Delivered Duty Paid: DDP Incoterms for international freight shipping
The DDP Incoterm, short for Delivered Duty Paid, is one of the ICC trade terms created to establish responsibilities in an international trade contract. Delivered Duty Paid is an Incoterm that can be used for all modes of transport. This Incoterm gives the most responsibility to the seller, who is responsible for all freight costs and import and export duties until the named destination. Learn more about the meaning of DPP in shipping and get ready to buy and sell cargo internationally effectively.
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DDP Incoterm from 2020 – DDP shipping terms
The DDP Incoterm 2020 can be used for all modes of transport, including multimodal deliveries when multiple modes of transport are used. The DDP Incoterm establishes the most duties for the seller, who is responsible for delivering the goods to a named destination, which is usually the buyer’s designated address. The risk of the goods transfers to the buyer once the goods are made available at the agreed destination.
The DDP is the only Incoterm where the seller is fully responsible for the import customs clearance procedures in the destination country. In this sense, the DDP shipping terms are the polar opposite of EXW, in which the buyer arranges everything from the export customs clearance to delivery.
When selling goods under DDP, the invoice issued by the seller already includes the transport costs, clearance fees and any potential charge that may come up. Since the buyer is paying for the invoice that includes everything, the seller has little incentive to negotiate the best transport prices, etc., so the costs of shipping with DDP are the highest in the industry.
SHIPPING COSTS
Costs when shipping under DDP
Under the DDP Incoterm, the seller is responsible for all the steps until the cargo is made available at the agreed destination. This means they need to arrange loading, transport, export and import customs clearance, and any other expense incurred during the delivery.
See below the description of the responsibilities of the seller and buyer when shipping under DDP shipping terms.
DDP shipping: costs and responsibilities of the seller
- Packaging the goods properly and preparing them for inspection
- Clearing the goods for export
- Loading them onto the selected vehicle or vessel
- Shipping costs from the place of origin to the designated address
- Import clearance, duties, taxes and VAT at the country of destination
- Final delivery to the named place of destination
DDP shipping: costs and responsibilities of the buyer
- Paying the DDP invoice
- Unloading of the goods at the designated address
Example of DDP shipping term
For example, an Irish company sells 100,000 units of merchandise under DDP shipping terms to a US buyer. The US buyer names the point of delivery to be their depot in inland Virginia.
- The Irish company (seller) packages the items, prepares them for inspection, clears them for export in Ireland and pays a freight forwarder to deliver the goods to the US company’s depot.
- When the goods arrive at the US port or airport, the Irish company pays to unload the goods from the vessel and have them cleared for import in the US.
- The seller also books a local US trucking company to transport the goods to the designated depot.
- The buyer pays to get the goods unloaded from the truck at their depot. The buyer must ensure they have the required equipment for unloading.
DDP CUSTOMS CLEARANCE
DDP terms in export and import: customs clearance
When using DDP terms for import and export, the seller or exporter covers all duties, taxes and clearance charges. The seller is responsible for providing all documentation necessary for the trade, as well as getting the goods ready for inspection at the port of origin and destination.
In practical terms, having the seller deal with the import clearance procedures is one of the reasons why using DDP for international trade may be tricky unless the seller has proven experience exporting on this specific route. Each country has specific rules, and it may be that the seller needs to be a registered business or a resident to be able to complete the import documentation.
Shipping under DDP is very advantageous for domestic transport or shipping within a trade area, such as the EU.
INSURANCE
Shipping insurance under DDP Incoterm
Under the Delivered Duty Paid Incoterm from 2020, neither the seller nor the buyer has an obligation to purchase shipping insurance. However, because the seller carries the risk of the goods until they are ready to be unloaded at the named destination, they often purchase insurance on their end.
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