Incoterms® (or International Commercial Terms) are essential terms of international trade that define the rules and responsibilities of sellers and buyers. Understanding which Incoterms® rule to use for shipping your cargo is crucial to avoid unforeseen costs or unnecessary risks. Here, you’ll learn about the meaning of Delivery Duty Paid in shipping, and where the responsibilities lie between buyers and sellers.
What is Delivery Duty Paid in shipping?
Delivered Duty Paid (DDP) is one of the 11 Incoterms® rules set by the International Chamber of Commerce. DDP Incoterms® places the maximum responsibility on the seller, and the least on the buyer. The seller bears all the costs and risks involved in bringing the goods to the named place of destination and has an obligation to clear the goods not only for export but also for import, to pay any duty (e.g. VAT, GST) for both export and import and to carry out all customs formalities.
The ‘named place’ is the agreed place between the seller and buyer where the delivery will take place and is usually on the seller’s own premises. Essentially, the seller is responsible for the entire process, apart from paying for the goods, which is, of course, the buyer’s responsibility.
The list below demonstrates the responsibility breakdown between the seller and the buyer.
The seller’s obligations under the DDP Incoterms®:
- Delivery of goods and documents required
- Packaging and wrapping
- Inland transport in the country of origin
- Customs handling fees at the origin
- International freight
- Destination charges
- Customs handling fees at destination
- Payment of duties and taxes
- Inland transport to the destination country (depending on agreed location)
The buyer’s obligations under the DDP Incoterms®:
- Payment of goods
Once the goods are ready for unloading at the agreed destination, the risk then transfers from the seller to the buyer.
DDP vs DAP: What is the difference?
DAP is a similar Incoterms® rule to DDP and stands for “Delivered at Place.” Just like with DDP Incoterms® (Delivered Duty Paid), the seller bears all risks involved in bringing the goods to the named place. However, under the DAP rule, the buyer is also responsible for sorting out the import process including unloading the goods at the destination, which is, under DAP, at the buyer’s risk. The buyer is also responsible for import clearance and any applicable local taxes or import duties.
Often, the buyer will be in a better position to handle local import customs formalities, since, in some countries, import clearance procedures can be very complex and bureaucratic. This is a reason why DAP in some cases is preferred over DDP. However, if the seller has the capability to handle everything smoothly themselves, DDP might still be the preferred option. Nevertheless, it can be helpful to have a clear understanding of both options to make the right decision for your business.
Incoterms® and the Incoterms® 2020 logo are trademarks of ICC. Use of these trademarks does not imply association with, approval of or sponsorship by ICC unless specifically stated above. The Incoterms® Rules are protected by copyright owned by ICC. Further information on the Incoterms® Rules may be obtained from the ICC website iccwbo.org.
