Incoterms are the official International Chamber of Commerce (ICC) rules for the explanation of trade terms. Incoterms are adhered to by all major trading nations of the world, and it is the authoritative text for determining how costs and risks are allocated to the parties conducting international transactions. They facilitate the conduct of international business by defining the responsibilities of the involved participants.
This is the third article in our series investigating the basic meaning of all 11 Incoterms. (You can read here about FCA and DAP here.) The Incoterm we’re discussing today is Delivered Duty Paid, also known as DDP.
What Does the Delivered Duty Paid (DDP) Trade Term Mean?
Delivered Duty Paid means “the seller delivers the goods when the goods are placed at the disposal of the buyer, cleared for import on the arriving means of transport ready for unloading at the named place of destination.” (ICC)
DDP can be used for any mode of transport—air, courier, truck, rail, vessel or multi-modal shipments—or when there are multiple modes of transport.
Benefits and Considerations of DDP
- DDP puts the maximum risk and responsibility on the seller. It is the only one of the Incoterms that requires the seller to take responsibility for import clearance and payment.
- The seller bears all the costs and risks involved in bringing the goods to the place of destination.
- The seller is obliged to clear the goods for both export and import, to pay duties for both export and import, and to execute all customs formalities.
- Sellers may not understand the complex and bureaucratic import clearance procedures that exist in some countries and make mistakes or miscalculations that affect their bottom line; therefore, it may be best left to the buyer who has local knowledge and understanding. Keep this in mind before choosing DDP.
More Information about Incoterms and DDP
There are myriad resources available to help you further understand the trade term DDP and all Incoterms. We have a robust archive of Incoterms-related articles on our blog. Here are several of our most popular articles along with other industry resources:
- The Beginner's Introduction to Incoterms
- An Introduction to Incoterms—Part 2: Why Do Incoterms Matter?
- A Behind the Scenes Look at Incoterms
- Incoterms 2010 Freight and Associated Charges
- From EXW to DDP: Incoterms 2010 Plain and Simple
- Incoterms Lesson: The Danger of Using Ex Works for Your Exports
- Incoterms 2010 and the UCC: A Guide to International and Domestic Terms of Sale
- Incoterms 2010
In addition, Shipping Solutions export software can help you streamline the process of recording which Incoterms version you’re using and making sure your documentation is correct throughout the transaction. You can try it for free today!