DDP Incoterm is one of the 11 trade terms in the incoterms series, published by the International Chamber of Commerce (ICC). It stands for Delivery Duty Paid, a terminology which can be used for any mode of transportation. Also, it lays maximum risk and responsibilities on the seller.
Shipping Terms As per DDP, all legal formalities need to be carried out by the seller. As implied earlier, the destination port will be in the importer's country, with the importer's house/warehouse/any other place of their choice also being possible options for the destination port. The cost, risk, and responsibility of goods fall on the seller's plate too, until the goods are transported from the place of origin to the destination.
DDP places all the costs, risks, and responsibilities of a shipment on the seller. Some of the details of the exporter’s responsibilities are:
For loading and unloading goods DDP does include the loading and unloading procedure, which the seller commonly carries out. This means that the responsibility for the entire course of action rests with them.
- Initial stage: Loading of goods and transporting them to the port of destination.
- Second stage: Unloading goods and preparing them for shipping.
- Third stage: Loading of goods before shipping.
For transportation and delivery terms The transportation-related activities involved in the process could include road transport, shipping transport, and nominated place transport.
Under DDP, the seller is responsible for the delivery of goods up to the place of destination agreed by the parties to the contract.
Under DDP terms, the DDP charges are borne by the seller, including packing and loading cost, transportation & delivery cost, freight charges for freight forwarding fees, terminal and loading charges till port, insurance, and duty charges, and custom clearance charges (both for export & import).
The seller has no obligation to the buyer to insure the goods, but as a part of the customs clearance process, they have to get the insurance of goods.
Duty and customs clearances
In DDP export, the seller has to pay customs duties and deal with customs clearance procedures. They not only have to look after the export customs proceedings but also has to be the import recorder, i.e., payments of all duties and taxes on the destination country.
The seller provides the following documents to the buyer:
- Bill of Lading
- Commercial Invoice
- Insurance Certificate
- Packing List
- Export License
- A acknowledgement of transfer of risk
Transfer of risk
The risks and responsibilities of the goods being transported are transferred from the seller to the buyer at the final destination wherein they are delivered.
As implied earlier, DDP are an incredibly buyer-friendly set of incoterms. As a result, the buyer’s role and responsibilities are fairly minimal. Loading and unloading of goods The buyer has to unload the goods once they are delivered by the seller. In case the agreed-upon place of delivery is the buyer's port, the responsibility of unloading and loading goods rests with the buyer.
As per DDP, the buyer has no part to play in the transport activities. But if the nominated place is a port in the buyer's country, then the buyer has to load the goods and bear the transportation cost from the port to the warehouse.
The seller is responsible for the delivery of goods to the buyer until the destination point. The costs of delivery will also be borne by the seller.
There is no cost in DDP for the buyer, as all the proof of documents is provided by the seller. The only expenses incurred by the buyer are those that are after the delivery is done by the seller. Insurance DDP does include insurance, but there is no risk for the buyer as the goods are delivered at their place.
Duty and custom clearances
The buyer has no responsibility for customs as the import customs will also be carried out by the seller. But in some cases, the import clearance procedures are risky, so the process may be carried out by the buyer, who has better knowledge of local requirements and practices, such as GST and VAT taxes.
The seller provides the proof of documents to the buyer, so there is no obligation to the buyer in terms of DDP documents. But in critical conditions, the seller may require the buyer’s assistance for documents for clearing import procedures.
Transfer of risk
The buyer has to bear all risk and responsibility of goods after they have been delivered by the seller, that is from the port to the door of the buyer’s warehouse.
If both parties agree that the buyer will determine the place of delivery, it is the buyer’s responsibility to notify the seller accordingly. Also, the buyer has to give sufficient notice to the seller regarding the timing and delivery terms, and place of destination. This procedure can be mentioned in the contract and carried out accordingly.
When should exporters/importers include DDP in their booking?
DDP maximizes the seller's risks and obligations. Additionally, it can be used for any mode of transportation: air, sea freight, or road-based travel.
Sellers can agree to incorporate these incoterms in their trade contracts as it allows them to have a high level of control over proceedings, even if they have to bear the majority of the costs for a given shipment.
Buyers abdicate a high degree of control over proceedings in a shipment when they include these incoterms in their shipping agreement with their sellers. At the same time, they are spending a minimal amount of money, bearing minimal risks, and responsibility in any given shipment.
So, essentially this incoterm could be selected if sellers want greater control and stakes in a shipment, while the buyer wishes to bear minimal to non-existent costs and responsibilities in the same shipment.
An Example of DDP Incoterms in a Shipment?
Bloom Corp is an automobile parts exporter based in Detroit, Michigan. They are exporting a consignment of spare alloy wheels to an importer named Dale Ltd in Kingston, Jamaica. Bloom Ltd starts with executing the inland transit procedure, then clearing the freight and customs, and then shipping the wheels to the destination port in Kingston. Once the goods reach this destination port, Bloom Ltd handles import customs duty and expenses. After this point, the risk and costs are transferred to Dale Ltd.
Difference between DDP, DAP, and DPU
DDP, DAP, and DPU are all extremely buyer-centric incoterms with a varying degree of responsibility on the seller. Here are the differences:
FAQs on DDP Incoterms
When should one use DDP delivery duty paid freight terms?
The DDP incoterm can be used in conditions where the seller wishes to seize complete charge over trade arrangements & the buyer prefers less engagement in carriage proceedings.
Who pays freight on DDP?
The seller pays freight on DDP. They are responsible for all the charges till the nominated place or port.
Does DDP include unloading?
Loading and unloading of goods are to be carried out by the seller till the goods leave the exporter country's port, but the unloading of goods, once they reach the importer country's port, is to be carried out by the buyer.
How does DDP work?
The trade process under DDP starts when the seller starts to execute the inland transit procedure, and clears the customs & freight proceedings, so that they can finally ship the goods to the importer's country. Once goods reach the destination port, they also take care of import customs duty and procedure, after which the risk and cost responsibilities are transferred to the buyer.
Who is the importer of record under DDP?
The seller is the importer of record under DDP, as they not only looked after export customs but also imports customs proceedings. Does DDP include insurance? The insurance responsibility rests with the seller, and the buyer has no obligation in coverage and security measures.
What is the DDP price?
DDP price is a cost-bearing arrangement wherein the seller assumes all the expenses till the nominated place of a port.
Is DDP door to door?
DDP is a door-to-door transaction. The responsibility of delivering the goods from the point of origin in the exporter's country to the destination port in the importer's country or buyer's place rests with the seller, and here the buyer is entirely dependent on the seller for shipping and delivery of goods.
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