What Does DDP Mean in Shipping? Protecting Buyers From Fees
by Jaidyn Farar
International shipping is full of complexities, and it can get expensive. But branching out into new markets is an important stepping stone in expanding your business. When you decide to ship internationally, you have an important decision to make: will your business handle shipping fees, customs fees, and taxes, or will you hold the buyer responsible for them? If you plan to cover the costs, you’ll need to understand how DDP shipping works.
What is delivered duty paid shipping?
Delivered duty paid (DDP) shipping is a delivery agreement where the seller is responsible for the costs of transporting goods, including shipping fees, import and export duties, taxes, insurance, and more. In DDP, the seller assumes responsibility for risk throughout the entire shipping process. Once the package is delivered, the buyer assumes liability.
DDP is one of 11 Incoterms rules developed by the International Chamber of Commerce to help standardize shipping worldwide. While it provides a great experience for buyers, who are more likely to make a purchase when they don’t have to cover shipping and customs costs, DDP can be risky for the seller. If your shipment gets lost, damaged, or stuck at customs, you’ll quickly rack up additional costs that lower the profitability of the sale.
DDP vs. DDU
In DDP, your business takes responsibility for all costs and risks associated with delivering goods to the customer’s location. Because you cover all expenses, the customer doesn't have to worry about additional charges upon delivery.
In contrast, delivered duty unpaid (DDU) shipping places the responsibility on the buyer to pay import duties, taxes, and other shipping-related costs upon receiving the goods.
What is the purpose of DDP?
The purpose of DDP is to protect the buyer by keeping costs transparent, ensuring safe and timely delivery, and holding sellers accountable. Ultimately, it helps promote a positive and secure transaction experience for both parties.
- Keep costs transparent. Since the seller covers all costs associated with international shipping, customers know their full financial commitment upfront and don’t face unexpected charges upon delivery.
- Reduce the risk of delays. When the seller is responsible for customs clearance and other processes, they make sure to choose the most reliable carriers and shipping partners. This helps ensure a smoother, faster delivery process.
- Ensure safe delivery. This point is similar to the one above. When the shipper has a lot to lose, they put extra effort into the delivery process and experience. This increases the chances that products are delivered damage-free.
Now that we know the purpose of DDP, let’s take a closer look at how it works.
How DDP works
How does DDP work in shipping? This section will explain what the shipping process looks like when you use a DDP agreement. Before you dive in, check out this overview of seller responsibilities:
- Creating a sales contract
- Packaging the product
- Arranging and paying for transportation
- Meeting import, export, and customs requirements
- Covering the cost of any government inspections
- Delivering product to the agreed-upon destination
- Providing proof of delivery
- Covering the cost for lost or damaged goods
Seller prepares goods and drops them off to a carrier
After finalizing a sales agreement specifying DDP, you’ll initiate the shipping journey by packaging goods and dropping them off with the designated carrier. To reduce the risk of package damage or loss, use the right packaging materials and techniques, choose reliable carriers to work with, and use address verification software to catch typos customers make when adding their shipping address.
Carrier delivers the shipment
After handing off goods to the carrier, you remain actively involved, making sure the shipment adheres to all customs regulations and requirements. To facilitate a smooth transit through customs, provide accurate and complete documentation.
Shipment is delivered, and value-added tax is paid by seller
Once the shipment is delivered, your business is responsible for paying value-added tax (VAT). VAT is a tax levied at different stages of the supply chain, including manufacturing, distribution, and sale, and generally ranges from 7-20%.
Buyer has liability after delivery
Once a shipment has been successfully delivered, the buyer assumes liability for it. In freight shipping, this means the buyer is responsible for things like unloading fees. When it comes to parcel shipping, it means the buyer has the responsibility for receiving their package safely.
DDP fees the seller is responsible for
We’ve briefly mentioned a few types of fees the seller is responsible for, but let’s look more closely at your responsibilities. Here’s what you’ll be paying if you use DDP for international shipping.
Shipping
First of all, you’re in charge of covering all shipping fees. While this may seem like a straightforward cost, a lot goes into shipping. Here’s a quick breakdown:
- Carrier fee. This will vary depending on the shipping method, destination, and carrier. To get a general idea of how much it might cost to ship internationally, use the EasyPost shipping rate calculator (UPS, FedEx, and DHL all ship internationally).
- Packaging. The cost of boxes, poly mailers, and filler materials contributes to the shipping cost.
- Fuel or remote delivery surcharges. Carriers often impose fuel surcharges to cover the increased cost of fuel. If the destination is in a remote or less accessible area, they may apply additional charges.
Inspections
Sometimes, goods are inspected to make sure they meet quality and safety standards. If the government charges inspection fees, you’ll need to cover them. To reduce the chances of your packages being held for inspection, fill out customs declarations accurately and make sure the products you’re shipping aren’t illegal in the destination country.
Import and export customs
You’re responsible for paying import and export customs duties and fees, including documentation and clearance charges. You also manage the necessary paperwork to facilitate the smooth passage of goods through customs.
Damage
If an item gets damaged during transit, you’re required to make things right. This may include filing a claim with a carrier or covering the cost of a replacement product.
Insurance
While not mandatory, shipping insurance is an excellent way to protect against potential risks during shipping, including loss, damage, or theft. Insurance has an upfront cost (a percentage of the item’s value) but it’s generally worth it—especially if you’re shipping DDP.
VAT (value-added tax)
As mentioned above, one of the significant responsibilities of the seller in DDP is to pay VAT (value-added tax). This ensures that the buyer isn’t burdened with additional tax-related expenses upon the arrival of the goods.
Storage
If there’s ever a customs delay, your packages might end up being held at a storage facility until the issue is resolved. This can incur storage fees, which you’ll need to cover.
Why DDP can make customs tricky
Customs is one of the biggest obstacles you’ll face when shipping to other countries. If you’re not familiar with local regulations—or simply don’t adhere to them—your shipments could be delayed. Often, it’s preferable for the buyer to manage the customs clearance process to avoid complications and delays. In this case, DDP shipping might not be the best option for your international shipping.
Streamline your shipping process with EasyPost
While you’ve learned more about DDP, a single article probably isn’t enough to address all your international shipping concerns or answer all your questions. EasyPost provides learning resources to help simplify the process—get started with the ones below:
EasyPost doesn’t just provide informational resources. Our suite of shipping APIs gives shippers access to discounted rates for an extensive collection of domestic and international carriers and automates label generation, package tracking, and address verification, and more.
Additionally, our consulting services team within our Summit Advisory Team brand also has extensive expertise with supply chain initiatives. We can help assess your current state as well as identify, prioritize and size improvement opportunities within your supply chain. Reach us at info@summitadvisoryteam.com to set up a free introductory consultation to work out how we can help.