What Does DDP Mean in Shipping? A Guide to Delivered Duty Paid Shipping Terms

Go back 16 Jun 2022
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DDP is one of the rules which have been developed by the International Chamber of Commerce in hopes of standardising shipping options across the globe. DDP in shipping means “Delivered Duty Paid” and this term, which is widely used within international trade, describes a type of delivery wherein the seller takes responsibility for all risk and fees when it comes to shipping any goods until they reach their destination. 

Typically, many companies will only use the DDP method when shipping goods by air or sea freight. This option actually provides many benefits to the buyer, as they will be subjected to far less risk, liability, and costs if anything goes awry during the shipping process. Although Delivery Duty Paid shipping is good for the buyer in these aspects, it does pose a large burden upon the seller due to profits becoming reduced if the process is handled poorly. 

International shipping comes with a wide range of complex rules. With each country having their own set of rules and laws when discussing customs, it can become extremely confusing for international buyers and sellers. Therefore, Incoterms like DDP being internationally recognised helps to streamline the international shipping process – making these terms commonplace when shipping across borders. 

What is DDP Shipping?

Delivery Duty Paid shipping is a delivery agreement between the buyers and sellers of goods that places any risks and responsibilities that come alongside transportation of said goods on the seller until they are received by the buyer. 

When using DDP services, buyers are not liable for the actual shipping costs, making customers more likely to purchase products internationally without the fear of being subjected to a scam or having to pay high taxes.
DDP shipping is used to protect the buyer – holding the sender responsible for the product until the customer receives what they have purchased.

When adhering to DDP Incoterms, the seller is obliged to:

  • Take care of all clearance formalities for exporting – including any and all export permits, quotas, special documents, and any other formalities related to the cargo.
  • Cover the cost of transporting goods from the packing area to the named place of delivery.
  • Arrange contracts of carriage with various carriers up to the named place of delivery. This includes any on-carriages wherever this applies.
  • Ensure that all potential risks are covered up to the named place of delivery.
  • Ensure that all goods arrive at the named place of delivery. This is because the risk and responsibility of the seller only cease when the goods have successfully been delivered.
  • Arrange and pay for all customs clearance charges at the destination’s port, all customs duties and VAT must also be paid if this applies, and all the charges incurred from carriers until the goods reach the agreed place of delivery. 

When conducting a DDP trade, the buyer’s activities are limited. They can only:

  • Take care of any further movement from the named and agreed place of delivery.
  • Cover themselves from any potential risks with insurance past the named and agreed place of delivery. 

What counts as an agreed place of delivery?

  • The end user’s premises.
  • A border post.
  • The warehouse belongs to the buyer or an agent.
  • Any other endpoint which is agreed upon between the buyer and seller.

As detailed by DDP Incoterms, neither the buyer nor the seller has a maximum obligation of ensuring the goods are being sold and transported, and any insurance requirement is not explicitly laid out within the Incoterms rules. This crucial issue should be discussed and agreed upon as part of the sales contract and the terms of the sale. 

DDP, DDU, DAP – Incoterms Explained

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Incoterms are terms that are specific to the logistics sector. Many of these terms are written in acronym form, and it can be confusing if you don’t know what they stand for – so this section is here to explain the differences between DDP, DDU, and DAP. 

DDU, Delivery Duty Unpaid, requires the end consumer, the buyer, or the person receiving or importing the package to pay any duties that are incurred once the package enters the destination country. The seller pays all duties in the country of origin. 

During a DDU delivery, customs will contact the buyer once their package arrives in the destination country, often prompting the buyer to visit the local post office to collect the package.

DDP is widely recognised as the better experience for customers, as this cross-border option takes all fees into consideration right away, allowing the seller or merchant to decide whether they pass those fees on to the customer by increasing the pricing of the product or simply pay the costs and fees themselves. 

DAP, which is known as Delivered-at-Place, means the seller or merchant takes on all the costs and risks of delivering the goods they are selling. 

Why is DDP Used?

  1. To protect the buyer:
    DDP shipments help customers to purchase internationally without the risk of being scammed. Since DDP places the responsibility of risk and the payment for the shipping of products upon the seller, it is in the best interest of the merchant to ensure the products a customer has ordered actually receive what they have ordered.
    As the time and cost associated with DDP shipping are large, scammers wouldn’t even consider using it.
  2. To ensure the safe delivery of goods to an agreed-upon international destination:
    A lot of variables are involved with international shipping, which means a lot can go wrong at any stage of the package’s journey.
    Every country has its own laws when it comes to transport, import duties, and shipping fees. In this respect, DDP shipping ensures the seller is diligent in only sending packages on the best, safest, and most efficient routes.
  3. To ensure safe delivery by sea or air freight:
    Depending on the type of product being sent, and where it is sold, safe delivery by air or sea can be a difficult feat to achieve. DDP is, essentially, an agreement that ensures the seller delivers the goods – not just taking the money and running.
  4. To hold sellers responsible for international fees:
    If a buyer does have to pay customs fees, there’s a large chance that the sale won’t even happen because they don’t know the cost of these fees. With the seller and shipper paying these international fees, DDP allows for a smoother purchasing experience as the buyer won’t need to worry about paying these fees.

The DDP Timeline

Delivery Duty Paid (DDP) follows a fairly simple supply chain timeline. The seller retains most of the potential liabilities until any products arrive with the buyer. Throughout the timeline, four major steps are involved: 

  1. Seller drops off the package with a carrier – liability lies with the seller:
    Here, the seller drops off any goods with a trusted carrier, or the carrier collects it from a location. Sellers have the incentive to use trusted and reliable carriers as it will help to reduce the risk and overall cost when it comes to shipping.
  2. Goods are shipped to the named place of delivery – seller liability:
    Packages can be shipped via any method of transportation to the destination country. This includes ships, planes, and motor vehicles. By using a trusted shipping partner, the seller will incur less risk and can be certain that the package will actually be delivered.
  3. Goods arrive at the agreed destination and are charged VAT (Value Added Tax) – seller liability:
    This is one of the main benefits of DDP shipping, meaning the buyer does not have to pay any incurred VAT – the seller takes on this responsibility instead.
  4. Package is dropped off at the agreed destination – risk transfers to the buyer:
    Once the package has arrived at its destination, the buyer is responsible for the actual product. For D2C companies, this is when they can expect to hear from their customer regarding any issues to do with the delivery. 

Contact The Delivery Group for Effective DDP Shipping

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DDP is one of the most popular options for businesses when it comes to international shipping as it is an effective way of retaining returning customers. All parties assume less risk for each product being sent until they are delivered due to the need for more credible shippers and carriers being used, so using DDP is in everyone’s best interest from a sales perspective. 

In contrast, if too many problems occur during the DDP process, the costs associated can actually make this shipping method unprofitable. 

Do you run an eCommerce business and want to begin shipping internationally with a well-respected and highly experienced UK fulfilment company? Get in touch with The Delivery Group to see how you can access the best rates with DDP shipping. 

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