What Is DDP? Delivered Duty Paid Explained for Shippers

What is DDP? DDP stands for Delivered Duty Paid. It is the Incoterms 2020 rule that places the maximum obligation on the seller. The seller handles export clearance, the whole carriage to the buyer's named destination and import customs clearance in the buyer's country. The seller also pays every import duty, tariff and indirect tax, including UK and EU VAT, Australian GST and US customs duty. The buyer receives the goods ready for unloading and does nothing else.

Everything else about DDP follows from that. It is the mirror image of EXW, where the buyer does almost everything, and it is the term most attractive to buyers and most dangerous to sellers who have not costed it properly.

The precise obligation split

Under DDP the seller must:

• Package, mark and make the goods available in the agreed form
• Complete all export formalities, including licences and the export declaration
• Contract and pay for carriage to the named place of destination, by any mode or combination of modes
• Carry the risk of loss or damage for the entire journey until the goods are placed at the buyer disposal at the destination
• Complete import customs clearance in the destination country and produce all the documentation that requires
• Pay every import duty, tariff and applicable indirect tax

The buyer obligation is short: take delivery and unload. Unloading is the buyer job unless the contract says otherwise, which matters at a site with no forklift or loading dock.

DDP applies to any transport mode, so it can be used for sea, air, road, rail or a multimodal movement. There is no obligation on either party to insure the cargo, but since the seller holds the risk all the way to the destination, a seller trading DDP without cargo cover is carrying the whole voyage on its own balance sheet.

The VAT trap that catches most sellers

The single most expensive mistake in DDP is treating import tax as a pass-through cost. It usually is not.

When the seller pays import VAT or GST in the destination country, that tax is normally only recoverable if the seller holds a valid tax registration in that country. Without one, the VAT is a sunk cost that has to be built into the sale price, and on a normal European VAT rate that can be a fifth of the goods value evaporating from the margin.

There is a related legal issue. Several jurisdictions restrict who can act as importer of record. A non-resident seller with no local entity, no tax registration and no fiscal representative may not be permitted to clear goods in its own name at all, in which case a contract signed on DDP terms cannot actually be performed as written. Confirm the position in the destination country before quoting DDP, not after the container has sailed.

DDP against DAP and DPU

Incoterms 2020 has three delivered rules and the difference between them is narrow but consequential.

• DAP, Delivered at Place. Seller delivers to the named place ready for unloading. Buyer clears the goods for import and pays duty and taxes. This is the rule that replaced the old DDU.
• DPU, Delivered at Place Unloaded. Same as DAP except that the seller also unloads. It is the only Incoterms rule requiring the seller to unload, and it replaced DAT in the 2020 edition.
• DDP, Delivered Duty Paid. Same delivery point as DAP, but the seller additionally clears for import and pays duty and taxes.

Put simply, the step from DAP to DDP is entirely about customs and money, not about where the truck stops. If your concern is who unloads, DPU is the rule you want, not DDP.

When DDP is the right choice

DDP earns its place in specific situations:

• Consumer and small business sales. A retail buyer cannot lodge an import declaration, and surprise duty bills on delivery cause refusals and chargebacks. Selling landed cost inclusive removes that entirely.
• Sellers with a local presence. If you already hold a tax registration or an established entity in the destination market, the VAT problem disappears and DDP becomes a genuine sales advantage.
• Samples, spares and warranty shipments. Low value, urgent consignments where the receiving party has no import function and any delay costs more than the duty.
• Projects with an agreed landed price. Where the buyer wants one number and no exposure to tariff changes.

When to refuse DDP

Decline or renegotiate DDP when the destination country tariff position is volatile, when the commodity requires import licences or approvals that only a local entity can hold, when the goods are subject to anti-dumping duty or quota, or when you have no reliable customs broker in that market. Tariff exposure is the sharp end: on DDP terms, a duty rate change between quotation and arrival lands on the seller, not the buyer.

How to write DDP into a contract properly

Name the place with precision, including the Incoterms edition, for example DDP 14 Harbour Road Felixstowe United Kingdom Incoterms 2020. State explicitly whether the price includes destination VAT or GST, since ambiguity there is the most common invoice dispute. Confirm in writing who is named importer of record and who holds the customs power of attorney.

Agree how the parties handle a duty rate change or a customs valuation query, and record which party carries demurrage and detention if clearance stalls.

Before you quote, price a full landed cost including freight, destination charges, duty at the correct commodity code, and irrecoverable tax. That number is the real cost of a DDP sale, and it is usually higher than sellers expect. Our Ports and Shipping section covers the rest of the Incoterms 2020 rules and the documents that go with them.

Incoterms are published by the International Chamber of Commerce and have no enforcing agency of their own. They are contract terms, and they bind only the buyer and seller. Duty and import tax are enforced by the destination customs administration against whoever is named importer of record. A DDP clause cannot move a liability that local law does not let the seller hold.

Statutory duties travel with the role, not with the Incoterm. On DDP the seller contracts the carriage, so the seller is the shipper, and the shipper owes the verified gross mass declaration for each packed container under SOLAS Chapter VI. Terminals will not load a box without it. Sellers new to delivered terms are caught by that one at the gate rather than in the contract.

Sources and further reading

• Delivered duty paid (DDP) Incoterms 2020 rule - Trade Finance Global
• DDP Delivered Duty Paid: Definition, Responsibilities and How It Differs from DAP - DHL
• DDP (Delivered Duty Paid) Incoterms 2020 - Rohlig Logistics
• Incoterms 2020 DDP: Spotlight on Delivered Duty Paid

What to read next

• Browse related maritime guides