How Does Delivery Duty Paid (DDP) Freight Shipping Work?
What is DDP? Delivery Duty Paid (DDP) is a popular freight shipping method worldwide, mostly used for international transport. Many sellers only use this approach for shipping by sea or air. DDP significantly benefits buyers because the seller assumes the risk, costs and liability from pickup to delivery. That makes it a burden for the seller that may cut too deeply into profits if not handled well.
What do DDP shipping costs include?
Under a DDP agreement, the financial risks and responsibilities remain with the shipper until the goods are transferred at the agreed delivery location in the country where the customer is located. The DDP shipping agreement obligates the seller to pay for the following costs, among other potential fees and shipping-related costs incurred at any point during the transport process:
- Shipping costs
- Export duty tax
- Import duty tax
- Freight insurance
- Any other costs involved during shipping
Other Shipping Cost Assignment Methods
The below three key terms in the global shipping industry refer to these arrangements for payment of duty and other freight transport and related costs:
- DDU: (Delivery Duty Unpaid) The end consumer pays the duties.
- DDP: (Delivery Duty Paid) The seller pays the duties.
- DAP: (Delivered At Place) The seller absorbs all costs and risks in delivering the goods.
What makes DDP shipping so popular?
As explained, the seller is responsible until the point where the buyer receives delivery of the shipment. So, why do sellers usually choose the DDP method for international shipping? Here are the essential reasons why a seller chooses the DDP shipping alternative:
- To free customers from the burden of dealing with the fees.
- To save customers from absorbing the cost of the fees.
- To protect their customers by ensuring they receive the goods ordered.
- To ensure successful transport by air, sea and ground for every shipment.
- To ensure the safest and most reliable and timely delivery.
- To preserve the seller's maximum product and service value to the customer.
- To further assure complete satisfaction with the customer experience.
How does DDP shipping work?
Tracking the DDP shipping process along the supply chain is simple. The four general steps of the timeline include:
- The seller transfers control of the shipment to the carrier.
Seller maintains financial responsibility.
- The shipment is sent to the delivery location.
Seller maintains financial responsibility.
- The shipment has arrived at its final delivery point.
The VAT payment is due. The seller is still financially responsible.
- The shipment is finally transferred to the receiver's possession.
(Financial responsibility for it transfers with possession of it to the recipient.)
The Downside of DDP Shipping
The already cumbersome regulations governing global freight shipping are further complicated by the seemingly countless laws and customs regulations of individual countries. These factors limit DDP as a practical choice only for goods of higher dollar value.
Potential DDP Cost Variables
Calculate the fees you will be required to pay and ensure that you will make a profit on what you're selling before you choose DDP shipping for your company. By using the DDP method, as the seller, you will be responsible for ALL the following fees:
- Various fees
- Storage and Demurrage
- Customs duties
- Freight shipping insurance
- Freight damage fees
- VAT (up to 20% of value + duty)
How does DDP compare to the other common options?
The DDP approach is a choice for shippers due to its benefits for their customers. Today's savvy sellers take pride in being customer-centric companies and prioritize protecting their customers. DDP shipping is another great way to help customers by saving them from financial responsibility and making the shipping process as seamless and convenient as possible for their valued customers — enabling buyers to avoid potential customs fee issues and any tasks that may require action to ensure prompt delivery. Still, DDP does cost shippers considerably more overall.
Managing shipping costs must be efficient to protect exporters from loss of profits in DDP shipping. Weighing the pros and cons of DDP and comparing the practice to its DDU alternative, DDP often presents the best approach for both shipper and receiver if the process is managed well.
Unishippers Makes Your International Shipping Easy
We offer international shipping services throughout Canada, Mexico, and overseas. Our vast network of carriers and shippers bring the best rates for your company. Additionally, we partner with the most efficient providers of DDP services.
For a freight shipping quote or for questions about 3PL services, call Unishippers at 1-800-999-8721, or contact us here on our website today.