Every business function requires focus, research, and strategic planning. But when it comes to shipping, you must know how complex the process is.
You need to choose the right shipping company, offer shipping options to customers, and manage your costs too.
For businesses shipping internationally, the process is tougher. There are complex rules related to international shipping plus, the costs are super high.
Hence, Delivery Duty Paid (DDP) is probably the best shipping type you can adopt for shipping internationally.
So, read on to know more about Delivery Duty Paid, its pros and cons, and DDP incoterms.
What does Delivery Duty Paid (DDP) shipping mean?
Delivery Duty Paid is a type of shipping in which the seller is responsible for the fees and risk of shipping packages until they get delivered. With DDP, the purchase becomes risk-free for the buyers as they are not liable for the shipping costs.
In other words, DDP is an agreement between sellers and buyers that places the responsibilities and risks of the order transportation on the seller until the buyer receives it. Delivery Duty Paid shipping option is like a protection to the buyer. It protects the buyer and holds the seller responsible for the package until it reaches its destination.
The Advantages and Disadvantages of DDP
Before we tell you about the pros and cons of DDP, here’s some more information on DDP.
DDP is one of the 11 International Chamber of Commerce Incoterms. By incoterms, we mean the set of international trade terms to reduce the complexities, confusions, and conflicts involved in exports and imports. So, the benefit of incoterms is that it helps solve the complexities of international trading.
For instance, the language barrier in international shipping was one of the problems solved using Incoterms. Three-letter acronyms and standardized definition for each was introduced to eliminate the language-related issues.
Now, let’s have a look at the pros and cons of Delivery Duty Paid shipping.
- DDP incoterms shipping gives a hassle-free shopping experience to buyers as sellers pay the international shipping charges and take responsibility for the package. Hence, customers are more likely to buy again in the long run.
- DDP ensures safe delivery of the package as sellers send it via the best and safest routes.
- No worry about supply chains
- DDP incoterms shipping is a high-risk zone for the seller as they take full responsibility for the shipment.
- The sellers must pay the customs and tariff charges, insurance, currency exchange, transportation costs, handling, duties, taxes, and everything else.
- For the buyers, one disadvantage is that they do not have control over the shipment’s movement.
DDP vs. DDU vs. DAP – What are the Differences?
Now that you are aware of what DDP is, let’s introduce you to DDU and DAP. These incoterms of different from DDP incoterms.
So, let’s understand the difference between DDP incoterm and DDU or Delivery Duty Unpaid.
Unlike DDP incoterm, DDU requires the end customer/ buyer or the person receiving the package to pay the duty charges incurred once the shipment enters its destination country.
With DDU, customs contact the buyer or the package receiver when the shipment arrives. After the settlement of all charges, the buyer can get the shipment delivered once released by the customs authorities. It may so happen that the customer had to go to the local post office to pick up the parcel.
There are eCommerce companies where the sellers include these duties at checkout. Then they collect the payment directly from the customers for DDP incoterms.
There are times when customers do not know if the package is a DDU incoterm shipment. This results in the customer calling the seller’s support team, canceling the order, refusing to accept it, or returning it to the seller.
On the other hand, DAP is Delivered- At-Place shipping. In DAP shipping, the buyer is responsible for paying import duties and other local clearance taxes.
So, among DDU, DAP, and DDP incoterms, DDP is the best option for a hassle-free customer experience. It also gives sellers a choice as to whether they should take up all the charges upfront or include them in the product pricing.
Further, Delivery Duty paid to ship reduces the chance of canceling the order, refusing to accept it, or returning it, unlike DDU.
So, DDP incoterms might be a safe option for sellers who do not prefer losing a sale and incur additional charges for shipment return.
Aim of DDP
Should sellers go for DDP incoterms?
Yes. DDP incoterms shipping is probably the best option in international trade. It is profitable to the buyers.
Here are the three underlying reasons for buyers about why Delivery Duty Paid shipping is beneficial for them.
Sellers protect the buyers through Delivery Duty Paid shipping. The seller takes on all the costs and responsibilities in the best interest of their buyers.
So, scammers stay away from DDP shipping as it proves to be too much of a burden for the sellers who do not intend to deliver the shipments.
The laws and regulations of international trade differ from one country to another. Hence, the chances of everything going haywire during international trade are high.
With DDP shipping, sellers ship packages via the safest routes. This is because the seller’s responsibility in DDP incoterms is to get the shipment delivered safely.
Also, with DDP shipping, buyers can be assured that sellers won’t run away after taking the money.
Sellers Responsible for International Fees
If the buyer has to pay the customs fee and other duties, they might step back from purchasing. It is primarily because buyers aren’t aware of the customs charges and other costs involved in international trade.
With DDP, sellers pay the international trading fees, and the buyers’ shopping experience becomes smoother.
DDP is by far the best shipping option that businesses can opt for. It is mainly popular with buyers. So, sellers using DDP incoterms will stay in the good books of the buyers.
However, the costs involved in DDP shipping might be unprofitable for the sellers. Plus, it is a high-risk zone.
So, if you are a risk-taker and are looking for customer loyalty and long-term business growth, go for Delivery Duty Paid shipping.
Because with a hassle-free and risk-free customer experience, buyers are sure to make repeat purchases, right?