Mastering the DDP Incoterm: The Key to Smooth International Transactions

Globalization and the many developments in the e-commerce sector have made international transactions commonplace. To define the responsibilities and obligations of sellers and buyers in international trade, the International Chamber of Commerce created incoterms. The DDP incoterm is one of the 11 incoterms in effect since January 1, 2020. Discover everything you need to know about the DDP incoterm, from its definition to its advantages and disadvantages in an international transaction, including the responsibilities it entails for the buyer and seller. 

Understanding the DDP Incoterm: Operation and Implications of Incoterms 

Before delving into the specifics of the DDP incoterm, it is essential to understand the operation and implications of incoterms. 

What is an Incoterm? 

Incoterms (International Commercial Terms) are tools developed by the International Chamber of Commerce (ICC) in 1936 to harmonize the legal and commercial practices related to international trade. Incoterms are recognized worldwide and define the delivery conditions of goods under a sales contract. In practice, incoterms define during an exchange of goods: 

  • The allocation of responsibilities between the seller and the buyer (transport, customs, insurance, etc.), 
  • The allocation of costs between the seller and the buyer, 
  • The allocation of risks between the seller and the buyer. 

The ICC revises the incoterms every 10 years to ensure that the provisions regulating imports and exports worldwide meet the current challenges of international trade. 

The 2020 Incoterms 

Since January 1, 2020, the ICC recognizes 11 official incoterms. These are presented as a three-letter code and are divided into two groups: multimodal incoterms and maritime incoterms. 

Multimodal Incoterms 

There are seven multimodal incoterms applicable to all modes of transport (air, sea, land, rail): 

  • EXW: Ex Works, 
  • FCA: Free Carrier, 
  • CPT: Carriage Paid To, 
  • CIP: Carriage and Insurance Paid to, 
  • DAP: Delivered At Place, 
  • DPU: Delivered at Place Unloaded, 
  • DDP: Delivered Duty Paid. 

Maritime Incoterms 

There are four maritime incoterms applicable only for the delivery of goods to a port or onboard a ship: 

  • FAS: Free Alongside Ship, 
  • FOB: Free On Board, 
  • CFR: Cost and Freight, 
  • CIF: Cost Insurance and Freight. 

DDP Incoterm: Definition, Scope, and Operation 

Discover the definition, scope, and operation of the DDP incoterm in the context of international import or export of goods. 

What is the DDP Incoterm? 

The DDP incoterm is part of the multimodal incoterms. The acronym DDP stands for "Delivered Duty Paid," which means "delivered with duties paid" in French. 

As its name suggests, the DDP incoterm involves delivery of the goods with duties paid. This means that the seller must handle the customs clearance procedure and pay various duties and taxes in addition to transportation costs. 

Note: The DDP incoterm does not require the seller to unload the goods. Only the DPU incoterm (delivered at place unloaded) requires the seller to handle the unloading of the goods. 

When to Use the DDP Incoterm? 

The DDP incoterm can be used for any international commercial transaction, whether it is an import or export of goods within or outside the European Union. The DDP incoterm is also suitable for all types of transport (maritime, air, road, rail, river freight). 

Although it is possible to use the DDP incoterm for most international trade exchanges, it is rarely the most advantageous choice for the seller. It is indeed the incoterm that involves the most obligations for the seller. 

The goods are delivered ready to unload and cleared, which is a significant advantage for the buyer. In other words, the DDP incoterm is a commercial argument that the seller can use to convince potential customers during negotiation and enhance the satisfaction of existing customers. 

Regulation of the DDP Incoterm: Responsibilities of the Seller and Buyer 

The DDP incoterm defines the responsibilities of the seller and the buyer for a given commercial exchange. 

Seller's Responsibilities with the DDP Incoterm 

In a commercial exchange under the DDP incoterm, most of the obligations fall on the seller. 

The seller's responsibilities are as follows: 

  • Packing of goods, 
  • Preparation of necessary documentation for shipment, 
  • Transport of goods to the departure platform, 
  • Loading goods onto the main transport at departure, 
  • Main transport of the goods to the agreed delivery location with the buyer, 
  • Export customs clearance, 
  • Import customs clearance in the buyer's country, 
  • Payment of all taxes (VAT, excise duties, customs duties, etc.), 
  • Delivery of goods (not unloaded) in good condition. 

Throughout these operations, costs and risks are entirely borne by the seller. In case of damage, loss, or theft of goods during transport, the delivery is considered incomplete, and the seller must compensate the buyer. 

Buyer's Responsibilities with the DDP Incoterm 

The buyer's obligations are minimal in a commercial exchange under the DDP incoterm. The buyer is only responsible for receiving, verifying, and unloading the goods at the destination. The buyer is also responsible for paying the insurance fees. 

DDP Incoterm: Advantages and Disadvantages 

The DDP incoterm has certain advantages for both the seller and the buyer, but also some drawbacks that are important to consider. 

Advantages and Disadvantages of the DDP Incoterm for the Seller 

The main advantage of the DDP incoterm for the seller is that it allows them to offer privileged conditions for their customers. It is a powerful commercial argument that helps attract new customers and enhance the satisfaction of existing ones. 

Additionally, the seller has complete control over the supply chain. They can freely choose the transport arrangements as long as they comply with the conditions set in the sales contract. 

The major disadvantage of the DDP incoterm for the seller is that they assume all risks, from packing the goods to delivering them in good condition to the agreed location with the buyer. In case of damage, theft, or loss of goods during shipment, the seller is obligated to compensate the buyer. 

Another disadvantage for the seller is that they must be capable of handling the customs clearance of the goods. This involves understanding the customs regulations specific to each country. They must also be familiar with laws related to non-compliance of goods to avoid penalties. 

Advantages and Disadvantages of the DDP Incoterm for the Buyer 

The main advantage of the DDP incoterm for the buyer is the minimal responsibilities and formalities to undertake. They are only responsible for paying the insurance fees and unloading the goods. 

Additionally, the buyer benefits from a comprehensive delivery service with clearly defined costs from the beginning. From packing to delivery of the goods at the agreed location, all risks and costs are borne by the seller. The shipping process is also simplified and faster, as the seller handles all customs formalities. 

The main disadvantage of the DDP incoterm for the buyer is the generally higher cost expected for acquiring their goods. The seller usually passes on the logistical and administrative costs to the product price or delivery cost. 

Furthermore, the buyer has no control over the delivery process. The seller can freely choose the carrier they work with and the transport arrangements for the goods. The buyer is entirely dependent on the seller's professionalism and expertise to receive their goods under the conditions agreed upon in the sales contract. 

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DDP from France to United Kingdom 

Would you like to ship your parcels to the United Kingdom under the DDP (Delivered Duty Paid) Incoterm with Happy-Post? Check out our dedicated page on DDP from France to the United Kingdom to learn more about this service and its benefits.


DDP from the UK to Europe

If you would like to ship your parcels from the United Kingdom to Europe under the DDP (Delivered Duty Paid) Incoterm, please visit our dedicated page on DDP from the UK to Europe.


FAQ 

What is a DDP Delivery? 

A DDP delivery is one that is carried out using the DDP incoterm (Delivered Duty Paid). This incoterm involves the seller taking on all risks and costs, including customs clearance, until the goods are delivered to the agreed location with the buyer. The buyer is only responsible for unloading the goods and paying the insurance fees. 

DDP or DAP Incoterm: What's the Difference? 

Unlike the DDP incoterm, the DAP incoterm stipulates that the buyer is responsible for customs formalities and payment of import duties and taxes. 

Who Pays for Transport in DDP? 

In a DDP commercial exchange, the seller is responsible for delivering the goods in good condition at their own expense to the delivery location agreed with the buyer.