What is Delivered Duty Paid?
Delivered Duty Paid (DDP), often known as Incoterms, defines the responsibilities, risks, and costs associated with the delivery of goods from the seller to the buyer. It is a standardized international code developed by the International Chamber of Commerce (ICC) to promote standardized global transactions. Delivered Duty Paid highlights the maximum obligation for the seller as the seller is responsible for bearing all the costs and risks associated with the transportation of the goods, including shipping costs, import clearance, tax payment, and import duty. Delivered Duty Paid Incoterms are suitable for those sellers who aim to provide a comprehensive delivery service to the buyer.
Geeky Takeaways:
- Delivered Duty Paid refers to a delivery agreement that represents the responsibility of a seller regarding the transportation of the goods until they reach their destination.
- It is a standardized international code, used for international transactions.
- Delivered Duty Paid aims to outline the maximum obligation for the seller including, shipping costs, import clearance, tax payment, and import duty.
Table of Content
- Uses of Delivered Duty Paid
- Seller’s Obligations
- Advantages of Delivered Duty Paid
- Disadvantages of Delivered Duty Paid
- Difference Between Delivered Duty Paid and Delivered Duty Unpaid
- Delivered Duty Paid – FAQs
Uses of Delivered Duty Paid
The “Delivered Duty Paid” (DDP) Incoterm is commonly used in international trade transactions under several scenarios including,
1. Direct selling to Customers: DDP is used by those sellers who sell goods to customers in another country directly via e-commerce platforms or other channels. The seller takes up the responsibility to bear all the costs and risks associated with transportation, insurance, and customs to provide comprehensive delivery service to the buyer.
2. Retail Distributors: Retail distributors who purchase goods from sellers residing abroad opt for DDP incoterms to avoid extra costs and customs complications. This enables them to receive goods easily and conveniently without worrying about import clearance and paperwork.
3. Corporate Purchase: Corporate bodies who purchase materials or products from international suppliers to run their operations, generally negotiate DDP terms and provisions to provide the complexity of international trading. DDP also helps them to focus on their core business operations instead of dealing with import and export authorities.
4. Project-based Contracts: Infrastructural development and construction operate on a large scale for which, materials and equipment are transited globally. The buyer-friendly element of DDP makes it suitable for such large-scale project-based purchases.
5. Subscription Services: DDP is used by those service providers who offer subscription-based services that include the transfer of physical goods from one country to another, to provide a hassle-free experience for their subscribers.
Seller’s Obligations
The “Delivered Duty Paid” (DDP) out lights the major liabilities of a seller including:,
1. Delivery of Goods: The seller takes up the responsibility to deliver the goods at the buyer’s place.
2. Transportation: Seller bears all the transportation costs related to the delivery and arranges the suitable means of transport to deliver the goods upon destination successfully.
3. Export and Import Clearance: The seller is responsible for obtaining an export license and other permits required to export the goods. He also meets all the import formalities to obtain the import clearance required by the importing country’s authorities, making it a hassle-free buying experience for the purchaser.
4. Risk Bearing: Seller bears all the risks related to transportation, insurance, and customs clearance. The risk is transferred to the buyer only when the goods reach their destination.
5. Costs: Seller pays off all the costs related to the delivery of the goods, including transportation costs, export duties or taxes, import duties or taxes, customs clearance fees, and any other charges.
6. Insurance: Although sellers don’t need to ensure the goods and bear it cost, however, it is always advisable for the seller to insure their goods to minimize the risk and prevent the risk of damage while transit.
7. Notification: It is the responsibility of the seller to notify the buyer about the delivery and documents required to take custody of goods once they reach their destination port.
Advantages of Delivered Duty Paid
1. Simplified Administration: DDP entrusts the seller with the responsibility of transportation, customs clearance, and import duties, making the administration easy and simple for the buyer.
2. Cost Advantage: All the costs associated with delivering the goods to the destination are borne by the seller, hence providing a cost advantage to the buyer.
3. Risk Reduction: Like cost, all the risks associated with the transportation of the goods are borne by the sellers until the goods are delivered to the buyer at the destination.
4. Improved Customer Experience: DDP enables sellers to provide a better buying experience to their customers by taking up all the responsibilities related to the delivery of the goods.
Disadvantages of Delivered Duty Paid
1. Higher Cost for Seller: The overall cost of the seller increases as he bears all the costs of transportation, insurance, and export-import clearance. DDP often proves to be expensive incoterm for sellers.
2. High Risk and Complexity: Seller takes up the responsibility to bear all the risk of delivery. He is responsible for obtaining import clearance and other permits from the authority of the buyer’s country which may be complex and risky for the seller.
3. Limited Control for Buyer: The buyer has limited control over the transit process as the seller plays a major role in the delivery. Any delay or delivery issue can cause difficulty for the buyer as he has limited control over the process.
4. Payment Disputes: A dispute regarding payment of import charges and taxes may arise between the buyer and seller. To avoid such suggestions, the seller shall make a clear conversation over this aspect before initiating the order.
Difference Between Delivered Duty Paid and Delivered Duty Unpaid
Basis | Delivered Duty Paid | Delivered Duty Unpaid |
|---|---|---|
Meaning | Delivered Duty Paid is an incoterm that enables a seller to deliver goods to buyers aboard and bear all the cost and risk associated with delivery. | Delivered Duty Unpaid enables sellers to deliver goods to buyers’ places, but costs related to import duties and taxes are paid by the buyer. |
Suitability | Suitable for situations where the seller wants to provide a comprehensive delivery service and maximum customer satisfaction. | Suitable when the buyer wants more control over import clearance and transit. |
Import Clearance | All the formalities and costs related to Import Clearance are borne by the seller. | Buyer handles import clearance and pays duties and taxes. |
Costs and Liability | The seller bears all costs, including duties, taxes, and risks associated with delivery. | The seller bears all the costs except for import duties and taxes. The buyer is responsible for such payments. |
Control Over the Import Process | The seller enjoys full control over the import process and customs clearance. | The seller may assist the buyer in this regard but has limited control over the import process and customs clearance. |
Delivered Duty Paid – FAQs
Who pays for import duties and taxes under DDP terms?
The seller is responsible for paying all import duties and taxes associated with importing the goods into the buyer’s country under DDP terms.
Can the buyer choose the transportation method under DDP terms?
While the seller is responsible for arranging transportation under DDP terms, the buyer may specify certain requirements or preferences for the transportation method. However, the ultimate decision lies with the seller.
Why would I use DDP as a seller?
As a seller you should go for DDP because:
Increased Customer Satisfaction: Offering DDP can make your product more attractive to buyers who prefer a hassle-free import experience.
Streamlined Process: If you have experience handling international shipping and customs clearance, DDP can simplify your overall sales process.
Who is responsible for unloading the goods under DDP?
The buyer is typically responsible for unloading the goods at the final destination after they are delivered by the seller.
Is insurance included in DDP terms?
DDP terms do not specifically include insurance coverage for the goods. However, the seller may choose to obtain insurance to protect against the risk of loss or damage during transportation.
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