DDP Incoterms 2020 – what does the Delivered Duty Paid rule mean?

International trade is not only about the transport of goods, but also about precise arrangements regarding costs, responsibilities and customs formalities.

 

Among the available Incoterms rules, one of the most demanding for the seller – and at the same time the most convenient for the buyer – is DDP (Delivered Duty Paid). This formula is often chosen for deliveries to countries with complex customs procedures or where the buyer wants to minimise their logistical involvement. However, before you consider it a favourable option, it is worth understanding its financial, legal and operational implications.

 

Below you will find a clear explanation of how DDP Incoterms 2020 works, who bears the costs and risks, in which situations this rule works best and when it can be problematic.

 

 

DDP in a nutshell: definition and business sense

 

DDP Incoterms 2020 means that the seller delivers the goods to the designated destination at their own expense and risk, covering all customs duties and taxes, both export and import.

 

In practice, the DDP Delivered Duty Paid rule assumes that all customs formalities are the responsibility of the seller.

 

Under DDP terms, the seller is fully responsible for: transport of the goods, import customs clearance, taxes and transport costs until the goods are delivered to the buyer. This means that the buyer avoids the risks associated with importing goods, formalities and unforeseen charges.

 

This rule is particularly useful when the buyer has no experience with customs procedures, does not have a customs agent or expects comprehensive logistics services. At the same time, DDP requires the seller to deliver the goods in accordance with local regulations (of the country of import), which can be difficult in the case of complex customs processes or restrictive regulations.

 

In summary: DDP Incoterms is a convenient solution for the buyer, but costly and risky for the exporter. In the following sections, we will look at how costs and responsibilities are divided and when this formula is beneficial to both parties to the transaction.

 

 

 

Division of costs and risks in DDP Incoterms

 

In the case of DDP, the seller bears full responsibility for the delivery of the goods and all costs related to transport, customs duties and taxes until the goods are placed at the buyer’s disposal. This means that the risk of loss or damage to the goods is transferred to the buyer only at the agreed destination or at the agreed delivery point.

 

The seller delivers the goods β€˜on the seller’s account’, covering all costs related to their transport, import and customs clearance. This is why DDP delivery terms are considered one of the most demanding for exporters – the financial and organisational responsibility for the delivery of goods rests almost entirely with them.

 

DDP deliveries also mean that the goods will be delivered to the designated destination, and the buyer is only obliged to accept the delivery as previously agreed. However, if they fail to provide suitable conditions for unloading or are not ready for collection, they bear the costs associated with the delay or additional handling.

 

 

Seller’s obligations in DDP Incoterms

 

The seller is fully responsible for delivering the goods to the agreed point of collection and must cover all costs related to logistics and customs clearance. They organise the transport of goods, ensure export and import customs clearance, customs duties, customs and excise duties and other fees related to delivery.

 

If certificates of origin, commercial invoices or other information required by customs authorities are required, the seller is also responsible for preparing them.

 

The seller is also fully responsible for securing the shipment, unless the parties agree otherwise – although Incoterms do not impose an obligation to take out insurance, in practice, obtaining insurance may be necessary to limit potential costs or losses.

 

In practice, the selling party has to deal with complicated customs procedures, which increases the costs associated with the performance of the contract. However, if the goods are damaged before they are handed over to the buyer, the seller bears all the consequences.

 

 

Buyer’s obligations in DDP Incoterms

 

The buyer’s obligations in the DDP formula are kept to a minimum and mainly boil down to collecting the delivered goods at the right place and time. Acceptance of delivery is the formal moment when the buyer’s responsibility begins.

 

The buyer is responsible for ensuring access to the unloading site (allowing the seller access to the specified location). If the buyer is not ready for unloading, they bear the costs associated with downtime or additional carrier services.

 

Although the buyer avoids the risks associated with importing goods and customs formalities, in some countries local regulations require their participation during customs inspections. The buyer may be required to provide information or approve documents.

 

Summary: The buyer has minimal obligations, but their liability may increase if they fail to collect the goods on time or provide access to the agreed place of delivery. All logistics, customs clearance and fees are the responsibility of the exporter.

 

 

 

Summary

 

DDP Incoterms 2020 delivery terms are a rule whereby the seller delivers the goods to the designated destination, covering all costs related to transport, customs clearance, taxes and fees. This is one of the most demanding formulas for the exporter, as they bear full responsibility for the delivery of the goods until they are received by the buyer.

 

For the buyer, this is a convenient solution – they avoid customs formalities and do not have to deal with import procedures or transport.

 

DDP delivery terms can be beneficial in commercial relationships where the buyer expects complete service and predictable costs. However, for the exporter, they mean the need for full control over logistics, knowledge of local regulations and readiness to act on behalf of both parties to the transaction. Therefore, the choice of the DDP rule should be informed and preceded by an analysis of risks, costs and obligations.

 

 

 

Frequently asked questions

 

What does Incoterm DDP (Delivered Duty Paid) mean?

 

DDP Incoterms loosely translates as: goods delivered, duty paid. Under this rule, the seller delivers the goods to the designated destination and covers all costs and customs formalities.

 

The buyer only collects the goods, without having to deal with customs clearance, taxes or transport.

 

 

What is the difference between DAP and DDP?

 

In DAP, the seller delivers the goods to the destination, but does not pay customs duties or import taxes, and unloading is the responsibility of the buyer.

 

In DDP, the seller additionally covers the costs of customs clearance, taxes and customs and excise duties, delivering the goods fully prepared for collection.

 

See: DAP Incoterms 2020 – what does the Delivered at Place rule mean? >>>

 

 

 

How does DDP differ from DPU?

 

In DPU, the seller delivers the goods and is responsible for unloading them at their destination, but does not cover import costs. In DDP, the obligations are broader – the seller also pays customs duties, taxes and import formalities.

 

Read also: Incoterms DPU – what does the Delivered at Place Unloaded rule mean? >>>

 

 

 

What are Incoterms and who creates them?

 

Incoterms are international trade rules that define the division of costs, responsibilities and risks between the parties to a transaction. They are created by the International Chamber of Commerce (ICC), which brings together entrepreneurs from around the world.

 

Read also: What are Incoterms? International sales terms in practice >>>