Incoterms are regulations put in place by the International Chamber of Commerce to establish export and import clearance guidelines for the delivery of goods between seller and buyer. There are two main groups of these regulations. Those in Group I set the rules for all modes of the transportation of goods, and those in Group II refer only to modes of transportation at sea and in Inland Waterways for supply chains. DDP (Delivered Duty Paid) Incoterms belong in Group I since they relate to all modes of the transportation of goods.
When the incoterms were devised for the shipping industry, certain considerations within the categories apply to all the various degrees of responsibility assigned to either the seller or the buyer. There are distinct levels of responsibility with each type, and the most encompassing for the seller is the DDP Incoterm. This carries risks as well as benefits, and the exporter usually chooses this path when shipping internationally.
Benefits to the Exporter
The exporter who offers the DDP Incoterm option has agreed to accept total responsibility for importing the shipment of their goods. This includes absorbing all the costs from the factory to the buyer’s door and being fully accountable to anything that happens in between. The seller carries all the risks until the buyer signs that they have received the cargo. The total shipping costs, customs clearance, warehousing and storage are all part of the seller’s responsibility. There are several benefits to the exporter when they choose to operate in this manner which makes this approach probably the most frequently used.
Controlling the Price
There are different costs associated with shipping a product with international trade. The landed cost of your goods is the total cost of the transaction of shipping the goods from the factory floor to the buyer’s door. This cost is the sum of the cost of the goods, insurance costs, shipping costs, customs fees, and any other charges that may appear such as storage fees, drayage fees, or warehouse fees. If the exporter has the capability of handling these costs, it turns out to be better for the buyer and in the long run a better deal as well for the exporter. The result is that there are no surprise invoices from an unexpected source, and the goods arrive safely and on time.
Controlling the Risk
The exporter bringing the goods may choose to hire a company to provide the DDP solution to their shipping needs. Asiana USA is skilled at putting all the shipping pieces together to ensure a smooth transfer and unloading the goods. A company with our expertise can anticipate the risks involved with delivering the goods, adapt to the demands of specialized and customized shipping agreements, and arrange for reliable drayage and storage.
It is no small inconvenience to have the goods that have been manufactured arrive at a foreign port only to lack a document that should have been prepared by the buyer to clear the goods for delivery. This is the kind of unnecessary hassle that can occur if the exporter is not knowledgeable of the customs requirements and how to address them. Working within the DDP Incoterm a freight forwarder or a company specializing in handling all responsibilities can remove this stress related aspect of the shipping process.
The delivery duty paid DDP solution for the exporter is one that is a complete approach to the shipping transaction. When an exporter focus on the entire scope of the project, it reduces the need to find other outside resources to complete the task. Sometimes the exporter can combine customs knowledge and experience with shipping know-how and support to simplify the process and make sure the shipping works for both the buyer and the seller to save money and time.