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When trading internationally, it is important to understand the various Incoterms® that regulate liability and costs between buyer and seller.
One of the most commonly used Incoterms® is DDP, which involves a clear division of responsibility between the buyer and seller, with the seller bearing almost all costs and risks associated with transport and delivery.
What does DDP mean?
DDP stands for Delivered Duty Paid, and it is one of the most comprehensive Incoterms®. With DDP, the seller assumes almost all costs and risks involved in transporting the goods to the buyer.
This includes shipping, insurance, customs clearance and any import duties.
When the goods reach the buyer, all costs have been paid and the buyer receives the goods without any further obligations.
Responsibility with DDP
With DDP, the seller has primary responsibility for transport and all costs associated with delivering the goods. However, the buyer is only responsible for receiving the goods.
Seller's responsibility:
- Transport costs: The seller pays for shipping and transport, both nationally and internationally, until the goods reach the buyer.
- Including: Preparation and payment of shipping
- Delivery of the goods to the buyer at the agreed destination.
- Customs duties and taxes: The seller pays all export and import duties and other charges.
- Risk: The seller is responsible for any damage or loss of goods during transport.
Buyer's responsibility:
- The buyer is only responsible for receiving the goods at the agreed delivery destination and ensuring that they are in good condition.
- After delivery, the buyer is responsible for any problems with the goods that are not related to transport.
DDP is just one of many Incoterms®. If you would like to learn more about other Incoterms® such as FOB, CIF and EXW, and get an overview of their responsibilities, you can read our post about all Incoterms® 2020.
Pros and cons of DDP for the seller
Pros:
- The seller has control over the entire process, which can ensure more efficient and reliable delivery.
- The seller can offer a better service, which can attract customers who want a simple process.
Cons:
- The seller bears the full risk of transport and any additional costs that may arise during transit.
- The seller must handle customs clearance and other formalities in the buyer's country, which can be time-consuming and require expertise.
Pros and cons of DDP for the buyer
Pros:
- The buyer does not need to worry about transport and customs, as the seller takes care of everything.
- The buyer knows exactly what the total price will be, as all costs are already included.
Cons:
- Since the seller assumes all costs, the price for the buyer may be higher than if they had to handle some of the logistical tasks themselves.
- The buyer is dependent on the seller's ability to handle transport and customs clearance correctly.
To sum up
DDP Incoterm® is a good solution for buyers who want a simple transaction without having to think about transport, customs and additional costs.
For sellers, this can be a way to offer customers better service, but it also means higher costs and greater risk.
Get an overview of the responsibilities under all Incoterms® 2020.
Frequently asked questions about DDP (Delivered Duty Paid)
What does DDP mean?
DDP stands for "Delivered Duty Paid" and is an Incoterm® where the seller bears almost all costs and risks associated with transporting and delivering the goods to the agreed destination. This includes freight, insurance, and payment of export and import duties.
What are DAP Incoterms®?
DAP stands for "Delivered at Place" and means that the seller is responsible for transporting and delivering the goods to an agreed destination. However, the buyer is responsible for customs clearance and payment of import duties upon arrival of the goods. Read more about
What does DDP delivery mean?
DDP delivery means that the seller is responsible for all costs and risks until the goods are delivered to the buyer at the agreed destination. The seller pays for freight, insurance and all necessary customs duties, so that the buyer has no further obligations upon delivery.
What is the difference between DDP and DAP?
The main difference between DDP and DAP is that under DDP, the seller is responsible for paying all costs, including import duties and taxes, while under DAP, the buyer is responsible for these expenses.
DDP provides the buyer with a more hassle-free experience, while DAP requires the buyer to handle some of the administrative tasks involved in importing.
How does DDP work in Denmark?
In Denmark, DDP works in the same way as in other countries. If a seller delivers goods to a buyer in Denmark under DDP, the seller is responsible for transport, insurance and payment of all relevant export and import duties, including Danish VAT and customs duties, until the goods reach the buyer.
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