Incoterm – Delivered Duty Paid (DDP)
When using Delivered Duty Paid (DDP), the seller delivers goods until the final point agreed with the buyer, with customs import clearance paid and goods unloaded. This Intocerm gives maximum risk to the seller. The seller is responsible for all duties, taxes, VAT, and other destination charges. Insurance parties are not required and can be used for any mode of transportation.
The buyer is only responsible for paying unloading charges at the final destination.
In practice, the seller must know what to do when selling up to the final destination with all expenses covered. It is usually applicable for items like couriers where the entire supply chain cost is under control and with minimum cost variance.
Choosing Delivered Duty Paid
- If the supply chain costs and routes are consistent and predictable.
- If the buyer fully trusts the supplier and logistics partner for the shipping process.
- If the buyer has a higher budget for the shipping process and prefers having a streamlined shipping solution.
Understanding the Responsibilities
Seller’s Responsibilities: Under DDP, the seller’s primary responsibilities are listed as follows:
Packaging
The seller must prepare the goods according to different origin's export packaging standards.
Carriage Loading Charges
When the goods depart from the seller's site, the seller is responsible for expenses encompassing any charges related to placing the cargo onto the initial carrier for its journey to the export location.
Delivery Charges
The seller is responsible for transporting goods to the agreed export location, including the fees involved in the process.
Duties, Taxes, and Custom Clearances
The seller is responsible for both export and import procedure, including the documentation preparation, expenses, and other examination processes.
Transportation Charges
The seller is responsible for the inland expenses at the origin and destination, including charges from the seller's premises to the carriage and the carriage to the destination.
Carriage Charges
The seller is responsible for covering all freight costs, specifically from the port of origin to the destination.
Terminal Charges
The seller is responsible for both origin and destination terminal charges.
Buyer’s Responsibilities: All responsibilities remain on the seller’s side until the goods have arrived at the final stop. The buyer pays only for the unloading charges. Buyers must recognize that this term exclusively addresses shipping fees, import and export duties, and taxes. Additional fees are likely the buyer’s responsibility beyond these aspects.
Unloading Charges
The buyer must cover charges for unloading at the destination from the final carrier.
Pros and Cons for Buyers
Reduced Risk
Until the goods safely reach their destination, buyers bear no responsibility for them, safeguarding against damage or loss incurred before delivery.
Transparent Expenses
With the seller covering all costs until unloading, the buyer gains a clear overview of the total expenses.
Strategic Logistics
By collaborating with specific logistics companies and setting delivery deadlines, DDP can favorably tip the balance between advantages and disadvantages, offering a buyer greater control.
Minimal Involvement
Buyers merely await the cargo's arrival and accept it, alleviating stress, knowing that any issues during transit fall under the seller's purview. This can be advantageous when buyers can mitigate shipping risks and ensure efficient logistics.
Customs Complexity
The seller's expertise in customs clearance, VAT, or import taxes at the destination is crucial. Buyers have no means to verify the competence of local agents selected by the supplier, potentially leading to costly errors.
Potential Higher Costs
Placing more shipping responsibilities on the seller may increase the overall shipping expenses.
Delay Dilemma
Sellers, driven by cost considerations, often opt for slower shipping methods, reducing buyer control over delivery times. Delays are more likely when the buyer can't influence the shipping speed.
Seller’s Interests
During shipping, the seller's priorities shift from satisfying the buyer to fulfilling their contractual obligations. They may be less inclined to expedite solutions since they've already secured the sale.
Risk of Supplier Actions
When shipping is supplier-controlled, cost-saving measures may result in choosing unreliable options, elevating the risk of cargo loss or damage. Supplier-driven decisions may prioritize savings over quality.
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