Agreements
A settlement agreement should list the customs entries covered by the request, the customer's filing deadline and obligation to share progress, and the deadline for transferring the refund after receipt. It should also specify which party bears the filing costs and customs broker fees.
If the customer agrees to designate a refund recipient, the parties may also consider a structure in which the exporter receives the refund directly. It is advisable to include damages for the customer's failure to cooperate and a prohibition on setting off the refund against outstanding invoices.
Because the refund request period is limited, delays in reaching an agreement may cause the refund opportunity itself to be lost.
| Item | Materials to Check | Purpose |
|---|---|---|
| Importer of record | Customs entries and customs broker information | Identify the party entitled to request a refund |
| Tariff burden | Invoice prices and duty reimbursement records | Basis for entitlement to the refund |
| Tariff basis | Applicable tariff items and rates | Determine eligibility for refund |
| Settlement agreement | Filing deadline and transfer conditions | Secure recovery of the refund |
6. Tariff Change Clauses in Future DDP Contracts
Contracts should include clauses allowing the parties to renegotiate prices or change the delivery terms if tariff rates change. Companies should also consider criteria allowing them to suspend supply or terminate the contract if tariffs increase beyond a certain rate.
Contracts should include in advance a clause providing that any benefit from tariff refunds or reductions belongs to the party that actually bore the duties. The contract should also specify who will act as importer of record and how customs documents will be shared.
7. Frequently Asked Questions (FAQ)
Q1. Can an exporter file a refund request directly?
Unless the exporter cleared the goods as the U.S. importer of record, filing directly is difficult. In that case, the exporter needs the importing customer's cooperation in filing and an agreement to transfer the refund.
Q2. Who is entitled to the refund if the contract has no refund clause?
Even without such a clause, the exporter may be able to demand the refund based on the fact that it actually bore the duties. However, the outcome depends on the governing law and the actual record of who bore the duties, so supporting evidence should be organized first.
Q3. Are tariffs imposed under other legal bases also refundable?
The current CAPE process covers tariffs imposed under IEEPA. Tariffs under Section 232 of the Trade Expansion Act or Section 301 of the Trade Act must be reviewed separately.
Overall Review of Refund Entitlement and Settlement Agreements
For tariff refunds under DDP export contracts, the exporter can actually recover the money only if the importer of record, the actual tariff burden, and the agreement on transferring the refund are aligned. It is advisable to document a settlement agreement while the relationship with the customer remains good.
Related Advisory Services of DECENT Law Firm
DECENT Law Firm reviews delivery terms and tariff burden structures in U.S. export contracts and assists with entitlement to IEEPA tariff refunds, settlement agreements, and the negotiation of tariff change clauses for future transactions.
