Understanding Delivered Duty Paid (DDP) is essential for any business considering trading internationally. DDP is a popular shipping method for B2B traders, but there is quite a bit to unpack to ensure it’s a cost-effective shipping solution for your business.
In this article, we’ll break down what DDP is, the benefits of DDP, and some useful tips for implementing DDP shipping.
Delivered Duty Paid (DDP) refers to the shipping agreement between a buyer and a seller in which the seller assumes full responsibility for the goods until they have reached the buyer. It’s an Incoterm, an international trade term which means that it’s a globally recognized shipping agreement.
Under a DDP agreement, the seller takes on full responsibility for the risk of goods being damaged, lost, or stolen in transit, as well as all the costs – including transportation costs, export and import duty, and insurance – associated with the transport of goods until they reach the agreed destination in the buyer’s country.
Other responsibilities of the seller include:
- Drawing up any necessary documents, including sales contracts
- Meeting the needs of all requirements related to imports and exports
- Proof of delivery
The benefits of DDP (for the buyer)
DDP shipping can be an enticing shipping agreement for buyers looking to purchase goods internationally. Some of the benefits for the buyer include:
- Buyer assumes zero responsibility for the majority of costs associated with the delivery and shipping process. This can often work in the buyer’s favour; shipping costs can be complex and there can often be unforeseen shipping costs. One fairly extreme example is inspection costs – they’re rare but when they do happen, they can be expensive. Under a DDP agreement, the seller incurs the costs.
- Transparent costs in relation to the shipping and delivery process. All of the buyer’s costs are agreed upon with the seller beforehand. Once the cost has been agreed upon and paid for, there is no cost to think about until the goods are in the buyer’s possession.
- Less stress about shipping and delivery. While the buyer might keep checking their phone to ensure goods are going to be delivered on time, all other worries regarding logistics are in the hands of the seller. The buyer can also rest easy knowing that they aren’t liable for any damage or loss of goods until the goods are in their possession.
The benefits of DDP (for the seller)
By the nature of the agreement, there are naturally far more benefits to the buyer than there are for the seller. That being said, offering Delivered Duty Paid shipping could benefit the seller:
- If the seller has reliable partners in the supply chain, they can mitigate their chances of unseen costs before reaching the destination country. Having organisations in the industry the seller can rely on is vital for cost-effective DDP shipping, but if the seller has them, they can create an enviable service.
- Buyers can be more satisfied when the seller offers DDP shipping. Allowing the buyer to make their order and let the seller do the rest can be a great customer service technique. This can result in happy customers and repeat business if all goes smoothly.
Who pays for DDP and how much does it cost?
As covered above, the seller assumes all costs associated with shipment and delivery. In return, the seller will charge the buyer, usually at checkout, to include the expected costs of shipping and delivery. Once the buyer has made the transaction, they do not need to worry about further costs related to the shipping and delivery of goods.
The cost of Delivered Duty Paid shipping, therefore, will be vastly different on a case-by-case basis. Typically, the cost of DDP shipping will increase with the value of the order and the complexity of the logistics.
An alternative to a DDP shipment is Delivered at Place (DAP). Previously known as DDU (and still referred to as DDU by some), the DAP Incoterm is very similar to DDP. The seller will still take much of the responsibility and risk, except for the costs and taxes related to import clearance. DAP puts slightly more responsibility in the hands of the buyer, but not much.
Important: We know the world of international trade is complex, but always try to use up-to-date terminology on your contracts, and when communicating with customers. DDU was officially replaced by DAP in 2020, and failing to adhere to this change in your contracts might cause some headaches!
Tips for implementing DDP shipping
A DDP shipping agreement is not always the most suitable shipping method. Keep these points in mind if you’re considering offering Delivered Duty Paid shipping:
- The supply chain is reliable and stable. It means that you should hopefully be able to plan against unforeseen costs when you ship your goods to the buyer.
- If you ship to multiple countries, consider using DDP shipping on a case-by-case basis for each country. It may be more suitable to offer DDP in countries where there is a good market for your goods, or that you’ve shipped to regularly before. There’s little point in risking DDP to a country on the other side of the world that you’ve never shipped to before.
- Try and stay up to date on the regulations of each country you offer DDP to. The world of eCommerce can be tumultuous, with rules changing constantly. Taking a proactive approach will stop new rules that may affect your business from creeping up on you.
Should I choose DDP or DAP?
As a seller, it is up to you whether you offer DDP or DAP. Remember that both options put significant responsibility in your hands. You can charge a premium for DDP shipping in return for maximum responsibility, or if you want to keep the cost at checkout down and assume less risk, you can pass some of the responsibility over to the seller through DAP.
Do I have to pay DDP?
As the seller, you can charge the buyer for DDP at checkout, or include it in the price of your products. Remember, once the seller has charged for DDP, all the freight costs, taxes, and other charges associated with delivering the goods will be up to the seller to pay.
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Is DDP door-to-door?
Yes. As part of the service agreement, the buyer and the seller will agree on a delivery destination. The delivery destination can be any suitable location that has been agreed upon by both parties.
What are some risks associated with DDP?
Without proper logistics planning, there can be considerable risk to the seller when using DDP. If you’re shipping large orders internationally, it’s important to have a reliable supply chain to mitigate risks and unforeseen costs. As a seller, you have the most risk, covering the cost of any goods that are damaged, lost, or stolen while in transit.
What is the main advantage of Delivered Duty Paid?
For the seller, the main advantage of DDP is how it can help you build trust with your customers. Providing them with an all-in-one service can increase customer satisfaction if everything goes smoothly. For the buyer, the main advantage of DDP is your lack of liability until your order reaches an agreed destination.
Want to know more? Get in touch with James and James
If you would like to know more about DDP shipping or have any other questions about how James and James can take the pain out of shipping internationally, we’d love to hear from you. We’ve helped hundreds of eCommerce businesses reach new markets overseas and created millions of happy customers along the way.