Delivered Duty Paid: What DDP Means for Importers, Exporters

DDP incoterm, meaning Delivered Duty Paid, places the maximum responsibility on the seller. Under this term, the seller bears all the risks and costs involved in bringing the products to the specified destination.

The seller must also clear products for export and import, pay any duties for both import and export and carry out the customs formalities. The specified destination in DDP is the place where the seller and buyer both agreed the delivery would take place.

-What is Delivered Duty Paid in Shipping?

Delivered Duty Paid in shipping is an agreement between the buyer and seller that assigns the seller the responsibilities and obligations of goods transportation until the buyer receives them.

The DDP in shipping helps buyers purchase goods more efficiently without the fear of paying high taxes or getting scammed, as sellers are responsible for the actual shipping costs.

The main purpose of the DDP shipping term is to protect the buyer and hold the seller responsible until the buyer receives the goods and products.

Some of the reasons why the buyer uses DDP are listed below:

-DDP Offers Protection to Buyers

One of the reasons for using DDP Incoterm is that it offers protection to buyers. Buyers are not swindled, as sellers are responsible for the risk and cost of shipping the product to the buyer. It ensures that the buyers actually receive the goods they have ordered.

It also saves buyers from potential scams since the cost and time associated with DDP shipping make it impossible for scammers to even consider using it.

-DDP Ensures Safe Delivery of Goods

In the world of shipping, so much can go wrong when the sellers ship packages around the world. This is because of the shipping laws, customs duties, shipping fees and more.

With DDP in shipping, sellers are more cautious about picking the best and safest routes for sending packages because of the cost involved.

-DDP Holds Seller Responsible for International Fees

Another reason why buyers pick DDP in shipping is that it keeps the seller and shippers responsible for international fees such as customs duties and other costs.

It ensures a smoother purchasing experience for buyers since they do not have to worry about the fees.

The DDP agreement clearly outlines the responsibilities of the seller and buyer in shipping. Let us break down their roles and obligations:

-Buyer’s Responsibilities

Under the DDP agreement, the buyer is not responsible for any logistical process. He is responsible for receiving the goods and their unloading process. Buyers are responsible for any unloading fees associated with goods after receiving them.

The buyer needs to bear the cost of shifting goods to fulfilment warehouses. Under DDP Incoterms, buyers are not liable to pay import and export costs, shipping costs, taxes or import duties. Any cost that does not fall under this category is the buyer's responsibility.

-Sellers Responsibilities

When a seller quotes a product, they likely quote the combined value of goods as DDP. It simply means that the quotation of goods also includes the cost of goods, including delivery and duty charges.

The responsibility of sellers is to deliver the goods to specified locations and bear all the costs. However, the seller's responsibilities under the DDP agreement go beyond that.

• The seller's responsibility is to draw the sales contract and other related documents.

• Another crucial responsibility of the seller is to meet export and import requirements.

• The seller is responsible for paying taxes and import and export duties.

• The seller will also bear the government inspection cost.

• The seller is responsible for providing the proof of delivery.

• The seller will bear all the transportation costs, which include delivering the goods to an agreed destination.

• If there is any damage or loss in transit, then the supplier is responsible for it.

Let us focus on the advantages and disadvantages of DDP for buyers when shipping.

Advantages of DDP for Buyers

• One of the advantages of DDP for buyers is that they are not responsible for any delivery costs and taxes, which will save them from any surprise costs incurred during the delivery or shipping process.

• This is generally helpful while shipping to foreign destinations, as countries require inspection of goods for both importing and exporting. The inspection fees can be high.

• Another advantage of DDP for buyers is that they do not have to calculate any additional cost. The buyer generally includes the cost of delivery and duties in the price of the product.

• With DDP in shipping, buyers can relax once the products have been shipped. Anything that happens to the goods in transit is now the seller's responsibility, providing a sense of reassurance and confidence.

Disadvantages of DDP for Buyers

• One of the disadvantages of DDP for buyers is the lack of control for delivery time. Since the seller is in charge of shipping, they would go with the options that are cheapest to them, which often leads to the slowest delivery. Delays in the process are common.

• Another disadvantage of DDP for buyers is inexperienced shippers. When the seller is in charge of shipping, they look for the cheapest option, which often comes from inexperienced suppliers. In such a situation, the chance of issues and errors with transit is higher, which will end up costing the buyer more.

• During shipping delays, the buyer looks for open communication with the seller to rectify the issues. However, since both are in different time zones, it can be difficult for them to find a time to communicate.

The commonly followed timeline when using DDP in shipping is mentioned below:

• The seller or exporter selects and packs the goods or products and meets the criteria for dispatching them through a trustworthy shipping company.

• The shipping company is responsible for sending the cargo to the specified destination using any mode of transportation available.

• Once the goods reach a specified destination, the exporter or seller is responsible for paying necessary taxes.

• Upon delivery, the importers or buyers will pay the exporters and sellers a decided amount as per the agreements.

• The exporters are responsible for loss or damage to the goods, while importers are responsible for unloading costs after receiving the goods.

Delivered Duty Paid is a popular shipping option in international business due to its significant advantages for buyers. This shifts the risk and complexity of shipping from the buyer to the seller, offering buyers convenience and peace of mind.

However, to fully capitalise on DDP's benefits, it is essential to have a comprehensive understanding of how it works in shipping, ensuring smooth transactions and avoiding potential pitfalls.

In addition to utilising services like DDP, businesses may consider investing in a cargo insurance policy to safeguard their goods while in transit. With the right marine cargo insurance, they can protect their financial assets from potential losses caused by unforeseen events.

TATA AIG offers a range of SME insurances, including marine insurance policy, designed to cover losses and damages related to goods during transit.

This provides businesses with critical protection, helping them mitigate the financial impact of unexpected events, ensuring smooth operations and safeguarding their investments.

-Who pays import in DDP?

In Delivered Duty Paid, the seller is responsible for paying all import duties, taxes and customs clearance charges. The seller handles the entire process until the goods are delivered to the buyer's specified location.

-What is the difference between FOB and delivered duty paid?

The main difference between FOB (Free on Board) and Delivered Duty Paid (DDP) is the responsibility for costs and risks.

In FOB, the buyer assumes responsibility once the goods are loaded onto the shipping vessel, while in DDP, the seller handles all costs, risks and customs duties until the goods reach the buyer's location.

-How to calculate DDP?

Delivered Duty Paid is calculated by summing up the cost of goods, shipping, insurance and any import duties or taxes the seller is responsible for. This represents the total cost to deliver goods to the buyer, including all applicable duties and taxes.