DDP is an acronym that stands for ‘Delivered Duty Paid’, used in international shipping.
It means the seller delivers the goods when the goods are available for the buyer to collect at the agreed place of destination. The goods must be cleared for import and be ready for unloading.
The seller organises the clearance of the goods for export and import, carries out all customs requirements, pays all costs and accepts the risk involved in transporting the goods to their destination. DDP can refer to goods delivered by any means of transport.
DDP Pros and Cons
There are advantages and disadvantages for a buyer using DDP. The buyer may prefer DDP because they know the total cost at the time of purchase, there is no supply chain to worry about and they aren‘t responsible for insurance and charges until the goods are due for collection.
Disadvantages for the buyer include not having control over movement of the goods and not having contact with the shipping company. If the manufacturer quotes one complete price, the transport and import costs aren’t transparent. The buyer may want to move to another manufacturer who doesn’t offer DDP but they won’t know the cost of producing the current product.
DDP and Incoterms for Shipping
DDP is one of the 11 International Chamber of Commerce Incoterms. The Incoterms is a set of international trade terms designed to reduce the confusion and conflict that can occur when goods are imported and exported. The language barrier was just one problem the Incoterms overcame by introducing three letter acronyms and a standardised definition for each one. Seven of the terms relate to all modes of transport and the other four relate only to sea and inland waterway transportation.
DDP vs FOB
Free on Board (FOB) is a commonly used shipping option. FOB means the buyer bears all costs and responsibility once the goods are on board. The buyer nominates which ship and port will transport and unload the goods.
The difference between DDP and FOB terms is the seller manages delivery and associated costs with DDP while the buyer is responsible with FOB.
DDP vs DDU
Delivered Duty Unpaid (DDU) means the seller pays all costs except the importing tax or duty on the goods. Therefore, the only difference between DDP and DDU is the party responsible for paying the tax and duty. DDU is an Incoterm that is being phased out. The 2010 version replaced four Incoterms (DAF, DES, DEQ, DDU) with two (DAT, DAP). The 2018 version of Incoterms doesn’t include DDU but some companies who have used it in the past may continue to use it.
DDP vs Landed Costs
The landed cost is the cost of goods plus all the costs involved in transporting, exporting and importing. DDP and landed costs are virtually the same because they both include all costs from manufacture to the buyer taking delivery. The main benefit of DDP is that the buyer knows exactly what the goods cost. When the buyer pays all the costs separately, it’s difficult to calculate. The landed costs can include cost of goods plus transport to wharf, fumigation, export formalities, freight, security surcharge, documentation, port charges, custom fees, insurance, customs clearance, AQIS clearance, and delivery by road.
Need Someone to Help With Importing?
Familiarity with shipping terms comes with experience. The more companies you deal with and the more shipments you organise, the easier it becomes to learn the language.
If you have any questions about manufacturing and shipping your goods from China, contact Vara Allied on (08) 6115 0118 or contact us online.