Incoterms® (or International Commercial Terms) are essential terms of international trade that define the rules and responsibilities of sellers and buyers. Understanding which Incoterms® rule to use for shipping your cargo is crucial to avoid unforeseen costs or unnecessary risks. Here, you’ll learn about the meaning of Delivery Duty Paid in shipping, and where the responsibilities lie between buyers and sellers.
What is Delivery Duty Paid in shipping?
Delivered Duty Paid (DDP) is one of the 11 Incoterms® rules set by the International Chamber of Commerce. DDP Incoterms® places the maximum responsibility on the seller, and the least on the buyer. The seller bears all the costs and risks involved in bringing the goods to the named place of destination and has an obligation to clear the goods not only for export but also for import, to pay any duty (e.g. VAT, GST) for both export and import and to carry out all customs formalities.
The ‘named place’ is the agreed place between the seller and buyer where the delivery will take place and is usually on the seller’s own premises. Essentially, the seller is responsible for the entire process, apart from paying for the goods, which is, of course, the buyer’s responsibility.
The list below demonstrates the responsibility breakdown between the seller and the buyer.
The seller’s obligations under the DDP Incoterms®:
- Delivery of goods and documents required
- Packaging and wrapping
- Inland transport in the country of origin
- Customs handling fees at the origin
- International freight
- Destination charges
- Customs handling fees at destination
- Payment of duties and taxes
- Inland transport to the destination country (depending on agreed location)
The buyer’s obligations under the DDP Incoterms®:
Once the goods are ready for unloading at the agreed destination, the risk then transfers from the seller to the buyer.
DDP vs DAP: What is the difference?
DAP is a similar Incoterms® rule to DDP and stands for “Delivered at Place.” Just like with DDP Incoterms® (Delivered Duty Paid), the seller bears all risks involved in bringing the goods to the named place. However, under the DAP rule, the buyer is also responsible for sorting out the import process including unloading the goods at the destination, which is, under DAP, at the buyer’s risk. The buyer is also responsible for import clearance and any applicable local taxes or import duties.
Often, the buyer will be in a better position to handle local import customs formalities, since, in some countries, import clearance procedures can be very complex and bureaucratic. This is a reason why DAP in some cases is preferred over DDP. However, if the seller has the capability to handle everything smoothly themselves, DDP might still be the preferred option. Nevertheless, it can be helpful to have a clear understanding of both options to make the right decision for your business.
Incoterms® and the Incoterms® 2020 logo are trademarks of ICC. Use of these trademarks does not imply association with, approval of or sponsorship by ICC unless specifically stated above. The Incoterms® Rules are protected by copyright owned by ICC. Further information on the Incoterms® Rules may be obtained from the ICC website iccwbo.org.
FAQs
Under the Delivered Duty Paid (DDP) Incoterm rules, the seller assumes all responsibilities and costs for delivering the goods to the named place of destination. The seller must pay both export and import formalities, fees, duties and taxes.
What does Delivered Duty Paid DDP mean? ›
DDP Shipping FAQs. Delivered duty paid (DDP) shipping is a type of delivery where the seller takes responsibility for all risk and fees of shipping goods until they reach their destination.
How does DDP shipping work? ›
What is DDP Shipping? Delivery Duty Paid (DDP) shipping is where the seller takes all responsibility for fees and risks of shipping goods until they are delivered to an agreed place by the buyer and seller.
Who pays duties and taxes on DDP? ›
The seller bears all the costs and risks involved in bringing the goods to the named place of destination and has an obligation to clear the goods not only for export but also for import, to pay any duty (e.g. VAT, GST) for both export and import and to carry out all customs formalities.
Why would a buyer accept delivery duty paid DDP freight terms when it may be the most expensive incoterm option for the buyer? ›
Benefits of DDP Shipping
Since the seller is completely responsible for the entire shipment, this creates security for the buyer. This means that the buyer does not take on any of the risks or costs associated with shipping and customs clearance.
When should one use DDP delivery duty paid freight terms? ›
It may also be advisable to use these terms when the seller expresses confidence in shipping their products to your country and possess a successful track record of delivering to other customers under DDP Incoterms.
Does DDP mean door to door? ›
Door To Door (DDU/DDP)
What is the disadvantage of using DDP as an incoterm? ›
Seller Assumes All the Risk
While DDP is a good Incoterm for buyers who know the total transportation cost. It imposes the highest risk of loss on sellers because they have to assume all charges to the point of delivery.
What are the incoterm rules for DDP? ›
Under the Delivered Duty Paid (DDP) Incoterm rules, the seller assumes all responsibilities and costs for delivering the goods to the named place of destination. The seller must pay both export and import formalities, fees, duties and taxes.
What is an example of a DDP incoterm? ›
Understanding Delivered Duty Paid
For example, a buyer in New York enters into a DDP deal with a seller from London to purchase a consignment of goods. It means that the seller from London has to pay for the transportation of the goods from their storage to the London port and to the port in New York.
Delivery Duty Paid (DDP) Not Available
- Andorra. Djibouti. Jersey C.I. Papua New Guinea.
- Albania. East Timor. Kazahkstan. Portugal.
- American Samoa. El Salvador. Kenya. Reunion.
- Angola. Eritrea. Kyrgyzstan. Russia.
- Anguilla. Estonia. Lesotho. Rwanda.
- Antigua. Ethiopia. Liberia. ...
- Armenia. Faroe Islands. Macedonia. ...
- Azerbaijan. Fiji. Madagascar.
DDP is a vital Incoterm for several reasons:
- Reduced Risk for Buyers: DDP shifts the responsibility and risk associated with international shipping and customs clearance from the buyer to the seller. ...
- Simplified Transactions: DDP simplifies international trade transactions by offering a comprehensive solution.
Under DDP, the supplier is responsible for paying for all of the costs associated with the delivery of goods right up until they get to the named place of destination. The buyer is then responsible for unloading the goods at the end destination.
Who is responsible for insurance in DDP? ›
DDP insurance
Even though cargo insurance is not obligatory under DDP, most sellers prefer to purchase insurance. This is because sellers have significantly more responsibilities than buyers and their liabilities only end when the cargo is delivered.
Which is better, DAP or DDP? ›
The main difference between DDP and DAP is delivery to destination and who is responsible for import duty, taxes and security clearance. Under DDP, the seller assumes the maximum responsibility in costs and risk from the beginning to the end. Under DAP, the buyer bears the costs and taxes of import clearance.
Can you use DDP for domestic shipments? ›
Fortunately, by utilizing Incoterms, you can make this as simple as changing EXW to DDP [name your delivery point] destination. Domestic and international use.
What does DDP mean in trucking? ›
Delivered Duty Paid (DDP)
Risk and costs transfer from the seller to the buyer when the seller makes the goods available, ready for unloading, at the named place of destination.
Is DDP the same as FOB destination? ›
What is the Difference Between DDP And FOB? The DDP vs FOB is primarily based on who pays for the delivery and related costs. In DDP shipping, the seller pays these costs; in FOB shipping, the buyer pays these costs.
What is the difference between DDP and delivery at place? ›
The main difference between DDP and DAP is delivery to destination and who is responsible for import duty, taxes and security clearance. Under DDP, the seller assumes the maximum responsibility in costs and risk from the beginning to the end. Under DAP, the buyer bears the costs and taxes of import clearance.
