1. Why Do Suppliers Offer This?
Mostly to help you, as they see it. Duty on Indian goods went up in some markets in 2025 and 2026, and a supplier who wants to keep your order looks for a way to make the landed price smaller. Some have seen it done for domestic buyers or on parcels, and assume it's normal. A few want the cash for their own reasons.
None of that makes the supplier a bad business. It makes them wrong about whose problem it is. The exporter answers to Indian customs for the Indian side of the paperwork. You answer to your own customs for the value you declare, and that's where an under-declared invoice lands.
2. Doesn't Customs Only Look at the Invoice?
It starts with the invoice, but the law looks at what you actually paid. Every one of our reader markets values most imports on the transaction value, which is the price paid or payable for the goods, and they all count payments that go around the invoice.
- United States. The price is "the total payment (whether direct or indirect, and exclusive of any costs ... for transportation, insurance, and related services ...) made, or to be made, for imported merchandise by the buyer to, or for the benefit of, the seller" (19 U.S.C. 1401a (opens in a new tab)). A cash payment to the seller is a direct payment.
- United Kingdom. HMRC bases the value on "the total payment made, or to be made" and tells you to add indirect payments to the seller (GOV.UK (opens in a new tab)).
- Australia. The ABF describes transaction value as "the price the importer actually paid (or is going to pay) for the goods" (ABF valuation fact sheet, April 2011 (opens in a new tab)).
- New Zealand. NZ Customs counts all amounts paid or payable, including agreed payments not yet made, and payments in money or in kind (NZ Customs valuation guide (opens in a new tab)).
So the cash half of a 60/40 split isn't outside the customs value. It's part of it, undeclared. And customs services can ask for your bank records, order history and emails when a value looks low.
3. Who Pays If It's Caught?
The importer on the entry. That's you, or whoever you let make the declaration for you, which is a story we tell on importer of record.
What it costs depends on the market. In the US the civil penalty caps are set in 19 U.S.C. 1592 (opens in a new tab). For negligence it's the lesser of the goods' domestic value or twice the duty lost, for gross negligence four times, and for fraud up to the full domestic value of the goods. Which level applies is for customs to decide, and a deliberate cash-and-invoice split is unlikely to be treated as a simple mistake. In Australia, false or misleading information is a strict liability offence under sections 243T and 243U of the Customs Act, as the ABF reminds importers (ACN 2021/01 (opens in a new tab)). In the UK and New Zealand, customs can review the value, reassess the duty and tax and apply their own penalties. Check how that works for your business with your customs broker.
On top of the penalty you pay the duty and tax you should have paid, and your later shipments may be held for checks. The supplier, meanwhile, is in another country and outside your customs service's reach.
4. Does Under-Declaring Even Save Much?
Often less than buyers think, and sometimes nothing. Indian goods can enter Australia at 0% under ECTA with a valid certificate of origin, and New Zealand's agreement with India starts taking duty to zero from 20 October 2026 (see India to New Zealand). On a 0% line, a lower value saves no duty at all. It only cuts the GST or VAT, which a registered business normally accounts for or claims back anyway. You'd be risking a strict liability offence to save nothing.
The saving is real only where duty is high, which today mostly means the US, where Indian goods pay the normal rate plus additional duty (rates on India to the US). That's also where penalties are steepest. Check your own line on working out the real import duty before anyone talks you into a "saving".
There's a further cost on the Indian side. India's export rules track the value on each shipping bill against money received through the exporter's bank (see what an Indian shipping bill is). A cash side-payment leaves the supplier with export money outside that record. That's their risk, not yours, but a supplier who takes it with you will take it with others.
5. What Should You Say to the Supplier?
Keep it short and friendly, and put it in writing. Something like this works.
"Thanks for trying to help with the duty. We have to declare the full price at our border, so please put the full agreed price on the commercial invoice, with the same Incoterm and the same total as the PO. All payments will go by bank transfer to your company account."
Then make it structural, so the question doesn't come back.
- Put the price, the Incoterm and the total on the PO, and say the commercial invoice must match it.
- Pay only by bank transfer to an account in the exporter's registered name. A proforma that shows the right name and account is the first check, set out in what an Indian proforma invoice should show.
- Refuse "gift", "sample" or "personal" labels on commercial goods. Gift reliefs are for gifts, not stock.
- Check the invoice before dispatch. Your broker or forwarder will spot a low value faster than customs does.
If the supplier's real worry is your landed cost, solve that properly. Claim the FTA rate with the right certificate (see certificate of origin), check the classification on HS codes, or look at whether duty you've already paid can come back on duty refunds.
6. What If It Has Already Happened?
Don't hope it goes away. Talk to your customs broker about correcting the declaration. US law reduces the penalty for a prior disclosure made before an investigation starts (19 U.S.C. 1592(c)(4) (opens in a new tab)), and the UK, Australia and New Zealand all have ways to amend an entry or tell customs about an error. Which route fits, and what it costs, is a question for your broker, not a forum. Keep the real invoice, the payment records and your emails together.
