DDP

What it means

DDP, Delivered Duty Paid, is the Incoterms rule that places the most obligations on the seller. The seller delivers to the customer, bears all costs and risks, and also pays import duty and VAT in the buyer's country. The buyer simply receives the goods ready for unloading.

It is the opposite of EXW, where the buyer does almost everything. It differs from DAP in that the seller also handles import clearance and pays import taxes, giving the buyer certainty about the final price with no surprises at the border.

For the seller, DDP is demanding because it must understand the customs and tax rules of the buyer's country. It often means VAT registration abroad or appointing a customs representative to handle the import on its behalf.

How it works in practice

When goods are imported into the EU under DDP, the seller is the importer and pays import VAT. If it is not established there, it needs a registration, otherwise it cannot deduct the import VAT, which then becomes a cost that erodes the margin.

In e-commerce, the DDP model is used for low-value consignments through IOSS: the seller collects VAT from the customer at checkout and the parcel clears customs without any extra charge. The customer does not receive an unexpected demand to pay VAT and a fee to the courier.

Within the EU, DDP is used less, as no duty is charged and VAT between businesses is handled by exemption and reverse charge. If DDP is agreed together with installation or assembly at the customer's site, however, the seller may have to register in the country of installation.

What to watch out for

Before agreeing DDP, the seller should check the duty rate, the tariff classification and any import licences or bans. Underestimated duty or unforeseen charges are at its expense and, on large shipments, can wipe out the whole profit on the deal.

DDP is unsuitable if the seller cannot legally act as importer in the buyer's country. In that case it is better to choose DAP and leave the import to the buyer, or agree to recharge the import charges actually paid.