Spotlight on Incoterms – Spotlight on Incoterms – DDP (Delivered Duty Paid) Everything You Need to Know

Created by the International Chamber of Commerce, Incoterms are a series of three-letter designations that define responsibilities between buyers and sellers around the sale of goods, specifically related to transportation costs and liability. If you’re looking for more information on Incoterms, check out our other articles on this topic:

The Complete Guide to All 11 of the 2010 Incoterms Rules

Incoterms 2020 Rules: Everything You Need to Know

Protect Your Bottom Line by Understanding These 5 Common Incoterms

Negotiating terms in a contract to buy or sell goods can be tricky. However, knowing your Incoterms® can make the process much more straightforward. 

By understanding these common, three-letter designations, you’ll be able to recognize quickly who’s responsible for which logistics costs—the buyer or the seller. If you’re considering a contract using the DDP Incoterm, let’s discuss what it means for buyers and sellers.  

What Does DDP Mean? 

DDP stands for Delivered Duty Paid. It’s very similar to DPU (Delivered at Place Unloaded), its neighbor on the Incoterms chart. Under both Incoterms, the seller is responsible for the costs to get the buyer’s shipment to a named place agreed upon in the contract. However, unlike DPU, DDP means that the seller is also on the hook for any import duties, taxes, or customs clearance costs. 

DDP can be a very convenient Incoterm for a buyer. All they have to do is place their order with the seller, who will handle all the rest. However, that ease often comes at a cost. Additionally, DDP can be a tricky Incoterm for a seller. We’ll explain why. 

What Is the Seller Responsible for Under the DDP Incoterm?
DDP creates a heavy lift for a seller. When agreeing to this Incoterm, the seller is responsible for all the costs involved with moving goods to the named place in the agreement. That includes all packing and loading, transit, delivery, import/export, and unloading costs.  

As a result, sellers usually offer goods sold under the DDP Incoterm at a higher cost to protect their margins. Sellers may also want to consider insurance since they’re responsible for the shipment until its arrival at the named place. 

DDP is the only Incoterm that places import costs on the seller. As a result, less experienced sellers might consider a different Incoterm, and leave buyers to deal with their own import duties, taxes, and customs fees. 

What Is the Buyer Responsible for Under the DDP Incoterm?
The seller handles pretty much all of the transportation costs under the DDP Incoterm. As a result, the buyer isn’t responsible for arranging or paying for any of the logistics. 

However, buyers should be aware that goods sold under the DDP Incoterm usually come at a higher cost. If you’re a more experienced buyer, you may be able to negotiate a lower per-unit cost from the seller under another Incoterm. Although it would require you to arrange and pay for some of the transportation costs, you might still come out ahead when you tabulate your final cost in the end. 

Incoterms Insights: DDP 

If you’re considering a contract with the DDP Incoterm, talk to one of our experts. If you’re the seller, we can help you arrange for transportation—and give you an accurate estimate of your costs so you can quote a price with confidence.