What are DDP delivery terms?

DDP terms (Delivered Duty Paid) in logistics constitute a key element of commercial agreements, defining the scope of obligations between the seller and the buyer concerning the delivery of goods. According to DDP terms, the seller takes full responsibility for the delivery of goods up to their designated destination, including customs duties and any other costs associated with shipment.

Definition of DDP (Delivered Duty Paid)

DDP is an abbreviation for Delivered Duty Paid; DDP is one of the Incoterms, which are international standards used in commercial agreements to specify the terms of delivery of goods. The DDP clause specifies that the seller bears full responsibility for the delivery of goods up to their designated destination.

Under DDP terms, the seller delivers the goods, covers the delivery costs, and also pays any obligations related to customs, taxes, customs and tax formalities, and other import-related costs. This means that the buyer is exempt from the obligation to engage in customs processes, making it one of the more advantageous clauses for them.

The purpose of DDP terms is to ensure transparency and clarity in international trade transactions, precisely defining the division of duties and costs between the seller and the buyer.

Applications of DDP

DDP delivery terms are applied in international trade, especially where precise determination of responsibilities between the seller and the buyer is necessary. The DDP clause is useful in situations where the buyer wants to minimize their involvement in customs procedures and avoid the risk associated with customs duties and taxes in the destination country. The application of DDP is particularly attractive when the buyer prefers full transparency of delivery costs and wants to avoid unforeseen customs charges.

Benefits and Risks

Although DDP offers several benefits for both parties in a transaction, eliminating the need to engage in complex customs procedures and providing transparency of costs, it also comes with certain risks. Let's focus first on the benefits.

Benefits of using DDP for the buyer:

1. No involvement in customs procedures:

   DDP relieves the buyer from the need to engage in complex customs procedures, saving time and resources.

2. Full transparency of costs:

   DDP terms enable the buyer to have full control over costs because the seller is responsible for all fees, including any customs duties and taxes.

3. Seller's responsibility for delivery:

   The seller bears full responsibility for organizing transportation, and it is the seller who delivers the goods to the destination, increasing delivery certainty.

Risks of using DDP:

1. High cost for the seller:

   For the Seller: DDP may entail higher costs for the seller because they commit to covering the delivery costs, including customs duties.

2. Lack of control over the customs process:

   For the Buyer: The buyer loses control over the customs process, which may lead to uncertainty about the delivery time and other logistical aspects.

3. Risk of changes in customs regulations:

   For Both Parties: Changes in customs regulations may affect the costs and procedures related to delivery, posing a potential risk for both parties to the agreement.

4. Additional costs and risk of unexpected charges:

   For the Buyer: Although DDP eliminates most hidden costs, there is a risk of unexpected charges related to delivery, which may affect the buyer's margins.

Applications of DDP

The application of DDP (Delivered Duty Paid) delivery terms in international trade is an effective way to minimize barriers related to customs procedures. The DDP clause transfers to the seller full responsibility for transporting goods to the agreed destination, including covering all costs related to customs duties and taxes. For the buyer, this means no need to engage in complex customs processes and certainty about the total transaction costs. However, like any trade clause, DDP is not without certain risks, such as the possibility of increased costs for the seller or lack of control over the customs process for the buyer. Nevertheless, the use of DDP remains popular due to its transparency and facilitation in managing international deliveries.

Buyer's Responsibilities

Under DDP (Delivered Duty Paid) delivery terms, the buyer's responsibilities are limited compared to other trade clauses, as the seller takes on several responsibilities related to delivering goods to the agreed destination. Nevertheless, the buyer still has certain obligations to fulfill to enable the seller to efficiently carry out the delivery. Below are the main buyer's responsibilities under DDP terms:

Acceptance of goods delivery:

The buyer must ensure readiness to accept and receive the delivered goods at the designated destination, according to the agreement.

Cooperation in customs inspections:

The buyer may be required to cooperate in customs procedures, such as providing necessary documents or information required by customs in the destination country.

Providing access to the delivery location:

The buyer should allow the seller access to the delivery location, including access to infrastructure and the ability to organize the delivery of goods to the specified place.

Informing about delivery terms:

In case of any changes or restrictions regarding the delivery location, the buyer should inform the seller to allow adjustment of the delivery process. At the request of the seller, the importer must assist them in obtaining documentation related to import, export, and transit. Also, at the exporter's request, the buyer is obligated to provide them with information needed to obtain insurance.

Participation in customs clearance:

Depending on the agreement and the requirements of the destination country, the buyer may be required to participate in customs clearance, although under DDP terms, this is typically the seller's obligation.

It's worth noting that the exact buyer's responsibilities under DDP terms may vary depending on the details of the commercial agreement between the parties. Therefore, it's important to precisely formulate the delivery terms in the agreement, specifying the specific tasks and responsibilities of each party.

Seller's Responsibilities

Under DDP (Delivered Duty Paid) delivery terms, the seller has extensive responsibilities related to delivering goods to the designated destination. Below are the main seller's responsibilities under DDP terms:

Organization of goods transportation:

The seller is responsible for organizing and covering the costs of transporting goods from the initial location (usually the seller's premises) to the final destination in the buyer's country.

Goods delivery:

The seller is obligated to deliver the goods to the agreed-upon destination specified in the agreement, including their unloading.

Cargo safety responsibility:

The seller must take all necessary measures to ensure the safe transport and delivery of goods according to the agreement.

Documents transmission:

The seller must provide the buyer with necessary documents, such as invoices, waybills, or customs documents, enabling the receipt of goods.

Covering customs costs:

Under DDP terms, the seller is responsible for covering all costs related to customs duties, taxes, and other customs fees in the destination country. The seller also bears full responsibility for all customs formalities, including submitting customs documents and settling any customs duties and taxes. Without customs clearance, the goods cannot be introduced into commercial circulation.

Goods insurance:

The seller may be required to insure the goods during transportation to protect against potential losses or damages. However, it's also worth emphasizing that neither the seller nor the buyer is obligated to enter into an insurance agreement.

Documents Required in DDP

In the context of DDP (Delivered Duty Paid) delivery terms, where the seller bears full responsibility for the delivery of goods up to the destination, there are several documents that are crucial for the proper conduct of the import process. Below are the main documents required under DDP terms:

Commercial Invoice:

This is a fundamental document containing information regarding the goods, their quantity, value, as well as details of the seller and buyer. The commercial invoice is essential for customs and tax settlements.

Bill of Lading:

This document confirms the agreement between the carrier and the sender of the goods. In DDP terms, where the seller organizes transportation, the bill of lading is significant for confirming delivery.

Customs Documents:

In this case, the seller is responsible for preparing all customs documents, such as customs declarations, certificates of origin, and any other documents required by the customs authority in the buyer's country. Failure to provide documentation confirming customs clearance will prevent us from introducing products into circulation and distributing them within the EU.

Certificate of Origin:

If required by the destination country, the certificate of origin confirms the origin of the goods. This is particularly important concerning trade preferences and regulations regarding the origin of goods.

Insurance Documents:

If the seller insures the goods during transportation, insurance documents are necessary for any claims related to damage or loss of goods during delivery.

Delivery Confirmation Documents:

These include evidence of goods delivery to the destination, confirming that the delivery has been completed as per the agreement.

The exact documents required under DDP terms may vary depending on the type of goods, the countries involved in the transaction, and the specifics of the agreement between the parties. Therefore, it is crucial to precisely formulate the delivery terms in the contract and consult with customs experts to ensure compliance with local regulations and requirements.

Comparison of DDP with Other Incoterms

Comparing DDP (Delivered Duty Paid) delivery terms with other Incoterms 2020, it is essential to note significant differences and similarities. DDP is one of the Incoterms 2020 that define the terms of delivery of goods in international trade and is often compared with other clauses such as EXW, FOB, or CIF. Incoterms rules are divided into universal rules, used for all modes of transport, and those available only for maritime and inland waterway transport.

Unlike the EXW term, where the seller is responsible only for preparing the goods for collection by the buyer at their premises, DDP transfers significantly more responsibility to the seller. DDP includes organizing transportation, covering delivery costs up to the destination, and settling any customs duties and taxes. Because of this, DDP is more comprehensive and encompasses a wider range of services than EXW.

Compared to the FOB term, where responsibility for the goods transfers from the seller to the buyer upon loading onto the vessel, DDP covers the full delivery of goods to the final destination. In the case of the CIF term, where the seller covers the costs of insurance and freight, DDP also includes these elements but with greater responsibility for the entire delivery process.

It is worth noting that while DDP provides the buyer with a high level of convenience and cost transparency, it may also involve higher costs for the seller, who bears full responsibility for transportation and any customs formalities.

In summary, DDP stands out for its full delivery service and minimization of the buyer's involvement in customs procedures, which distinguishes it from other Incoterms delivery terms such as EXW, FOB, or CIF. The choice of the appropriate term depends on the needs and preferences of the transaction parties, as well as the specifics of the type of goods and the market.

DDP vs DAP

In the context of international trade, comparing DDP (Delivered Duty Paid) and DAP (Delivered at Place) terms, a key aspect is the division of responsibilities between the seller and the buyer in the process of delivering goods.

DDP terms transfer a significant portion of the responsibility to the seller, including organizing transportation, covering delivery costs up to the destination, and settling any customs duties and taxes. In this case, the buyer is practically excluded from customs processes, which can be advantageous for those who prefer full cost transparency and avoid involvement in complex procedures.

On the other hand, DAP terms indicate that the seller is responsible for delivering the goods to a specified place, but the responsibility for customs duties and taxes is limited only up to that point. In DAP terms, the buyer may have some involvement in negotiations regarding freight and delivery costs, as well as being more engaged in customs procedures after the goods have been delivered to the agreed place.