DDP Shipping: Definition, Obligations, and Benefits [Ultimate Guide 2023]

International commercial terms, or Incoterms, are developed to simplify the global freight shipping process. And DDP ( Delivered Duty Paid), as one of the most commonly used Incoterm rules, determines what obligations will be placed on the seller and the buyer, respectively. What is DDP shipping? Who pays for the DDP shipments? Here we offer a comprehensive guide on DDP international shipping. Read on to get more details, so you won't be confused next time.

1. 1. What Does DDP (Delivered Duty Paid) Mean in Shipping?
2. 2. DDP Timeline: Understanding How DDP Shipping Works in Steps
3. 3. What Are the Seller's Obligations Under DDP Shipping?
4. 4. What Are the Buyer's Responsibilities When Using DDP Incoterm?
5. 5. DDP vs. DAP vs. DDU
6. 6. What Are the Benefits of DDP Shipping?
7. 7. Why Should Buyers Choose DDP Shipping?
8. 8. DDP Fees: What Are the Costs Involved in DDP Shipping?
9. 9. Professional DDP Shipping Solutions Offered by Seabay Logistics

1. What Does DDP (Delivered Duty Paid) Mean in Shipping?

DDP stands for Delivered Duty Paid, an incoterm often used in international logistics and global transactions. The DDP agreement states that the seller (also known as the shipper) should assume all responsibilities, risks, and costs coming with the cargo delivery process until the buyer receives the cargo at an agreed destination.

DDP, as an incoterm, plays a big role in the international shipping industry. It was first introduced by the International Chamber of Commerce (ICC) with the intention of standardizing and simplifying global shipping. Indeed, it worked. DDP applies to all transportation modes, including multimodal transportation. Under DDP, the seller will take up the maximum responsibility. Only after the cargo is unloaded at the destination place the responsibility and risks will be shifted to the buyer.

DDP shipping or Delivered Duty Paid shipping can be used in both sea freight and air freight. Since air freight shipping costs a lot of money and sea freight shipping costs a lot of time, applying the DDP Incoterm is a good way to protect buyers from financial losses. Besides, the DDP shipping agreement represents a promise made by the seller to deliver the goods via sea freight or air freight on time.

2. DDP Timeline: Understanding How DDP Shipping Works in Steps

1. 1. Seller hands over a package to a carrier or freight forwarder.
2. 2. Carrier collects packages.
3. 3. The package is shipped to the designated place of delivery.
4. 4. The package goes through customs clearance procedures.
5. 5. The applicable duties and taxes, including VAT (Value Added Tax), are charged accordingly.
6. 6. The package is dropped off at a named destination address where the obligations and risks transfer to the buyer.

3. What Are the Seller's Obligations Under DDP Shipping?

• ● Providing goods
• ● Picking-up & packing & labeling
• ● Preparing the commercial invoice
• ● Preparing documentation (in paper/electronic form)
• ● Arranging the transportation of goods
• ● Handling both import & export clearance
• ● Arranging cargo insurance (if there is a need)
• ● Paying for customs duties and taxes
• ● Covering other expenses associated with shipping goods (i.e., insurance fees, demurrage fees)

4. What Are the Buyer's Responsibilities When Using DDP Incoterm?

Under DDP Incoterm rules, when the goods are unloaded at the destination port, it turns to the buyer to take on the risks and costs. However, before the unloading, there still remains something the buyer should do:

• ● Helping the seller to get together the necessary documentation
• ● Negotiating what terms will be listed in the contract with the seller, including when and how to make a payment
• ● Figuring out whether the goods are subject to Value-added Tax (VAT) or Goods & Services Tax (GST) before deciding to ship DDP
• ● Making the payment

5. DDP vs. DAP vs. DDU

Incoterms involve many international trading terms except for DDP (Delivered Duty Paid). Some relevant terms need to be clarified. Or, confusion remains. Here we will show you the main difference between the Incoterms of DDP, DDU, and DAP.

What is DAP?

DAP refers to Delivered at Place, an Incoterms used in international shipping. With DAP, the seller bears all costs and obligations until the goods are delivered to a named place. It means the seller should collect the goods, package the goods, prepare documentation, handle exporting, load the cargo, and deliver the goods to a specified location. And the buyer is the one who has to be responsible for navigating customs clearance for import, paying import duties and taxes, and taking care of unloading.

DDU Meaning in Shipping

As for DDU, Delivery Duty Unpaid, is another Incoterm rule that was replaced by DAP in 2010. DDU and DAP have set out basically the same responsibilities for the seller and the buyer. However, since the introduction of Incoterms 2010, DAP has been officially used in international trade contracts instead of DDU.

DDP vs. DAP

Learning about the main difference between DDP and DAP can help you make a more informed shipping decision. What is the difference, then? The DDP rule has stipulated that sellers need to cover duties and taxes. While the DAP Incoterm serves as the opposite. With DAP, it rests upon the buyer or the customer to pay the duties and taxes incurred. Once the goods enter the destination country, the customs authority will reach the DAP buyer for clearing goods and charging duties and taxes.

Both DDP and DAP are Incoterms valid to use. Whether it is shipping DDP or shipping DAP, the seller is obligated to deliver the goods to an agreed place on time. And that is essential for both sellers and buyers.

6. What Are the Benefits of DDP Shipping?

For buyers, DDP indeed brings various benefits. First and foremost, buyers are faced with reduced risks. What's more, buyers don't have to figure out ways to navigate complex customs clearance. Last but not least, the buyer does not need to spend their time on calculating taxes and duties.

Although it is not rested on the seller to purchase cargo insurance, the seller is always the one who handles insurance in order to avoid cargo damage and cargo losses. Cargo insurance means an extra layer of protection, reducing the buyer's financial losses to the minimum.

Other potential pitfalls may be found in customs procedures. Managing customs often requires extensive local knowledge. Complicated procedures and rapidly changing regulations add to the difficulty. A small mishap may lead to unwanted bills, customs holds, or even rejected shipments. However, with DDP shipping, the responsibility of clearing customs is transferred to the seller. In most cases, sellers will utilize their local resources to clear the goods smoothly.

Different duties and taxes represent another headache. For example, sometimes, the importing country will charge VAT/GST on the imports. With DDP, sellers will collect customs-related fees along with other shipping costs during the checkout. Buyers make a payment, and there is no more worry about handling customs fees. There is no specific rule as to when the payment should be made. The two parties should reach an agreement before delivery.

7. Why Should Buyers Choose DDP Shipping?

Different incoterms will lead to different shipping methods and shipping costs. It is still highly recommended that buyers choose DDP shipping because it can greatly save buyers' time and energy. With the contract of sale, the seller is legally bound to deliver the goods to the destination on time and ensure the goods are in fine condition. The intricacy of shipping cargo internationally would not be that intimidating if buyers decide to use DDP.

8. DDP Fees: What Are the Costs Involved in DDP Shipping?

Here let us learn about several types of fees that can be involved in the Delivered Duty Paid (DDP) shipping process so next time, you will know how to access and calculate the DDP-related fees and how much you need to cover when opting for DDP shipments.

Costs of Cargo Transportation

Freight shipping costs are based on the following factors: transportation modes(sea freight or air freight), shipping routes, cargo types, shipment dimensions, shipment weight, distances, and more. You can ask for freight quotes from multiple carriers/freight forwarders and compare them until you have the most competitive price. Here you are mostly welcome to request a quote from Seabay Logistics. We will propose a tailored DDP shipping solution whenever there is an importing need. Contact us right away and get the best shipping rate.

Customs-related Costs for Importing and Exporting

Customs-related fees will incur during the importing and exporting procedures. Besides, there are import duties and taxes required to be paid for clearing the goods. The way how duties and taxes are calculated is shipment-specific. Customs regulations vary for different countries.

Valued-added Taxes (VAT)

Valued-added Taxes are part of the import taxes, which depend on the cargo type, the declared value of the cargo, Goods and Services Tax (GST), Value Added Tax (VAT), and more. Under DDP, the seller is obligated to cover the Valued-added Taxes.

Insurance Fees

Obtaining cargo insurance is not mandatory when shipping DDP. However, sellers usually tend to purchase insurance to minimize potential risks.

Demurrage and Detention

Here come the unwanted fees: Demurrage and Detention. Shipping delays caused by customs authorities, supply chain shortages, freight capacity limits, or other factors will probably lead to unexpected demurrage and detention fees. When using DDP, ensuring an on-time delivery is important. Or, unwanted bills can quickly add up.

9. Professional DDP Shipping Solutions Offered by Seabay Logistics

Ready to cut your busy work? We are well-versed in DDP shipping. You are absolutely welcome to outsource the most difficult shipping task to us. At Seabay Logistics, we have built a vast network of overseas agents who are quite familiar with changing customs regulations and requirements. Together we will provide DDP shipping solutions that include conducting logistics operations professionally, handling customs clearance smoothly, and avoiding unexpected delays. We also offer the most competitive freight rates. You can ask for an instant quote via our website and get started on shipping your freight today.