In international trade, certain rules govern the business relationship between buyers and sellers. These rules are called trade terms or Incoterms.
Incoterms are an abbreviation for “International Commercial Terms” published by the International Chamber of Commerce. They cover the trade arrangement from shipping costs to delivery methods, pricing, customs clearances, and import duties between buyers and sellers.
Some of the most popular incoterms include DDP, EXW, FOB, CIF, etc. To learn more about incoterms, check our exhaustive guide here.
This article would be placing more emphasis on DDP, which is the most buyer-friendly incoterm in Alibaba international trade. Ultimately, you would know all the basics about DDP shipping and when to use it when shopping on Alibaba.
What is Delivered Duty Paid(DDP)?
Delivered duty paid (DDP) refers to a delivery agreement in which the seller bears all liability, risk, and expenses related to transporting the goods until the buyer picks them up or transfers them at the destination port. It is one of the most commonly used incoterms developed by the International Chamber of Commerce.
Although DDP might be the most expensive shipping option, the buyer benefits from it because it requires less planning and logistics preparation on their part.
What fees are included for DDP shipping?
DDP is a pretty straightforward shipping method for both the buyer and the seller, whether by air freight, ocean freight, or rail freight.
If you use the DDP shipping method to ship goods from China to another country and work with a freight forwarder to plan your shipments, all fees associated with the DDP shipping are included in your invoice. The fees include:
1. Transportation costs (from a factory to a port of entry, an airport, or a freight forwarder’s warehouse)
2. Cost of export customs declaration and clearance
3. Shipping costs and fees
4. Customs clearance fees for import duties.
5. Shipping Insurance fees
6. Import tax(VAT) fees.
7. Delivery costs.
What are the seller’s rights and obligations under DDP trade terms?
Under DDP shipping, the seller calculates all costs needed to produce and ship the goods to your destination beforehand and includes all these costs in your quotation. So, when a seller gives the DDP quotation, you should understand that every other cost has been factored in.
The seller is also accountable for the following:
Creating sales agreements, shipping agreement and related paperwork
Choosing the most favorable route for cargo shipment
Organize all export clearance and import clearance procedures.
Negotiates contracts for transportation with different carriers up to the designated delivery location.
Settles the fees for all government inspections
Provides proof of delivery and is accountable for any damages or cargo loss during transit.
The seller’s responsibility only ceases when the buyer has received the cargo.
What are the buyer’s rights and obligations under DDP trade terms?
In DDP shipping, apart from receiving the goods, the buyer is not accountable for any aspect of the logistics procedure. The few obligations expected from the buyer include the following:
Sorting out unloading fees.
Arranging for any additional transportation from the designated delivery location
Extending their insurance coverage and risk coverage beyond the agreed-upon delivery location.
Is DDP shipping safe for a buyer?
Now, although a seller may choose to insure the goods to ensure their safety, under DDP incoterm, neither the buyer nor the seller is required to insure the goods. The Incoterms rules do not specifically address this insurance requirement and must be sufficiently discussed by both parties before progressing on the agreement.
While the buyer may have it so simple in DDP shipping, there are many things to watch out for.
First, a DDP shipment places the buyer’s reliance on the seller from the origin to the destination. As a result, the buyer may be at the seller’s mercy in terms of costs, even though there may be some expenses that the buyer is better able to secure than the seller.
Also, sellers are always looking for ways to cut shipping costs to make more profit. Thus, they might choose the cheapest shipping carrier available, which might translate to unnecessary delays and longer shipping times.
Some sellers might not be familiar with delivering to a particular destination, and this causes stress and delays at the port due to a lack of necessary documents or paperwork to clear goods.
Before agreeing to deal in DDP shipping with any supplier, check their reviews and ratings to ensure they have completed many successful DDP trades in the past. Better still, work with them only on referrals from trusted persons.
Choosing DFH as your freight forwarder would eliminate all the hassles of getting the right seller. We will take over the entire logistics process for you until the goods are at your required destination.
When to Use a DDP Agreement?
Based on the drawbacks mentioned above, DDP is at its most beneficial and should be considered when the routes and costs of the supply chain are predictable and stable.
Additionally, use DDP only when the vendor has been successful shipping to your country with DDP before.
Only when your supplier and their freight forwarder are trustworthy should you choose DDP.
FAQs about Delivery Duty paid.
Does DDP include shipping?
Yes. DDP includes and covers all the costs of shipping.
Does DDP ship door to door?
DDP is called a door to door shipping because the seller delivers the products right at the buyer’s premises or an agreed-upon location.
How does DDP shipping work?
First, the buyer requests a DDP quote from the supplier. After all agreements and payments have been made, the supplier takes responsibility for shipping the entire cargo right to the buyer’s preferred location.
What does DDP service mean?
DDP is an Incoterm that stands for Delivered Duty Paid shipping and is a form of shipping used when the seller assumes all responsibilities of shipping the cargo and sorting out both import clearance and export customs formalities right to the final destination of the buyer.
What is the DDP shipping term?
The DDP shipping meaning stands for Delivered Duty Paid. The seller is responsible for all logistics in moving cargo to the buyer’s final destination.
Should I Ship DDP?
You should only ship DDP when your supplier and freight forwarder are trustworthy and have a track record of shipping to your country.
Who Pays the shipping cost on DDP?
The seller pays the costs of shipping on DDP.
Conclusion of Delivery Duty Paid
Due to its popularity with customers, DDP continues to be among the most common shipping options for businesses doing international trade. It is generally in the buyer’s best interest because they take on less risk for the goods up until delivery.
However, as stated in the article, DDP can be unprofitable when dealing with untrustworthy sellers or if there are too many problems and costs involved for sellers.
With a reputable freight forwarder like DFH, which has a track record of shipping to many countries worldwide, businesses can rest knowing we’ll deliver your cargo to you stress-free and in no time.
