Delivered Duty Paid (DDP) [Incoterms]

Who is responsible for what when using Delivered Duty Paid (named place of destination)?

DDP is quite unique among the other incoterms as it’s the only one where the vendor is responsible for customs clearance and paying taxes and duties; it is almost the opposite of EXW. If they quote DDP it means that they’re going to be including the shipping and duty costs into the price the buyer pays for the goods. The buyer’s responsibilities are minimal, but you may need to provide certain information and documentation to your vendor upon request.

Vendor’s responsibilities

• Manufacturing and finishing the products, packing them for transit, and affixing shipping labels
• Arranging internal freight from the facility to the port/airport
• Preparing the import/export documentation and paying the necessary import and export duties, tariffs, taxes, VAT, etc
• Arrange and pay all sea, air, and/or truck freight costs to the buyer’s required destination
• Purchase cargo insurance (this is optional, but may be preferable to the vendor who is responsible for the products during transit)
• Pay any inspection costs (if performed by the buyer’s country’s local government officers — that’s common for certain commodities in certain countries)
• Provide the buyer with proof of delivery
• Cover the costs or loss or damage up to the point of unloading at the destination

Buyer’s responsibilities

• Unloading costs
• Pay clearance payments
• Domestic shipping to your customers/regional fulfillment warehouses, after you received the goods in the designated warehouse

Why would you agree to ship DDP?

Usually, this is not the best incoterm to choose as we’ll explore in the next section. However, if you have a really good relationship with your vendor and they have a good history of being able to ship to your country and location with minimal delays and issues, then they can be trusted to handle the logistics side of things.

Another instance where Delivered Duty Paid is preferable is if a buyer has little experience with importing products and needs to lean on their supplier to handle that part of the process. If the vendor does a good job then this is very convenient, but the question is: Can they be trusted to handle it?

DDP becomes a far better option, though, if you’re able to agree with your vendor for them to use a freight forwarder or shipping company who provides a good price and specializes in shipping to your location. Or if you work with a 3PL company that has done it before (for instance, at Sofeast we do it regularly for some of our regular clients who are in certain countries).

Delivered Duty Paid Pros

• If your vendor prides themselves on delivering a very high level of customer service they may insist on providing DDP to help buyers have an easier time.
• If a vendor regularly ships to, say, France, then they can probably be trusted to provide DDP shipping as they are experienced in arranging shipping, the customs and tax regulations, and probably has a mature relationship with a relevant freight forwarder, customs agent, etc.
• Buyers have very low risks, and can rest assured that they have no responsibility over the products until they’re unloaded at the port.
• You don’t have to deal with customs clearance which can be complex, and if there is an unexpected inspection, the vendor pays the fee for this.

Delivered Duty Paid Cons

• DDP is likely to cost buyers more than other incoterms, such as FOB, because you have no control over which freight forwarder, shipping company, or shipping method is used.
• You are more likely to suffer from delays when accepting DDP shipping as the vendor is more likely to choose the cheapest slowest carrier. Make sure to get their commitment on a ETA (delivery at your door) date!
• If the buyer is in the USA, the vendor will need an export license in order to export, as the States don’t allow freight forwarders to complete customs clearance on their own. (There are workarounds, such as using a third party that has an export license.)
• If your vendor is not very experienced in shipping to your country, mistakes in the paperwork could occur leading to further costs and delays. If the vendor makes a mistake when paying customs fees, import duties, or VAT, for example, the government is likely to come after you, the buyer, to recover the remainder, as it will deem it easier than chasing the foreign supplier. If you have already paid DDP prices, this could easily leave you out of pocket.
• You, the buyer, forfeit all control over the shipment of the products. This means that you can’t select a better value shipping method, for example.
• Once the buyer has paid DDP they’re locked into whatever shipping option the vendor chooses. If there is an issue or delay it’s easy for the vendor to just ‘blame the shipping company’ (even if they chose a poor option), but this doesn’t help you to resolve the issue quickly and you have to wait for the vendor to try to resolve it at their end.

Any similar options?

Yes. Read more about DDU vs DDP shipping.