DDP also stands for Delivery Duty Paid, where the seller is responsible for delivering goods to a buyer country and handling all aspects of shipping. The DDP incoterm is a good option for buyers as it minimises the financial surprises and logistical challenges.

Under the DDP, the seller is responsible for handling all the costs associated with delivering goods up to the place of destination. After that, the buyer is responsible for unloading the goods and taking them to the next destination.

Also Read: What are Incoterms?

According to the DDP agreement, the buyer and seller have different sets of responsibilities. Let us understand these responsibilities in detail.

Buyers Responsibilities

Under the DDP process, the buyer is not responsible for the logistic process other than receiving the goods. When the goods have been delivered to the specified destination, responsibility will then shift to the buyer.

He will be responsible for unloading charges and any other additional charges. Let us understand the buyer responsibility based on certain categories:

Loading and Unloading of Goods

The buyer must unload the goods once the seller delivers them to the agreed-upon location. For instance, if the agreed-upon location is the buyer’s port, then the responsibility of unloading the goods is on the buyer itself.

Transport and Delivery Conditions

Generally, in DDP incoterm, the buyer has no role in the delivery and transport-related activities. However, if the mentioned delivery place is a port in the buyer's country, then it is now the buyer's responsibility to load the goods and transport them to the warehouse. In that case, the buyer will bear the transportation cost.

Cost

The seller bears most of the costs in DDP, including export duties, freight, import taxes, and local delivery to the buyer’s location. The buyer only pays for unloading and post-delivery handling if these services are not included in the agreement.

Insurance

The seller usually arranges insurance until delivery. However, the buyer may opt for additional coverage, particularly for high-value goods.

Duty and Custom Clearance

The buyer is not responsible for duty and customs clearance, as this is the seller's responsibility. However, in some exceptional cases, when the seller is not aware of the destination country’s rules and regulations, the buyer may need to assist the seller and undertake import clearance procedures.

Documentation

Generally, the seller provides the proof of document to the buyer, so there is no obligation on the buyer for documentation. However, in rare cases, the buyer may be required to assist the seller with import clearance documentation.

Sellers Responsibilities

Under the DDP incoterms, the major responsibility lies with the seller. This includes all logistics costs, export and import duties, customs clearance, freight charges, and delivery of goods to the final destination. The seller assumes all risk until the goods are delivered to the buyer’s location. Let us examine the seller’s responsibilities within specific categories.

Loading and Unloading of Goods

The loading and unloading of goods responsibility under the DDP incoterms lies with the seller. It means the seller needs to load the goods for transport, then unload them, and prepare them for shipping procedures. Sellers also need to carry out the loading of goods for shipping procedures.

Transport and Delivery Conditions

The seller is responsible for the transport and delivery of goods under the DDP process. The seller must deliver the goods to the agreed-upon location specified in the contract. The transportation activities included in the process are shipping transport, road transport, and others.

Cost

In the case of delivery duty paid, costs are borne by the seller, including loading, packing, freight, delivery and transportation costs. The seller also bears the costs of customs clearance, insurance, and other charges until the goods are delivered to the agreed-upon location.

Insurance

Under the DDP incoterm, there is no obligation to buy insurance for goods. However, as a part of customs clearance, many sellers purchase an insurance plan.

Duty and Custom Clearance

Under the DDP process, the seller is responsible for carrying out the duty and customs clearance. The seller must complete the procedures before handing over the goods to the buyer.

Documentation

The documentation part also falls under the seller's responsibility in the DDP incoterm. The seller is responsible for preparing bills of lading, commercial invoices, packing lists, export licences and more.

Also Read: What are the 11 International Freight Incoterms?

The Delivered Duty Paid process outlines the step-by-step responsibilities of the seller to ensure the goods are delivered to the buyer’s location with all duties and costs covered.

Step 1: Buyer and Seller Agrees on DDP Terms

The DDP process begins when both buyer and seller agree on the DDP terms and conditions. The documents have been prepared which specify the delivery destination.

Step 2: Seller Prepares Goods

Once the have been finalised, the seller starts preparing the goods for shipment, ensuring all required export documents are ready and accurate.

Step 3: Export Customs Clearance

The seller completes the export customs process in the country of origin, paying any applicable export duties or fees to obtain clearance.

Step 4: Transportation to Destination Country

Once the export clearance is obtained, the seller arranges and pays for international freight, ensuring the goods are safely transported to the buyer’s country.

Step 5: Import Custom Clearance

Upon arrival, the seller handles all import procedures, including payment of customs duties and taxes, as well as obtaining the necessary permits.

Step 6: Final Delivery to Buyer

The seller transports the goods from the port or entry point to the buyer’s specified address, covering all local delivery costs.

Step 7: Transfer of Responsibility

Once the goods are delivered to the agreed location, the buyer becomes responsible for unloading and any further handling.

Delivery duty paid is certainly a good choice for buyers, as it helps minimise logistical challenges. Let us focus on the advantages and disadvantages of a DDP in detail.

Advantages of DDP Incoterm

• One of the benefits of DDP incoterm for buyers is the simplified buying process. The buyer will receive the goods without any unexpected costs or risk.
• Another benefit of DDP incoterm for buyers is predictable costs. The seller covers all the shipping-related costs, so buyers have a clear understanding of the total cost.
• The DDP process provides a high level of commitment and service, ensuring customer satisfaction, particularly for buyers.

Disadvantages of DDP Incoterm

• The DDP incoterms are crucial for sellers, as they must navigate the complexities of international shipping, including variable import duties, unknown regulations, and other factors.
• The DDP incoterm generally comes with higher costs, as sellers need to bear all the costs and factor in potential expenses to ensure profitability.
• Another potential disadvantage of DDP is the complex documentation process. The seller must ensure that all documents are accurate and complete to avoid any delays.
• DDP incoterm requires proper communication between the seller and buyer for smooth delivery. Any miscommunication can lead to delays.

Let us understand the DDP by example; a company named XYZ, based in Mumbai, purchased cranes from a German company, ABC. The agreement between both parties is based on DDP.
The seller ABC packs the goods, transports the equipment and carries out the customs clearance process. The ABC company bears all the costs associated with logistics and shipping.

Once the machinery arrives at the agreed-upon location, the risk transfers to the XYZ company, as per the DDP Incoterms. The XYZ company is responsible for unloading the equipment and installation.

Also Read: DAP vs DDP

When selecting the DDP Incoterms for international trade, there are several key considerations for both buyers and sellers to keep in mind.

Cost Calculation

One of the crucial factors both seller and buyer need to keep in mind is cost calculation. Since sellers need to bear all expenses, such as customs duties, transport costs, and more, they must carefully evaluate the total cost, including profitability. The buyer should be aware that the DDP Incoterms may be more expensive, as the seller will typically include their profit margin.

Customs Expertise

Another important factor sellers need to pay attention to is custom knowledge, especially for import clearance in the buyer's country. Having a strong knowledge base will help ensure smooth clearance.

Unloading Arrangements

The responsibility of loading and unloading generally lies with the seller until the goods are delivered to the destination. Once it is delivered, then the buyer needs to be prepared with the unloading arrangements.

Negotiated Terms

Lastly, both the seller and buyer, when discussing the DDP Incoterms, need to negotiate the terms very well to avoid any disputes in the future.

DDP incoterm is an incoterm that favours buyers more than sellers. This Incoterm places maximum responsibility on the seller while buyers have minimum responsibility. However, this type of incoterm can also be expensive for buyers. By understanding all about this, incoterm can help both parties use DDP effectively for seamless international trade.

Additionally, to facilitate smooth international trade, businesses should also consider investing in marine insurance plans. A marine and transit insurance plan from TATA AIG offers protection to goods and shipments during the transit. It saves businesses from financial losses caused by unforeseen situations, such as theft or damage.

Beside this, TATA AIG offers a suite of small business insurance plans, like Fire Insurance, Workmen Compensation Insurance, etc that safeguards your business against various unforeseen situations like fire, burglary, theft, workplace injury, etc.