What is DDP?
Delivery Duty Paid (DDP)
Delivery duty paid (DDP) is a delivery agreement where the seller (exporter) is responsible for the shipment and for all potential risks and costs, until the shipment reaches its final destination. The potential costs ”include all transportation costs, any loss due to damage during transit, and the payment of customs duties, import taxes, and other relevant charges.” The buyer is responsible for unloading the goods and transporting them from the port to the warehouse,if the mutually agreed upon terminal destination is the buyer’s port.
DDP is one of the terms published by the International Chamber of Commerce (ICC). It is an international commercial term (Incoterms®). Different practices and legal interpretations between traders around the world necessitated a standardization of terms and the “Incoterms® rules provide specific guidance to individuals participating in the import and export of global trade on a daily basis,” according to the ICC.
DDP Shipping: Advantages & Disadvantages
With delivery duty paid shipping, it’s a huge advantage for the buyer that the seller assumes responsibility to deliver the goods and take on the cost and risk of all import clearance formalities. DDP shipping is considered a good customer experience because it takes all fees into consideration upfront, with no surprises later on. The seller can choose whether they pass those fees to the customer by increasing the product pricing, or pay those costs themselves. Delivery duty paid shipping works well for domestic transactions or transactions within a customs union, but for international trade, it can be problematic.
According to Trade Financial Global, “The importing country’s rules might require an importer to be a registered commercial entity in that country, there might need to be an import permit being issued, and as the seller is highly unlikely to be a registered or recognized commercial entity in the importing country (not through another related entity that is itself registered there), there are likely to be all sorts of problems.” With DDP shipping, the seller also has to deal with various risks, like non-refundable VAT charges, bribery, and possible storage costs if unexpected delays occur.
Stay Knowledgeable
The shipping industry is changing rapidly. As a fundamental part of global trading, organizations throughout the maritime ecosystem are facing headwinds, experiencing rising challenges in regards to safety, growing regulatory demands, competitive commercial landscape, and operational complexity. To overcome these challenges,it is important to fully understand the different possible delivery agreements and to select the one that will be most beneficial. A trusted advisor to many organizations, LINKWAY FREIGHT can help.
