What is DDP?
Delivered duty paid or DDP is a delivery agreement where a seller assumes all the responsibility and related costs before the goods are delivered. DDP is one of the 11 incoterms introduced by the International Chamber of Commerce. It is globally acceptable and enforceable. However, there are no provisions which enforce the use of DDP.
Significance of DDP in an E-commerce Shipping and Delivery
DDP is often termed a customer-focused shipping agreement, as a seller is held accountable for undertaking all the risks during transit. It is important for an e-commerce business in the following ways:
- Navigating away from custom clearance: A DDP agreement requires a seller to clear the customs fees. Therefore, customers can skip paying the mentioned fees and wait until the order arrives at their door.
- Comparatively low transit times: Parcel carriers offer a lower transit time when compared to postal services. As a DDP agreement leverages parcel carriers, the overall transit times across the board are very low in a DDP shipping agreement when compared to its incoterm siblings.
Prerequisites of DDP and How It Works
The seller and the buyer can draft a DDP agreement between the two parties when placing the order. As a globally enforceable set of rules, there are no such requirements; any party must suffice. Once an order has been placed under the mutual agreement, the following processes take place.
- Packing: The product is packed as per the usual protocols of the seller.
- Shipping: The product is shipped, and the seller handles all the intermediate situations.
- Final delivery: The product reaches the customer, and the product risk is transferred.
Use Case with DDP
A buyer from Phuket orders a pair of jeans from a Sydney-based retailer under a DDP agreement. Subsequently, the product is dispatched by the seller. Furthermore, the customs in Thailand were cleared and paid for by the retailer before the product reached the buyer in Phuket.