Delivered duty paid, or DDP, is a type of shipping agreement that is most often used for international deliveries. In a DDP shipping agreement, the seller assumes all of the financial obligation, legal risk, and responsibility for the shipment until it reaches an agreed-upon international destination.
This type of agreement was developed by the International Chamber of Commerce to create a standard for international shipments. It has significant benefits for buyers, although it can come with some financial risks for international sellers. Delivered duty paid can be a helpful solution for international e-commerce transactions – here’s what you need to know about DDP transactions and their benefits.
What Is Delivered Duty Paid (DDP)?
In a DDP shipping transaction, the seller assumes all responsibility for the transaction up until an agreed-upon port of destination. This means that the seller needs to cover all of the shipping costs as well as necessary import and export customs, insurance, value-added tax, and any fees, including fees for damages.
In a DDP transaction, the seller is also responsible for obtaining shipping clearance from the relevant authorities in both countries. They are also responsible for arranging the logistics of the shipment and making sure it gets there safely. Finally, the seller is responsible for providing proof of delivery and will be responsible for correcting any late or damaged shipments.
DDP vs. DDU
The most common alternative to this shipping agreement is DDU or delivered duty unpaid. With a DDU transaction, the buyer pays customs duties after the shipment arrives at its destination. Many buyers are unwilling to pay the customs costs and other fees involved with DDU transactions. DDP transactions are much more appealing to the end customer. Many international sellers are willing to take on the additional cost of a DDP shipping agreement in order to increase their sales in the long run.
Understanding Delivered Duty Paid (DDP)
Because DDP shipping agreements are fairly standard around the world, they have become a popular option for international e-commerce deals. DDP agreements are most often used for shipments via air or sea but could be used for other types of shipments as well. It is most popular for high-value items, where the money generated from the sale can offset the additional costs of sending an item using a DDP transaction.
A DDP agreement is also best for shipments that are relatively predictable in terms of fees, shipping times, and any potential complications with customs. Using a trusted shipping provider can help reduce the risk of delays and damages. However, customs can be unpredictable, and security risks can vary from country to country. Therefore, there is always some inherent risk when shipping using this kind of agreement.
As a seller, there are a number of fees and expenses associated with DDP shipments. Many sellers will find other ways to recoup these costs. One common way of offsetting DDP costs is by increasing the price of the product. Here are the different types of DDP fees to be aware of before shipping.
1. Shipping fees
The most important cost associated with a DDP shipment is the shipping fees. International shipments are typically much more expensive than domestic shipments, and retailers will need to be aware of this when pricing their items.
It’s very important to select a reputable shipping company with international experience for DDP shipments. Although reputable sellers offer higher prices, they can save you money in the long run because of the quality of their services. Reputable shipping companies are more likely to get your product to its final destination on time and without damages, which saves you money on other fees.
2. Import and export custom duties
You will also need to pay both import and export customs fees for each DDP shipment. Each country has its own unique customs regulations, and the cost of fees for customs in each country may vary as well. It’s important to research the customs rules for each country that you ship to in order to prevent delays or damage.
3. Damage fees
Unfortunately, there are times when your items may be damaged during shipping, no matter how proactive you are. This can result in additional fees, and in some cases, you may need to replace and re-ship the item. While you may not always need to pay damage fees during a DDP shipment, it’s important to anticipate them and incorporate them into your budget when planning your shipments.
4. Shipping insurance
You aren’t required to purchase shipping insurance in order to send a DDP shipment. However, many sellers opt to pay this additional fee in order to protect their shipments. Shipping insurance can provide you with financial protection in the event that you have to pay very high fees for lost, stolen, or damaged goods.
VAT, or value-added tax, is one of the most significant expenses to consider with DDP shipments. The US and many countries in the European Union charge value-added tax, and it can be a significant portion of your shipping expenses – sometimes as much as 20 percent of the item’s value.
6. Storage and Demurrage
Storage and demurrage are additional customs charges that can occur during shipment. These often happen unexpectedly as a result of additional inspections or delays by customs authorities as well as other types of delays. These charges won’t always happen, but it’s always important to be aware of them when planning your DDP shipment.
Final Thoughts on DDP
DDP shipments provide your buyers with the extra security and peace of mind they need when shipping internationally. While this approach won’t work for every shipment, it can help convince customers that might otherwise be skeptical of buying from an international retailer. Working with a third-party logistics provider like Print Bind Ship can help you navigate the challenges of DDP shipping agreements. Contact us today for a free consultation!