What does DDP mean in shipping terms?

DDP, or “delivered duty paid”, means that the seller has fulfilled their end of providing a product and now it’s time for them to take care of its delivery. This Incoterm is used when importing sea freight or air freight from abroad; under these terms, there are specific responsibilities placed on both parties, leading to risks such as not knowing about local regulations in destination countries.

DDP Agreement: Buyers and Sellers Responsibilities

This is an agreement between a buyer and seller regarding their responsibilities regarding shipping. The supplier (seller) must pay for all import taxes, fees associated with importing goods into another country or region etc. until they are delivered offloading at the destination; meanwhile, buyers won’t be held responsible if there are any damages during transport, including but not limited too lost profits due because of cargo theft–so make sure you inform them about anything valuable being inside your vehicle before setting out on long journeys!

Buyer’s Responsibilities:

The buyer is not responsible for any part of the logistics process except receiving their goods. Receiving them can be an expensive endeavour depending on how you choose to ship your order! The cost could include disposal fees if it’s going into a fulfilment warehouse, so make sure that these are covered before placing extraction requests with third parties like UPS or FedEx. Don’t forget about import duties and taxes either – they’re usually included in the shipping price but not always.

Seller’s Responsibilities:

To ensure that the buyer gets a fair deal, sellers often include landing costs in their quotes. Landing cost represents all of your shipping expenses combined, and it’s what you’d pay before any taxes or fees are applied, so they’re an essential part when considering how much things cost! When one seller includes Incoterm (DDP) with their price-tag, they have taken into account both delivery charges and duty charges, resulting from importation into different countries around the world.

The responsibilities of a seller don’t end with the delivery and acceptance of final goods. They also include:

  1. Drawing up sales contracts and related documents
  2. Meeting all import and export requirements
  3. Paying for all import and export duties and taxes
  4. All transportation costs, including delivery to a final agreed-upon destination
  5. The cost of all government inspections
  6. Proof of delivery
  7. In the event of damage or loss in transit, the supplier is responsible

Advantages and Disadvantages of a DDP Agreement

You’ll learn about the pros and cons for anyone who chooses DDP as their Incoterms when shipping internationally.

DDP Advantages for the Buyer:

  1. The buyer is not responsible for random inspections during shipping and delivery. This can often be beneficial, as there could potentially be unknown costs when it comes to export or importing countries requirements that require an inspection of some kind–these expenses will always fall on the shipper themselves if they occur in either case but become more likely with higher-risk shipments due process rights being exhausted after one shipment has been made through DDP terms because sellers are usually billed back from what was spent so far even though these risks do exist within international trade agreements between governments
  2. The buyer pays for the cost of delivery and duties into their purchase, so they have no additional expenses. When products arrive at their destination without incident- this means there are also none left on behalf of either party!
  3. The buyer is granted complete peace of mind once they accept the shipment. They know that anything to happen with their goods would be at fault solely on behalf or lack thereof from either party, so there isn’t any need for stress in this situation because everything has been taken care of ahead!
  4. DDP can be an excellent way for buyers to protect themselves from the risks of shipping delays and unqualified logistics companies. Suppose a buyer structures their purchase agreement in such a way that reduces these potential issues. In that case, DDP will become more beneficial for them as they avoid any adverse consequences resulting from having bad service or, worse yet: no delivery at all!

Suppose a seller can agree to use a specific logistics company specialising in shipping from and delivering to the two destinations, defining a required delivery date. In that case, the overall advantages can outweigh the disadvantages.

DDP Disadvantages for the Buyer:

  1. The opportunity for error increases when the supplier is not an expert on customs clearance, VAT or import taxes of a destination country. Even if they feel confident in their local freight forwarding company to assist with the delivery, there’s no way for buyers who are unsure about which agent will best handle things accordingly since each nation has its own rules and regulations governing how these types of deals must go down. Freight forwarders are often not adequately qualified or have the necessary experience to resolve issues with freight. This is a recipe for disaster when mistakes arise, and they will cost clients more in rectifying them than if addressed early on before any damage has been done! This is a massive blow for them, as deposits were inevitably paid, and there’s no telling how much time was spent on production or shipping.
  2. When sellers are tasked with shipping their goods, they have two options: find the cheapest option or do it themselves. The supplier will typically opt for whatever route saves them money since that means increased profit margins in case anything goes wrong during transport; however, there’s always this chance of issues that could result from using cheap carriers who lack expertise and care about protecting customers’ products as much as possible.
  3. When sellers are in charge of shipping, they will almost always choose the slowest option, which will be the cheapest. DDP Incoterms removes the opportunity for the buyer to control the delivery time or identify opportunities to speed the delivery process up should they need to.
  4. The shipping process can be time-consuming and frustrating for both buyers and sellers. Buyers often have to wait until they’re able to communicate with the seller if there are any issues, but this slows down communication which could lead to delays taking longer than necessary because of how far away each party is from one another in different zones on earth (e-g: America).
  5. The cost of delivery is usually higher when purchasing DDP terms because buyers don’t have control over shopping the quoted price. Sellers need to factor all possible additional costs into their sales prices regardless of whether they incur them.

When to Use a DDP Agreement?

  1. DDP can be an excellent strategy when costs and routes are stable and predictable.
  2. You should also use these terms when the seller expresses confidence in shipping their products to your country and has a successful track record of delivering other customers under DDP Incoterms.

How can I get help to manage my shipping terms?

Incoterms® 2020 is only a tiny part of the international shipping process. If you want to focus on your business more and outsource the international shipping matters, AnsarComp (M) Sdn Bhd is the right company to help you with this. Ansarcomp (M) Sdn Bhd can act as the legal importer and exporter of goods without having ownership over them. While being technically responsible as the importer and exporter, Ansarcomp (M) Sdn Bhd’s job scope for Importer of Record (IOR) and Exporter of Record (EOR) service for our clients involves liaison such as courier services and/or forwarding agent companies for both shipment clearance and the client’s delivery. We are responsible for obtaining import permits and labels from SIRIM wherever necessary. We are offering our clients trade compliance solutions. Manufacturers, distributors and agents are our most regular clients who find the IOR and EOR concepts are helping them in managing their products into Malaysia without hassle. And as for us, DDP Incoterms are the most preferred international commercial terms to be chosen with its cost inclusivity borne by the seller. If you want to know more about our trade compliance and logistic solutions, particularly for goods coming into Malaysia, please click here to contact us.

Where can I learn more about shipping incoterms?

Check out our: Know your Incoterms.

 

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