EXPORTING MADE EASY
DDP (Delivered Duty Paid) is an Incoterm (International Commercial Term) used in international trade to define the responsibilities between a buyer and a seller when delivering goods. Under DDP, the seller assumes the maximum responsibility, as they are responsible for all costs and risks associated with delivering the goods to the buyer’s location, including customs duties, taxes, and import formalities.
What DDP Involves:
1. Seller’s Responsibilities:
• Delivery to Destination: The seller is responsible for delivering the goods to the final destination specified by the buyer, typically at the buyer’s warehouse or another agreed location.
• Transportation Costs: The seller arranges and pays for all transportation, including the main carriage (ocean freight, air freight, etc.), unloading, and local delivery to the buyer.
• Export and Import Formalities: The seller must handle all export and import formalities, including obtaining export licenses, customs clearance, and paying any required import duties and taxes in the destination country.
• Risk and Insurance: The seller bears all the risks of loss or damage to the goods until they are delivered to the final destination. While not explicitly required under DDP, the seller may also be responsible for arranging insurance.
• Taxes and Duties: The seller pays all duties, taxes, and other charges related to importing the goods into the buyer’s country, hence the term “Delivered Duty Paid.”
2. Buyer’s Responsibilities:
• Receive Goods: The buyer’s main responsibility is to take delivery of the goods at the agreed location.
• Minimal Risk: The buyer does not assume risk or responsibility until the goods have been delivered, which makes DDP very favorable for the buyer.
• Minimal Costs: The buyer is not responsible for any transportation, customs clearance, duties, or taxes, as all these costs are borne by the seller.
Key Features of DDP:
• All-Inclusive Delivery: Under DDP, the seller takes full responsibility for delivering the goods to the buyer, including handling customs procedures and paying all relevant taxes and fees.
• Maximum Seller Obligation: DDP places the highest level of obligation on the seller compared to any other Incoterm, making it less favorable for the seller but very convenient for the buyer.
• Transfer of Risk: The risk transfers from the seller to the buyer only once the goods have been delivered to the specified destination and made available to the buyer.
Example:
If a U.S. company sells machinery to a buyer in Germany under DDP terms, the U.S. seller is responsible for:
• Exporting the machinery from the U.S.
• Paying for the international shipping to Germany.
• Clearing customs in Germany, paying any import duties and VAT.
• Delivering the machinery to the buyer’s warehouse in Germany.
• The buyer only takes control and responsibility after the goods arrive and are unloaded at their location.
Advantages and Disadvantages:
• For the Buyer: DDP is highly advantageous because it involves minimal effort, risk, and responsibility for logistics, customs, and taxes.
• For the Seller: DDP can be risky and costly, as the seller has to handle all import formalities, customs compliance, and taxes in the buyer’s country, which may be complex and vary by country.
Conclusion:
DDP (Delivered Duty Paid) is an Incoterm where the seller assumes complete responsibility for transporting goods and clearing them through customs in the buyer’s country, including paying all associated duties and taxes. It minimizes the buyer’s risk and logistical responsibilities but increases the seller’s obligations and potential costs.