DDP to the Middle East:
who holds the import licence?

What I saw on the ground

Handling equipment imports and exports in the Middle East, the first question was never "who does the work?" It was "who holds the local import/export licence?"

Plenty of companies were actually moving the cargo, preparing documents and working on site. But only one or two of them held the licence that let them carry a clearance through. The firms that could do the work and the firms that could finish it in their own name were not the same. Coming from Korea, where you rarely feel this, it took some getting used to.

Why — the importer-of-record rule

Most Gulf states restrict the importer named on the customs declaration (the importer of record) to a locally registered entity holding a commercial registration and an importer or customs code. A foreign company cannot bring goods in and clear them under its own name, and in Saudi Arabia a foreign company cannot import directly without a local entity.

Product certification sits on top of that. Conformity registrations such as Saudi Arabia's SABER also have to be held in a local name, so clearance ends up running through a local firm that holds both the licence and the certificates. However many companies handle transport and unloading, only a few can be the name on the entry.

Where it collides with DDP

DDP is the only Incoterms 2020 rule that puts import clearance in the destination country on the seller. A foreign seller, though, cannot be the importer in the Gulf. The ICC itself notes that DAP is more suitable where local rules prevent the seller from handling import clearance.

So in practice "DDP to the Middle East" works like this: the contract puts clearance on the seller, the importer on paper is a licensed local firm, and transport and unloading are done by yet another company.

What it means when only one or two firms hold the licence

• The importer on paper is not a party to your contract — declarations, tax payments and certificates are all in a third party's name. If something goes wrong, the party you contracted with and the party customs deals with are different.
• Hard to replace — with one or two options, they set the schedule and the price, and if one runs into trouble there is little to switch to.
• Liability can land locally — commentators note that customs authorities find a local business easier to pursue than a foreign seller, and increasingly look to the local buyer for duty shortfalls or penalties even on DDP deals.
• Longer chain of responsibility after an accident — when the contracting seller, the importer of record and the firm doing the work are all different, sorting out who to claim against after, say, an unloading accident takes time.

Before you sign

• Who will be named as importer on the declaration, and is their licence valid for this category of goods (equipment, machinery)?
• In whose name will certifications such as SABER be issued, and can they be reused for later shipments?
• Is there any alternative to the licensed firm? If there is only one, have you built in slack for delays?
• Who pays duties and VAT, and who can reclaim them if needed?
• Rather than insisting on DDP, would DAP — with a buyer entitled to import handling clearance — be more realistic?

References

· ICC Academy, Incoterms® 2020: DAP or DDP? — DAP is more suitable where local rules prevent the seller from handling import clearance
· Trade Finance Global, DDP Incoterms® 2020 rule — contract on DAP if the seller cannot be the importer; customs regimes increasingly pursue the buyer
· Carra Globe, Importer of Record in the GCC — importer registration requirements by Gulf state (published by an IOR service provider)

· Unloading accidents and when risk passes — DDP and unloading accidents
· Loading equipment into a container — Container dimensions and door openings

Trade terms and site risk — series

· DDP and unloading accidents
· DDP to the Middle East: who holds the import licence? (this article)
· EXW vs FCA: dropped while loading at the factory
· FOB and CIF: dropped while loading on board
· CIF vs CIP: what the insurance actually covers