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What is Delivery Duty Paid (DDP)?

Delivery Duty Paid is when a seller fulfills an obligation to deliver available goods to a buyer that is in another country. The costs and risks are the responsibility of the seller, which include taxes, duties, charges for delivering the goods, and importation clearance.

However, the term “DDP” can still be used if some of the seller’s costs are excluded. For instance, value added tax, or VAT, can be removed from the seller’s responsibilities. In this case, the term used is “DDP, VAT unpaid.” Most of the time, however, the shipper is the one that pays any VAT. If a wholesaler pays VAT, this has to be considered when determining profit margin.

Some pros of Delivery Duty Paid for wholesalers include:

  • The buyer allows the seller to handle many of the responsibilities.
  • A third-party DDP solution company can be used to lower risk.
  • Landed cost is known at the time the goods are purchased.
  • Absence of administrative management of the supply chain.

Some cons of DDP are:

  • Shipments are only tracked through the vendor.
  • The buyer has no control over importation or how the goods move.
  • No ability to intervene if there’s a problem.
  • There might be hidden import and transport costs in the seller’s calculations.

Nonetheless, DDP is what wholesalers can use to ensure the seller shoulders maximum responsibility for the transport of goods.

DDP Requirements and Specifics (Seller and Buyer)

DDP also includes customs clearance and it applies regardless of shipping method. Since most of the burden is on the seller, the seller must do the following:

  • Provision goods according to the contract with the buyer – Provide the commercial invoice or an electronic version of it, as well as the goods. All points in the contract must be adhered to.
  • Take care of formalities, licenses, and authorizations – The seller must acquire the proper import and export licenses or other authorizations. Carry out customs formalities where necessary.
  • Establish the contract of carriage and insurance – Goods are carried to the agreed point of delivery. The seller chooses the point and names the destination that best suits the delivery of the goods. There is no obligation to carry insurance on the shipment unless specified in the contract between seller and buyer.
  • Goods must be delivered in a way that they are easily obtainable by the buyer – The buyer must be able to easily obtain the goods once they are stateside.

Other areas that buyers and sellers must be aware of include:

  • Risk transfer – The Free Alongside Ship (FAS) rule is restricted to goods that are transported by inland waterway or overseas. The seller must have direct access to the vessel for risk to transfer to the buyer at port when the goods are with the vessel. Free On Board (FOB) is when the risk transfers after the goods are loaded onto the vessel.
  • Cost division – Some costs can be divided, which is the case when VAT is unpaid.
  • Buyer notices – A buyer (in this case, the wholesale owner) is to be notified within a sufficient amount of time that goods have been shipped so measures can be taken to obtain the goods once they arrive stateside.
  • Proof of transport – At the seller’s expense, a bill of lading, waybill, non-negotiable sea waybill, or other such document must be provided so the buyer can take the goods.
  • Package checking and marking – The seller pays the costs associated with checking package quality, measuring, counting, and weighing.

The buyer must make sure the agreed-upon price is paid and that any import licenses are obtained. There is no carriage contract obligation on the buyer side, as this is something reserved for the seller. Of course, the buyer has to have a full understanding of the risk transfer because, if something were to happen after risk has transferred, then the buyer has full financial responsibility for the losses. These costs don’t factor into delivery duty paid.

In regards to cost division, the buyer is responsible for any costs if he or she fails to accept delivery of the goods when they have been properly placed at his or her disposal. The exception is when a sufficient amount of notice has been given to the seller that would void these costs. “Notice to the seller” terms should be stated in the contract. If notice is given within the proper amount of time and the seller fails to comply, it’s the seller that is responsible for the associated costs.

Once the goods are received, proof that the goods have been delivered can be done via a transport document or electronic message. The goods can then be inspected to ensure they are in good condition. Of course, the buyer can pay for pre-shipment inspection when the exporting country requires it. This is one of the costs included in delivery duty paid.

Ensuring a Smooth Process

To ensure the DDP process and overall delivery experience moves along seamlessly, it is good to provide the seller with assistance when it is requested. This can include the acquisition of documents that are necessary to ensure the goods are delivered efficiently, as well as any splitting of costs that must be figured into your profit margin. The seller bears the maximum obligation and that can be challenging, depending on the country of origin and the final destination.

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Our team has deep industry knowledge, and a network of solution providers that help wholesalers spend more time working on their business than in it. If you’d like to get free advice and recommendations on how to work more efficiently to increase your profit margins, feel free to book a time to speak 1-on-1 with one of our knowledgeable industry advisors.

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