An Incoterms® rule, applicable to any form or forms of transport (air, ocean, ground, or multimodal), under which the seller is responsible for all risk and costs associated with shipping and delivering goods to a named place of destination (often the buyer’s place of business), including export clearance, transport costs and – significantly -- import clearances. Risk and costs transfer from the seller to the buyer when the seller makes the goods available, ready for unloading, at the named place of destination.
Though DDP may be seem to be an attractive option for buyers, as it places all of the burden of shipping, importing, and delivery on the seller, keep in mind that sellers may increase their prices to cover the potential additional costs of using this method.
Sellers should be particularly cautious in agreeing to a DDP sale, as they may not be in a position to obtain import clearances in the destination country. Some countries, for example, require entities conducting import formalities to have a local presence in the country. Where a seller anticipates difficulty in carrying out import formalities, the parties may be better off choosing DAP or DPU.
When an Incoterms® rule is included in a contract of sale, it creates legal obligations for the buyer and seller, which can have costly implications. Therefore, it is important that traders read and understand the precise wording of the Incoterms® rules carefully and choose the rule to include in their sale contract thoughtfully. For additional information and resources on the Incoterms® rules, and to purchase the full text of the Incoterms® 2020 rules, visit the ICC website.
Learn more about the eleven existing Incoterms® rules and what they mean for your shipping business.
Whether you’re a seasoned supply chain expert or this is your first time just starting out, we’re here to help.
Every day we move ocean freight across 2,300+ lanes. So if you're nervous about going ocean, don't sweat it.