When it comes to global commerce, the International Chamber of Commerce sets specific rules and roles to define the responsibilities of the seller and the buyer in the trade contract.
DDP (Delivered duty paid) is an international commercial term also known as Incoterms. It is a shipping agreement in which the seller is fully responsible for the goods, including all associated responsibilities, risks, costs, taxes, and duties, until they finally reach the agreed-upon destination for the buyer and seller.
What is DDP Shipping?
DDP, or Delivered Duty Paid, is a shipping method in which a seller takes care of all the fees, risk, import/export duties, tax clearance, and additional payments for the shipping goods until they reach the desired location set by both seller and buyer.
In DDP, seller duties include;
- Transport,
- Export/import clearance,
- Duties/taxes, insurance,
- Documentation,
- Delivery to the doorstep
The transfer of liability only happens once the package is delivered to the buyer.
What does duty paid mean in DDP?
By “duty paid,” it means that all the duties, including customs duties, taxes, and fees, are being paid by the seller on imported goods.
In simpler terms, it’s the most convenient shipping method for customers because they just have to pay the purchase amount, no overheads or upfront costs.
How is DDP different from other shipping terms, Incoterms (DAP, DPU)?
DDP vs DAP (Delivered at place)
In both DDP and DAP (Delivered at Place), formally known as DDU, the seller is fully responsible for shipping costs and risks until the item is finally delivered.
The only difference is that in DAP, the buyer pays import duties, taxes, and customs clearance fees, while in DDP, the seller covers these.
DDP vs DPU (Delivered at place unloaded)
In DPU (Delivered at Place Unloaded), the seller is responsible for delivering and unloading the goods at the designated place. From that place, the responsibility is shifted to the customer, who will then be responsible for import clearance, duties, and any further transport.
Previously, DPU was known as DAT (Delivered at terminal), and it is now being replaced by the new incoterm DPU.
Source
Life cycle of DDP shipping
The DDP timeline is simple and direct. The seller bears all the liability until the package reaches the customer/buyer.
1- The seller drops off the package to the carrier
2- The package will be transferred to the destination
3- VAT is being charged when the package arrives at the destination location
4- Finally, the package is delivered to the destination
How DDP Shipping Works
The DDP shipping process follows a workflow that places most responsibilities on the seller:
- The buyer and seller agree on a transaction with DDP shipping terms
- The seller prepares a comprehensive sales contract with all details
- The seller handles packaging, carrier selection, and shipping insurance
- The seller manages export customs clearance and documentation
- The goods are loaded onto the shipping vessel after clearing customs
- The carrier transports the shipment to the destination port
- The seller pays for unloading and handles import customs clearance
- The seller arranges final transportation to the agreed destination
- Upon delivery, risk transfers from the seller to the buyer
- The buyer is responsible for unloading at the final destination
Why buyers love DDP Shipping
Because in DDP,
- Buyer just has to simply agree to the terms, pay, and wait for the goods to arrive
- All expenses are included upfront with no surprise fees
- Minimal paperwork and administrative tasks
- Increased confidence when dealing with international suppliers
- The seller bears the responsibility for the shipment until it is delivered
Why Sellers Love DDP Shipping
- Sellers can work with preferred shipping carriers and handlers
- They can negotiate rates for better profit margins
- With a hassle-free customer experience, there is an increased chance for repeat business
- Those who use DDP stand out in global markets
- It expands market reach and attracts more customers by simplifying international sales
Why DDP Shipping is not always “YES”?
For Buyers
1- When doing DDP, sellers can charge unexpectedly high shipping costs to cover all the fees, which might not always be appealing to customers.
2- The Buyer can’t tell how much they are paying for the actual product vs. the shipping associated with it, which means less transparency.
3- To cut costs on Texas or duties, the seller might choose slower deliveries that could take months, making it a less reliable approach.
4- The buyer has minimal input in the overall shipping process
For Sellers
1- High shipping costs, risk management, customs duties, and taxes make it less favourable for some.
2- If not done properly or with a lack of understanding of international customs procedures, it can cause the seller a lot of damage or monetary loss.
3- Sellers hold the maximum responsibility for the product until it reaches the buyer, which can be overwhelming.
4- Any unforeseen circumstance can reduce profits, such as inaccurate pricing or a sudden surge in duties.
5- Seller has to bear a lot of logistics and administrative burden.
When to Use DDP Shipping
1- For high-value products:
Best for items with an average order value above $30
2- When expanding into new international markets:
Allows testing global demand without establishing local fulfillment centers
3- For customer experience-focused brands:
It helps make a reasonable buyer experience with no surprise fees in the end
4- For air and sea freight shipping:
Most commonly applied to these shipping methods
5- When buyers ask for hassle-free transactions:
Especially beneficial for first-time purchases from international sellers
DDP Shipping Costs and Considerations
There are several factors that can affect DDP shipping costs that sellers should carefully consider:
| Shipping fees | Transportation via sea or air can be expensive and varies by carrier |
| Import and export duties | These vary by country and product type |
| Damage fees | Sellers must pay for any damage during transit |
| Shipping insurance | While optional, most sellers purchase insurance to reduce risk |
| VAT (Value Added Tax) | Can be 15-20% of the goods’ value plus duty |
| Storage and demurrage | Unexpected delays can result in additional storage fees |
Conclusion
As a seller, if your product meets the criteria, you can go for DDP, but if you are dealing with low-cost products, it might not be the best option.
For sellers, it might feel like they are going the extra mile, but on the customer side, it feels satisfactory, and it increases the chances for positive feedback, happy clientele, and repeat business.
FAQs
Who pays shipping on DDP?
The seller pays all the shipping costs, customs clearance, and other duties.
Is DDP more expensive?
Yes, from the seller’s perspective, it might cost more than other methods. However, if you are dealing in high-value products or customer experience-focused products, then it might be a good option for repeat business.
Is DDP free shipping?
Yes, we can say. DDP (Delivered Duty Paid) is an international commerce agreement in which the seller is responsible for bearing all the costs associated with shipment until it reaches the agreed-upon destination.
What is the difference between DAP and DDP shipping?
In both DDP and DAP (Delivered at Place), formally known as DDU, the seller is fully responsible for shipping costs and risks until the item is finally delivered.
The only difference is that in DAP, the buyer pays import duties, taxes, and customs clearance fees, while in DDP, the seller covers these.
Do buyers also pay some amount in DDP?
No additional cost other than the purchase amount. That’s why it is considered the most convenient shipping method for customers because they just have to pay the purchase amount, no overheads or upfront costs.
