When shipping across the world, your paperwork, money, and cargo may pass through different hands, intermodal points, and countries. Having the correct paperwork and delivery duty paid is extremely important as it will save you time and money.
Logistics between the buyer and the seller can get complicated, so delivered duty paid (DDP) makes sure the seller is responsible for all payments through delivery.
Incoterms DDP: Spotlight on Delivered Duty Paid
Incoterms, or International Commercial Terms, is a set of 11 individual rules issued by the International Chamber of Commerce (ICC). These trade terms predetermine what parties are responsible for the different aspects of managing shipping, insurance, and logistics.
They are accepted and adhered to worldwide, helping standardize some aspects of the world of international shipping. This helps mitigate the risk of loss during transport. In the case of damage or loss, the terms will dictate which parties are responsible.
DDP Incoterms requires the seller to insure the goods until they are delivered at the terminal at the agreed-upon port of shipment. Under these terms, the seller bears the maximum responsibility during export and import.
When Can DDP Be Used?
DDP can be used when the full supply chain cost is stable and easy to predict. Sellers may be subject to a lot of fees, including delays. So its best to use DDP when your foreseeable risk is low.
It is important that a buyer and seller determine all payment and delivery details ahead of time to avoid any unexpected surprises. In addition to customs and duty fees, US exporters may be subject to value-added-tax (VAT).
A US importer will have limited information about the shipment under DDP terms, as the seller will be handling the paperwork. A seller may also add padding, unbeknownst to the importer. However, if DDP is not accurately handled, the shipment may get delayed or held temporarily,
Benefits and Considerations of DDP
Delivery Duty Paid Incoterm is the only one that places the entire responsibility on the seller. The seller has to do that work of accurately describing and estimating the cost of the shipment, clearing it through customs, and getting it delivered to an agreed-upon location. This is good to use when working with a new shipper, and you are not sure what their delivery will be like. It is generally low risk if you are the buyer.
However, this may be the riskiest for you if you are the seller. This is particularly true exporting from the United States. In addition to standard shipping, duty, and customs fees, you may be subject to foreign fees, including VAT, additional customs, bribes, and more. It should be used with caution when working with international importers.
DDP Incoterm Obligations
Under a DDP Incoterm agreement, the seller is obliged to prepare, pack, and price out the goods for export, as well as (CFR) cost and freight. The seller will also cover (CIF) cost insurance and freight to its final destination. Once the shipment reaches its port via its arriving means of transport, the seller must move to the final destination. This is not a location named at the disposal of the buyer, but rather one agreed upon when finalizing the contract.
The buyer will be responsible to have the cargo unloaded from the arriving vessel and stored or transported. At this point, the seller has fulfilled their obligations. DDP for a buyer is usually a safe and risk-free process.
Get expert help with Delivered Duty Paid
At Asiana USA, we want to help you find the best way for you to ship or receive your cargo. If you are a buyer and are working under DDP incoterms, then that might be suitable for you and your business at this point. However, if you are an exporter, there may be better terms for you to ship under.