Delivery Duty Paid (DDP) is one of the 11 Incoterms issued by the ICC (International Chamber of Commerce) in the ninth edition. It lays a delivery agreement between an exporter and an importer made at the time of signing the shipping contract. As per this Incoterm, a seller/exporter is responsible for bearing all the costs and risks associated with the freight shipment. It is an exporter’s responsibility to ensure that the goods have reached safely at the importer’s disposal within the predefined period.
So, here the maximum engagement is of the seller. While the buyers are at utmost ease and comfortable with DDP in the shipping agreement, exporters are at immense risk and responsibility. However, there are shipping companies in the country that can share this burden with an exporter to transport the goods. One such name is Cogoport, an end-to-end shipping service provider. The company will look after all the responsibilities related to the process. Traders can contact the service department of Cogoport or visit their site to seek help. But first, let us understand the significance and application of DDP in the shipping process.
Door-to-door deliveries are the result of shipping contracts with Delivered Duty Paid.
DDP means the seller is liable for paying all the shipping expenses and delivery duties associated with the freight shipment. From customs duties to inland logistics charges, exporters must pay for all the expenses incurred in the process. Although buyers may offer to extend a helping hand by bearing half the expenses or a percentage of the same, it is the sole responsibility of the exporter to manage the delivery.
All the Incoterms lay ground rules in a common agreement that all the traders across the world accept and obey. DDP is one of the 11 Incoterms, and its usage specifies the cost liabilities of a freight shipment.
The first usage of this Incoterm is protecting the buyers from all the risks and costs related to a freight shipment. Most budding buyers intend to incorporate this term in the shipping agreement to acquire the goods without bearing any headache! However, it might be difficult for them to find the sellers who agree with the deal.
Some trading experts believe DDP shipments are much safer than others, given the entire process is monitored by one party. There is no chance of any misconduct between the two parties unless an exporter fails to make enough contacts in the importing country. But exporters can also aid this minor problem by taking the help of a shipping service provider.
Lastly, budding sellers may take the risk of bearing this term in the agreement to gain reliable contacts in the industry. It allows them to build business associations with different parties and also increase their knowledge and understanding of the market.
Delivery Duty Paid imposes all the burden of costs and risks associated with the freight shipment on the exporter. It becomes the responsibility of the exporter to ensure the safe and successful delivery of the goods to the destination defined by the importer.
- Shipping fees, including inland logistics charges on both sides, are a part of the DDP agreement.
- The exporter has to pay both export and import customs duties and additional fees.
- If any damage is incurred to the goods during the shipping process, the exporter is liable to bear the cost.
- If the shipping agreement involves insuring the goods before shipment, the insurance cost is also a part of the cost liabilities.
- Technically, exporters must also pay the VAT incurred on the goods. However, VAT can be expensive and tough to bear for most traders. Thus, in some cases, buyers may agree to share this burden.
Exporters have to arrange for inland logistics, loading and unloading at the port of shipment and port delivery. If the delivery destination is at a different location than the port, the exporter must also arrange for import customs clearance and delivery. All the risks and responsibilities associated with this entire process relies upon the seller of the product following DDP.
- Although exporters usually never wish to propose Delivery Duty Paid in an agreement, it might be the best time for them to use this Incoterm during the growth years of their businesses.
- Sellers may want to propose this Incoterm whenever possible. However, they must also be careful
Delivery Duty Paid is an active Incoterm in the international shipping market. As we have learnt, this agreement term lays almost all the responsibilities on the sellers. So, shippers need to take assistance from an experienced shipping company to avoid unnecessary troubles and flight risks in the process!