DDP (Delivered Duty Paid): Maximum Seller Obligation Explained

DDP Delivered Duty Paid, Incoterms 2020: the seller clears import and pays duties and VAT. Costs, importer-of-record issues, a worked example, DDP vs DAP.

DDP, Delivered Duty Paid, is the Incoterms® 2020 rule that puts the greatest obligation on the seller. The seller carries the goods to the named place in the buyer's country at its own risk, clears them for export and for import, pays the import duties and taxes, and delivers them on the arriving vehicle, ready to be unloaded. The buyer receives a fully landed shipment and only has to unload it.

For a buyer, DDP is the most comfortable rule. For a seller, it is the most demanding and often the most dangerous, because it requires acting as an importer in a foreign country. This lesson explains how DDP works and when it is a sensible choice.

When should you use DDP?

DDP fits when:

• the seller has a subsidiary, a VAT registration or a reliable customs representative in the buyer's country;
• the buyer is a consumer or a small business that cannot clear imports itself;
• the seller sells regularly to the same country and has mastered its tariff, taxes and procedures;
• the deal is within a customs union, where import formalities are light.

Avoid DDP when you cannot legally act as importer in the buyer's country, when you cannot estimate the duties and taxes reliably, or when import licences and local registrations are required in the buyer's name. In those cases sell DAP.

Where does delivery happen and when does risk pass?

The seller delivers when the goods, cleared for import, are placed at the buyer's disposal at the agreed point in the named place, on the arriving means of transport and ready for unloading. Risk passes then. The buyer must help the seller, at the seller's request, cost and risk, with information and documents the seller needs for import clearance, but the obligation to clear remains with the seller.

Who pays what under DDP?

Import VAT is the seller's cost under DDP unless the contract expressly allocates it to the buyer. Adding "VAT unpaid" to the term is possible, but it modifies the rule: write out exactly which taxes the buyer pays, rather than relying on shorthand.

Documents and payment

The seller provides the buyer with a document enabling it to take delivery, such as the transport document or a delivery order, and keeps the import declaration and the receipts for duties and taxes. To clear the goods, the seller or its broker needs the commercial invoice, packing list, transport document, proof of origin if a preferential rate is claimed, and any certificates or licences the import country requires.

DDP is rarely paired with a letter of credit; sellers who sell DDP usually do so on open account or with an advance payment, to customers they know.

Insurance under DDP

There is no insurance obligation, but the seller bears the risk to the named place and should insure the whole journey, including any storage at customs.

Worked example: tableware to a store chain near Paris

A producer of ceramic and olive-wood tableware in Tizi Ouzou sells to a French store chain, DDP Gennevilliers, buyer's warehouse, Incoterms® 2020. The goods travel by groupage trailer via Algiers and Marseille.

The duty line depends on the goods' origin and tariff classification: without a valid EUR.1 or origin declaration, the full third-country duty would apply. See free trade agreements. The VAT line is the real issue: to import in France, the seller needs an EORI number and, in practice, a French VAT registration, often through a fiscal representative. If it is not registered, the EUR 5,120 is a pure cost. Had the parties agreed DAP, the buyer would have imported the goods itself and normally deducted the import VAT in its own VAT return.

DDP compared with DAP and DPU

DDP is the mirror image of EXW: one puts almost everything on the buyer, the other almost everything on the seller. The Incoterms matrix shows the full spectrum.

Common mistakes with DDP

• Quoting DDP without checking whether you can act as importer in the buyer's country.
• Underestimating duties by using the wrong tariff code or the wrong customs value. See customs valuation.
• Forgetting import VAT in the price, or assuming you can recover it.
• Missing licences, standards certificates or labelling rules that only an importer can satisfy.
• Using "DDP" for courier shipments without reading the carrier's own terms, which may bill duties back to the shipper with fees.