Abbreviation of term: Delivered Duty Paid

What is the definition of DDP?

The term DDP (Delivered Duty Paid) is an acronym that originates from incoterms, which define the responsibilities between a seller and buyer in international trade contracts, implying the majority of obligations of the exporter. The seller must fulfill customs formalities and pay taxes and duties integrally before delivering goods to the buyer at the agreed destination.  The exporter, according to DDP classification, is responsible for all risks inherent to transportation, as well as all the costs indicated by it.

The incoterm (shortened form of “International Commercial Terms” or “conditions internationales de vente” (CIV in French) represents the terminological evolution of “Free on Board” or “franco à bord” (FOB), terms which first appeared in 1812 to organize shipments by sea. Created in 1953, the word “incoterms” designates all regulations relative to international trade. They facilitate interpretation of commercial terms in a global way. With the development of world trade, these incoterms have been modified and added to many times until the 2010 version, in application since 2011.

The term DDP is one of the most frequently used incoterms. If a transaction is signed with the term DDP, the seller is obligated to supply the buyer the goods at the place of delivery once all transport costs have been paid, administrative formalities completed, and all import-exports duties honored. The only obligation of the importer consists in the collection of the goods at destination.

The obligations of DDP transport

The DDP ensures the seller respects the following obligations:

  • To pay in full all transport costs to the agreed upon destination;
  • Take charge of costs relative to inspections before exportation, whether these are required by the authorities of the exporting or importing country;
  • Complete all customs formalities;
  • Pay taxes inherent to the transport of goods;
  • Complete customs clearance for export;
  • Deliver the goods to the buyer to the agreed upon destination;
  • Ensure goods are ready for unloading.

According to DDP logistics, the buyer is responsible for:

  • Reception of goods on delivery;
  • Taking charge of unloading of goods, unless the contract stipulates that the cost of unloading is to be paid by the seller.

It should be noted that according to the previous version of incoterms, inspections carried out by the exporting country were the only inspection incumbent on the seller. In other words, in 2000, DDP transport was less advantageous for the buyer than it is today.

Examples and practical applications

DDP: one of eleven incoterms

The eleven incoterms of three letters each, of which DDP is a part, are classed in two main categories. The first list concerns transport by sea and waterways only. Four incoterms are associated to it, as follows:

  • FAS: Free Alongside Ship;
  • FOB: Free On Board;
  • CFR: Cost and Freight;
  • CIF: Cost Insurance and Freight.

Seven incoterms are used in multimodal transport, as follows:

  • DDP: Delivered Duty Paid;
  • EXW: EX-Work;
  • FCA: Free Carrier;
  • CPT: Carriage Paid To;
  • CIP: Carriage and Insurance Paid to;
  • DAT (ex DEQ): Delivered At Terminal;
  • DAP (ex DAF, DES, DDU): Delivered At Place.