Delivered Duty Paid: What does DDP mean for exporters?
Delivered Duty Paid (DDP) means that the exporter bears costs and risks until goods arrive at their destination. In this blog, learn more about its benefits and uses.
Commonly used in international shipping, DDP is a shipping technique introduced by the International Chamber of Commerce (ICC) that helps standardize shipping alternatives internationally. DDP in shipping is a delivery method where the exporter bears risks and expenses involved with delivering goods till the destination. When delivering goods by air or ocean freight, businesses usually only use DDP since it provides significant benefits to importers.
What is Delivery Duty Paid?
In international trade, Delivered Duty Paid (DDP) refers to a deal where an exporter undertakes the responsibility to bear all costs until goods arrive at a mutually agreed-upon destination. This includes cost of transportation, losses incurred due to damage while in transit, payment of customs tax, import tariffs, and other applicable costs. If the mutually agreed-upon final destination is the importer’s port, the importer is responsible for unloading and transferring goods from the port to the warehouse1.
Why is Delivery Duty Paid (DDP) used?
Some of the common uses of DDP are: • To safeguard the importer • To secure safe transportation of international goods to the final destination • To guarantee secure ocean or air freight delivery
Obligations under Delivered Duty paid (DDP)
• Export packaging and marking • Goods, commercial invoices, and documentation • Export licenses and customs formalities • Loading charges • Pre-carriage and delivery charges • Main carriage charges • Import formalities and duties • Cost of all inspections • Delivery to the destination • Proof of delivery
• Payment for goods according to the sales contract • Unloading charges • Assistance in essential paperwork or information for export or import clearance procedures
Advantages and disadvantages of Delivered Duty Paid (DDP)
Importer: • The exporter is responsible for goods’ freight and documentation so it allows the importer to organize for sale. • The importer has a stress-free environment since they do not have any obligation till goods arrive.
Exporter: • The exporter controls export of goods under a DDP arrangement, which allows control over logistic expenses. • It also allows the exporter to select shipping company that’s the most optimum for the deal.
Importer: • Since all associated expenses are included in the selling price, the importer might pay a higher price for goods. • Importer cannot interfere if there are difficulties during delivery.
Exporter: • The exporter bears landing expenses, which include shipping, clearance, and delivery. Even if something goes wrong on the way to the destination, the exporter is responsible for additional costs.
Timeline of DDP
Below is the commonly followed timeline when using DDP2: 1. The exporter selects, packs, and meets the other criteria for goods to be dispatched through a trustworthy shipping company. 2. The cargo is sent to the destination using any mode of transportation available. 3. Once goods reach its destination, the exporter is responsible for paying taxes. 4. Upon delivery, the importer bears responsibility for goods and pays the agreed-upon amount to the exporter. 5. Exporters are charged in the event of loss or damage, whereas importers are charged for unloading costs.
What is the cost associated with DDP?
The cost of international transportation starts even before the exporter and the importer finalizes an agreement. Shipping expenses include materials, labour and other supply chain operations that are required to deliver goods. The price of packing supplies, shipping, inventory storage space in warehouses, cost of getting export and import licenses, and other associated permissions, delivery, and labour for all of these operations are all included in these charges.
DDP is one of the most common delivery alternatives used, owing to its popularity among importers. In any agreement, it is important for the two parties to discuss and finalize terms mutually to avoid hassles later.
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Frequently Asked Questions
What documents are provided by the exporter to the importer under DDP?
The exporter gives the following documents to the importer3: • Commercial invoice • Bill of Lading • Packing list • Insurance certificate • Export license
When should one use Delivery Duty Paid (DDP)?
In the following situations, one can use DDP: • When supply chain costs and routes are stable and predictable. • If an importer does not want to get into any form of transportation arrangement with any company and would prefer to have the exporter handle these tasks. • If the exporter is confident in shipping their goods and also has a record of successfully delivering to previous customers using these incoterms. • When importer has confidence in the supplier and freight forwarder.
Who pays freight charges on DDP?
The exporter is responsible for all shipping charges and customs clearance fees, import levies, VAT in a DDP agreement.
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