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What is Delivery Duty Paid - DDP

Delivery Duty Paid

Trade today knows no boundaries and as such the terms of the contract need to be uniform, transparent and for the benefits of the parties involved. In national or international transactions where the goods pass through many hands, it is imperative to arrive at a method whereby the duties and obligations of the parties involved are clearly defined so as to avoid confusion.

Cost of a product includes its making and delivery charges. To ease out the calculations for buyers and sellers International Chamber of Commerce has coined 11 Incoterms and Delivery Duty paid is one amongst them.

Meaning of Delivery Duty Paid(DDP)

An agreement whereby the seller is obliged to pay for all the costs and assumes the responsibility until the buyer receives them or he transfers the goods to the desired destination is called Delivery Duty Paid. By virtue of this,maximum responsibility lies on the shoulders of the seller, and he is required to pay the following costs:

  • Shipping Costs
  • Import Clearance
  • Tax Payment
  • Import Duty

When is DDP most suitable?

Since DDP is one agreement whereby the seller is required to assume maximum responsibility, it becomes viable when the cost of supply is stable and can easily be predicted. In such a case, the risk for the seller gets minimized.

Important Points for the Seller:

  1. The seller has to get the goods cleared through customs at both the points which means country of origin and destination.
  2. Import clearance and all the taxes associated with import have to be paid by the seller.
  3. Arranging export clearance.
  4. Complying with the documents related to import and export.
  5. The seller has to pay for all sorts of inspections and arrange for the license for import
  6. In case the goods are damaged in transit,the seller has to bear the loss.
  7. Arrange for a warehouse in case the delivery gets delayed by any chance.

Obligations of the Buyer and Seller:

Buyer:

  • He is required to make the payment once the goods have reached the destination.
  • The Buyer owes the risk once the goods are offloaded.
  • Cooperate in providing all the necessary documentation and information required by the seller.
  • All the costs associated with unloading are borne by him.

Obligations of the Seller:

  • He is responsible for delivering the goods to the destined place.
  • All the necessary documentation and licenses have to be procured, and work has to be done accordingly.
  • Pay for all the costs associated with packaging,transit, and delivery.
  • The risk lies with the seller till the goods are handed over.

Cost of Insurance:

Insurance has a major role to play when it comes to cross border transactions because all sorts of contingencies are covered by the Insurance Companies, thus safeguarding the interests of the parties involved.

However,in case of DDP agreement, there is no legal binding on either the buyer or seller to provide insurance, though it is advisable to minimize the risk

DPP happens to be the only Incoterm whereby the maximum responsibility is with the seller thus making it more complicated for the party.

The 11 types of incoterms 2010 are

  1. EXW (Ex Works)
  2. FCA (Free Carrier)
  3. FAS (Free Alongside Ship)
  4. FOB (Free on Board)
  5. CFR (Cost and Freight)
  6. CIF (Cost, Insurance and Freight)
  7. CPT (Carriage Paid to)
  8. CIP (Carriage and Insurance Paid To)
  9. DAT (Delivered at Terminal)
  10. DAP (Delivered at Place)
  11. DDP (Delivered Duty Paid)