Delivered Duty Paid – Definition
When a buyer and a seller enter a sale agreement or contract, there are a number of responsibilities that both parties assume depending on the nature of the agreement reached. Delivered duty paid (DDP) is a contractual agreement in which the seller assumes maximum responsibility for the transportation of goods purchased by buyers and all the costs associated.
Once a seller transports goods to the agreed destination port, all the risks and responsibilities are transferred from the seller to the buyer. When a DDP agreement is used in a contract, the seller is responsible for payment of shipping costs, tariffs and taxes and other expenses involved in the delivery of the goods.
A Little More on What is Delivered Duty Paid
Delivered Duty Paid (DDP) is used in shipping agreements, it states that a seller is responsible for the carriage of goods from the point of purchase and their delivery at an agreed place by both the seller and buyer. At the point of unloading the delivered goods, all risks entailed is transferred to the buyer. While the seller assumes maximum responsibility for a minimum cost variance, the seller is only responsible for import clearance at the port of the delivery of the goods.
When a Delivered Duty Paid agreement is used by a buyer and seller, both parties must agree on the mode of payments and the port where the goods will be delivered. The buyer must also be notified when the goods are delivered, all costs associated with damage and loss of goods will be footed by the seller.
The responsibilities of a seller in a delivered duty paid agreement are;
- Delivery of the goods purchased by the buyer.
- Acquire a license for importation and delivery of the goods, as well as export clearance.
- Payment of all costs associated with the carriage and delivery of the goods. This includes transportation costs, Value-added tax and other unexpected costs associated with the delivery.
- Arrangement of all documentation that will aid an easy clearance of the goods at the port.
- Obtaining of necessary approvals from authorities.
- Issuance of proof of delivery to the seller and evidence of due payments made for the transportation of goods.
Delivered Duty Paid (DDP) shipments are free from customs, regardless of the country a particular carriage is being sent to, customs are applicable. Due to the rigorous process of customs, the buyer bears the burden of customs and import clearance. Also, the seller being in a foreign country will be unable to go through customs or import clearance, hence, the buyer must undergo the process.
Customs requirements are not the same for all countries and the buyer must ensure all the processes are met, to avoid the DDP shipment being delayed at the port.
Real World Example
DDP clauses are commonly used in shipment agreements across the world. Due to the reliability of the agreement, many buyers feel more comfortable when this agreement is in place.
Exporters in the United States often use DDP agreements where they are responsible for the transportation of the purchased goods, their storage, VAT, bribery and other unexpected costs associated with the carriage.