What is DDP Shipping?
Delivery Duty Paid (DDP) shipping is where the seller takes all responsibility for fees and risks of shipping goods until they are delivered to an agreed place by the buyer and seller. DDP differs from Delivery at Place (DAP) as the seller is responsible for the import formalities and transportation of the goods, including unloading the goods.
DDP shipping is commonly used for international shipping as the risks are reduced but as a result, the costs are higher. When using DDP shipping internationally, the buyer is also responsible for paying any tariffs and taxes when importing the goods into the buyer’s country.
What is DAP Shipping?
Delivery at Place shipping offers many of the same benefits as DDP but without as much risk to the seller. Under DDP, the seller shoulders all of the responsibility, which can leave the sellers exposed to unknown costs, particularly when selling internationally which can lead to problems at customs.
Under DAP, the buyer is responsible for the unloading, packaging, labeling, freight, customs clearance, duties, and taxes. The majority of problems for sellers using DDP come when trying to sell internationally and in particular, through customs. It can be problematic selling into some countries where goods cannot be passed through customs or the custom process is complicated. In these scenarios, it makes sense for the buyer to take responsibility as they are more likely to be familiar with the terms of the customs for that country.
What are the benefits of shipping DDP?
DDP shipping allows the buyer security and reduces risk which can be especially important when shipping internationally. With certainty comes confidence and an increase in conversion rate and the opportunity to win business internationally.
The seller has full responsibility for the delivery and with an agreed place for delivery with the seller, can take full control that the goods will arrive safely and on time.
The cost and responsibility of risk can be sizeable for businesses, especially if your average order value is low.
What are the benefits of DAP shipping?
Delivery at Place offers security to both parties that they will be protected at different stages of the journey.
For the buyer, they can have confidence that their goods will be delivered from the origin to their delivery at the place agreed with the buyer, ready for unloading at destination.
And for the seller, they can offer a secure method for international shipping that works for the customer, but also not be responsible for any of the potential pitfalls around customs clearance, and duties and taxes of the importing country.
What are the cons of DDP shipping?
Due to the increased cost of shipping and potential tariffs, the products need to have a high average order value in order to remain profitable, especially when it comes to luxury goods fulfillment.
The seller will be exposed to more risk as if there are any problems with a delivery, the seller will be responsible for the costs.
As the main benefit of using Delivery Duty Paid is international shipping, customs can face a potential problem for sellers. In some countries, it’s not always possible to clear the goods through customs, and in some countries where customs can be complicated, it would make sense for the buyer, who knows the customs, to handle the process. In the case where the goods do not clear customs, this can cause delays, increases in cost, and a change in delivery methods.
What are the cons of DAP shipping?
The cons of DAP shipping are also the pros. Some buyers may prefer that sellers take as much responsibility as possible, to have the most secure delivery attainable without any of the risks. The consideration for the seller comes down to whether they want to handle a great proportion of risk and cost in order.
Why is DDP and DAP used?
DDP and DAP are used to protect the buyer from risks and costs when shipping goods to an agreed destination. This is done to help build trust and relationships with sellers as well as to offer protection for international customers.
Using incoterms shipping can conversion rate, with increased buyer confidence through the fact they have reduced liability for shipping costs, making them more likely to purchase products without fear of fraud or having to higher taxes from international delivery.
Both DAP and DDP shipping also guarantees that the delivery will arrive at a named destination for both parties, which is important with international trade. The seller will be responsible for ensuring the goods arrive at the agreed place safely, by sea or air freight, and this security is good for both parties.
DDP under incoterms 2020
Whether buying or selling overseas, it’s important to be familiar with the International Commercial Terms (Incoterms). The terms were updated in January 2020 which can be downloaded from the ICC website.
Offering a secure form of international shipping will help you expand your business globally but with rising costs along every step of the supply chain journey. We offer both DDP and DAP shipping and have experts in-house to help talk you through shipping options, fulfillment services and international expansion.
Click here to find out more about DDP and DAP.