International shipping is a headache for businesses and customers alike. Delivered duty paid (DDP) is the medicine.
Under a DDP agreement, the seller takes on all responsibility for transporting goods to the buyer’s location, including the costs of shipping, import duties, and taxes. And while it seems like more work for you, it streamlines the shipping process and boosts customer satisfaction — two perks that lead to greater business success.
Here’s a guide to DDP, its benefits and disadvantages, and how it compares to other shipping agreements. Jump to the end to see how Fishbowl optimizes every aspect of inventory management, including DDP arrangements.
An overview of DDP
In shipping, DDP is an agreement that exporters and importers use to minimize the risk of disputes over shipping responsibilities. It’s recognized by the International Chamber of Commerce (ICC), which means there are clear standards for both parties and a source of truth in case of any misunderstandings.
Here’s how DDP works: The exporter or seller assumes responsibility for delivering goods and paying all associated costs. This means they control the entire shipping process, from selecting the carrier to managing customs clearance and covering import duties and taxes. Until the goods are delivered, the seller bears the risk of any damage or shipping disruptions. If the delivery never arrives or doesn’t arrive in good shape — even if it isn’t the seller’s fault — the seller is responsible for amending these issues.
Under DDP, the importer or buyer is entitled to receive the goods at a specified delivery location, which is usually in the country where it operates. It doesn’t have to worry about managing the complexities of international shipping, like customs procedures, and it doesn’t have any additional financial obligations. The buyer isn’t responsible for the goods until the seller delivers them.
DDP versus DAP versus DDU: What’s the difference?
DDP shipping is one of several standard Incoterms, or international shipping solutions, that businesses can choose from. Another common arrangement is delivered at place (DAP), formerly known as delivered duty unpaid (DDU).
Under DAP, the seller handles transportation costs, assumes responsibility for losses, and delivers goods to the agreed-upon destination. But the buyer takes on some responsibility for getting the goods through customs. It has to choose a customs broker and pay import duties. While this is inconvenient for the buyer, it takes some of the weight off sellers because they have one less thing to worry about. With DDP shipment, the seller covers these responsibilities, giving the buyer a more comprehensive service.
5 benefits of DDP
Why choose DDP over DAP or another shipping strategy? Here are five pros of DDP shipping.
If you’re the seller:
1. You have total control of order fulfillment: With DDP, you make all the choices when it comes to shipping orders. You oversee every step, including selecting the carrier and mode of transport, creating the shipping invoice, and managing customs clearance. This level of control ensures handlers manage products according to your standards, reducing the risk of damage, delays, and miscommunications.
2. Customers are happier: Since you cover all the risks and shipping costs, you can give customers a clear price, without any hidden fees. This means there are fewer uncertainties and frustrations for customers. Feel confident assuring them you’ll deliver orders safely and on time.
If you’re the buyer:
3. You get a smoother shipping and delivery experience: Since the seller handles all the logistics and costs of international shipping, you avoid headaches related to customs clearance and damage in transit. The ease of receiving goods without these responsibilities makes DDP attractive to buyers who value convenience and efficiency.
4. It’s easier to track order statuses: The seller is responsible for the entire shipping process, which means it can often provide tracking information from the moment the goods leave the facility until they get to you. Monitor the progress of your shipment in real time and reduce the uncertainty that often comes with international deliveries. This is especially helpful if you’re a business ordering large volumes of stock. Since there’s a clear delivery date, you can more accurately plan to unload, store, and sell goods.
5. There’s a lower scam risk: DDP is a big financial investment for sellers. They take on all responsibility for the shipment, which means there’s a strong incentive to make sure goods arrive as promised. This level of accountability makes it less likely that you’ll encounter fraud, unnecessary delays, and unexpected damage. And on the off chance that you do, there should be options for recourse per the DDP shipping terms of agreement.
Common disadvantages of DDP
Here are four cons of DDP to consider as a seller.
1. Higher costs
Since you’re responsible for all shipping costs, including transportation, import duties, and taxes, DDP gets expensive quickly. Absorbing all the costs associated with delivering goods lowers your profit margins. This is especially challenging when sending goods to countries that have high import duties, complicated customs processes, or fluctuating exchange rates.
You also assume all the financial risks associated with shipping. For example, you may incur penalties for non-compliance with local laws or be responsible for replacing lost or damaged goods. Some companies manage these risks by purchasing shipping insurance, but in some cases, DDP costs more than it’s worth.
2. Complexity and administrative burden
DDP requires you to manage the entire shipping process, including customs clearance and compliance with regulatory requirements in the destination country. This is time-consuming and requires a deep understanding of ever-changing international trade laws and procedures. It’s hard to keep up.
For businesses without experience in these areas, the DDP’s administrative burden can be overwhelming and lead to costly errors and delays. Even when you get everything right, dealing with the formalities of international shipping can strain your resources.
3. Reduced control for the buyer
Buyers who prefer to have more control over the shipping process may find DDP unappealing. Since you handle everything, the buyer has little say in choosing the shipping carrier, customs broker, or transportation method. This lack of control could frustrate buyers with specific standards or established relationships with certain service providers and means some buyers are better off choosing an agreement like DAP.
4. Potential for miscommunication
International shipping is always challenging. When you’re responsible for it all, it’s easy to miscommunicate or lose track of who’s doing what. On top of this, discrepancies between the seller’s and buyer’s expectations about shipping timelines and procedures can result in delays, disputes, and dissatisfaction. Both parties have to communicate clearly to avoid confusion, which isn’t an easy task.
Streamline your DDP process with Fishbowl
Navigating DDP can be a whirlwind. With Fishbowl, you can simplify the process to enhance efficiency.
The Fishbowl ShipExpress plugin allows you to manage shipments more easily, no matter which shipment agreement or carrier you choose. It works with popular providers like UPS, FedEx, and DHL. Plus, Fishbowl’s seamless QuickBooks integration helps you maintain accurate records, optimize inventory management, and ensure compliance with ease. Book a demo today.
