DDP incoterms, one of the Incoterm rules imposed by the International Chamber of Commerce, is widely considered a riskier approach for sellers. It bounds them to be solely accountable for the shipping costs and more. Whereas it gives leverage to the sellers, it still highlights the responsibilities of both buyers and sellers. Are you curious to know more about these shipping incoterms? We have got you covered in the article below!
In this ultimate guide, we will walk you through what DDP means, its advantages and disadvantages, what obligations it offers for sellers and buyers, and more. Let’s dive in to get started!
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What do You Mean by DDP Incoterms?
DDP incoterms, Delivery Duty Paid shipping, means that the seller will be responsible for the safe shipping of the goods, whether it involves import or export. Alongside that, they will be obliged to clear out any duties if imposed. Note that all these responsibilities are generally of buyers, but DDP shipping gives them leverage.
In short, sellers account for the ones who will deal with all the customs formalities when shipping goods to the destination. The destination here refers to the place where both parties have agreed to deliver the goods. It’s mostly within the seller’s premises.
DDP Incoterms account among the 11 Incoterms rules by the International Chamber of Commerce. Other rules include the FCA Incoterms, DPU Incoterms, and more. However, our main focus in this article is the DDP incoterms, so without any further ado, let’s get deep into what awaits exploration!
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What are DDP Incoterm Obligations for Buyers and Sellers?
Now that you have got an answer to the query “What is DDP shipping?” you might want to get in-depth knowledge about the obligations of buyers and sellers under this Incoterm rule. If that’s the case, we have got you covered below!
Seller’s Responsibilities
These can be divided into responsibilities on the export and import sides.
Export Side
- Structuring sales contracts and other related documents
- Hiring a reliable logistics company
- Paying all sorts of shipping costs, including shipping taxes, duties, and logistics company charges
- Paying for export packaging, loading charges, insurance, pre-carriage, and delivery
- Making necessary documents for export clearance
- Making commercial bills for the entire shipment costs
Import Side
- Dealing with import clearance formalities
- Getting shipping approval from the destination’s local authorities
- Acquiring import license
- Handling import clearance inspection and its dues
- Paying import duty, local taxes, and VAT charges
- Making a proof of delivery
- Pre-alerting the buyers about the shipping time and date
- Handing over the goods to the buyers on the cargo
- Paying for the damage, if any, caused during shipping
Buyer’s Responsibilities
In this kind of shipping, buyers have minimal responsibilities. These include the following:
- Payment for goods according to the sales contract
- Paying unloading charges once the goods have reached the agreed destination
- Helping out the sellers in dealing with the required documents for export and import clearance formalities
What are the Advantages and Disadvantages of DDP Incoterms?
In this section, we will highlight the advantages and disadvantages of DDP for buyers. You can assume advantages for buyers to be disadvantages for sellers and disadvantages for buyers to be advantages for sellers. Let’s hop on to the details now!
DDP Shipping Incoterms Advantages for Buyers
Following are the key advantages offered to the buyers by the DDP incoterms:
They Can Skip Paying Delivery Costs
As explained earlier, sellers will pay for all the shipping costs; buyers will only have to pay for the product’s price. Once they have the product at the destination, there will be no hassle paying for any dues, be their taxes, duties, surprise charges during shipping, or whatever.
The seller will Pay the Inspection Fee, if Any.
Importing and exporting countries both might have varying inspection rules and fees. But one clear thing is that the inspection fees are always higher and can become a headache for whoever is obliged to pat them. DDP incoterms free up buyers from any inspection costs that usually charge higher.
No Need to Worry About Damage During Shipping
In DDP shipping, buyers just have to accept their cargo on its arrival. They are free from the worry of any damage during shipping because they know sellers will be obliged to take the transit responsibility if there’s any.
However, if both buyers and sellers agree on hiring a reliable logistics company and shape their agreement in a way to reduce the risks of any shipping delays, DDP can prove much more beneficial. These companies are responsible for shipping to the agreed destination on the specified date. But still, the seller’s agreement is necessary, as he will be paying for the logistics company’s charges.
DDP Shipping Incoterms Disadvantages for Buyers
Though DDP shipping seems to favor buyers in all the ways possible, still, there are some hidden disadvantages that buyers have to face. Some of them are listed below. Just hop on to give them a quick read!
Greater Chances of Shipping Errors
As everything regarding shipping is left to the sellers, buyers can expect greater chances of shipping errors. They have no idea whether the sellers are experts or novices in shipping and customs clearance. Even if the sellers win faith by hiring a local logistics company, the risks don’t diminish, as buyers can’t estimate or evaluate to what extent that company is pro in handling shipping.
Sellers will Tend to Save More.
In most cases, sellers save every penny to maximize their profit. So, buyers can expect them to choose a cheaper option when considering the logistics option. No doubt, if any damage happens, it will damage sellers more, but buyers have to compromise on time wastage during re-production and shipping of goods. Moreover, “What if the buyers disagree to pay for the damage?” remains an alarming question for them too.
Slower Shipping
To spend as much less on shipping as sellers could, they might go with the slowest shipping option available, as it will cost them less. Here is to note that during DDP shipping, buyers have no right to decide on shipping time or suggest any possible quick delivery option. However, selecting an experienced and reliable buyer can help solve this issue.
In short, an irresponsible seller or his irresponsible choice of logistics company can make the selection of DDP shipping the worst for the buyers. They must compromise on time wastage, take risks, and more.
DDP VS DDU VS DAP- What is the Differences
Now that you have gained enough knowledge about the different aspects of DDP shipping terms let’s explore how these incoterms differ from that of a few others on the International Chamber of Commerce list.
DDU (Delivered Duty Unpaid) and DAP (Delivered at Place) are essentially the same terms. Back in 2010, the International Chamber of Commerce introduced the term DAP Incoterms to simply replace the existing term, DDP Incoterms.
DAP is much similar to DDP’s meaning and imposes somehow similar obligations. Meaning sellers will be the ones to ship the goods to the destination place, ensuring safety during delivery. However, DAP differs from DDP in one aspect the buyer will sort out the import process.
The buyer will deal with import clearance, dues, taxes, and safe unloading of the goods at the destination. It’s favorable for the seller, as sometimes local import rules are way complex and inflexible, and buyers being residents, better know how to deal with them. This is the main reason why DAP is sometimes prioritized over DDP.
But if the seller better understands the shipping formalities, DDP should be preferred. In short, both parties must clearly understand the DDP and DAP Incoterms before deciding on one.
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FAQs
1. Who Pays for DDP Shipments?
The seller of the goods is responsible for paying DDP shipment costs, whether it’s the custom duty, taxes, clearance fee, inspection charges, or more.
2. What Is the Risk of DDP?
DDP includes multiple risks, and these are transferred to the buyers, as sellers can tend to play irresponsibly in a bid to reduce shipping costs.
3. Who Is the Importer under DDP?
The foreign seller of the goods plays the role of an importer in DDP shipping. He must have enough knowledge of the destination’s local shipping rules to avoid any shipment issues.
Conclusion
That was all about how DDP can favor or increase the risk for buyers and sellers. Going through the above details, you must have noticed that most shipping issues are created by irresponsible or novice logistics companies. However, we suggest relying on NextSmartShip as it’s a faster yet more affordable shipping solution.
