Most Incoterms divide responsibilities between the buyer and seller. The DDP Incoterm works differently. The seller handles almost everything, including transport, export customs clearance, import customs clearance, import duties, and VAT in the destination country. DDP stands for Delivered Duty Paid according to the Incoterms 2020.

Under DDP, the seller delivers the goods to the agreed destination, fully cleared for import. All import duties and taxes are already paid before arrival. The buyer only receives the goods. However, this approach creates serious risks for the seller, which many Dutch exporters underestimate.

This article explains what DDP means in practice. It covers delivery including import duties, risks for the seller, the DDP VAT excluded option, and when this Incoterm is the right choice.

What Is the DDP Incoterm?

DDP stands for Delivered Duty Paid and is one of the 11 Incoterms 2020 rules established by the International Chamber of Commerce. In the Netherlands, this is known as Delivered Duty Paid. The DDP Incoterm places the highest level of responsibility on the seller. It is the opposite of EXW.

Under the DDP Incoterm, the seller arranges and pays for the entire transport process to the agreed destination. The seller also handles all export formalities in the country of departure and all import formalities in the destination country. This includes paying import duties, VAT, and other local taxes. DDP is a true door-to-door delivery rule.

DDP can be used for all modes of transport, such as road, rail, air, and sea. The delivery location can be a warehouse, terminal, airport, or another agreed location. The exact delivery location must be clearly specified in the contract because the risk transfers at that point.

What Does Delivery Including Import Duties Mean in Practice?

Delivery including import duties means that the seller does more than simply ship the goods. The seller becomes the importer of record in the destination country. The seller is legally responsible for customs clearance and all import-related costs.

This is a major financial and legal responsibility. In some countries, the seller must register for VAT in order to pay import VAT.

What the Seller Pays Under DDP:

• Costs for import customs clearance and required permits
• Import duties and tariffs according to local regulations
• Import VAT or GST as the importer of record
• Other local taxes or import charges
• Currency exchange costs when paying in foreign currencies

The buyer pays nothing related to import under Delivered Duty Paid. The goods arrive customs cleared, with import duties already paid, and ready to be unloaded. This makes DDP simple for buyers. It is often used in e-commerce, where customers expect a clear final price without additional charges.

DDP Responsibilities of the Seller and Buyer

Under DDP, the division of responsibilities is much more unequal than under other Incoterms 2020 rules. The seller handles almost everything in the shipping process. The buyer only receives and unloads the goods.

Understanding these DDP responsibilities properly helps prevent expensive mistakes before signing a contract.

The seller carries all costs and risks from departure to the agreed destination. The risk only transfers when the goods arrive at the destination, ready to be unloaded. Under DDP, the seller’s obligations include both import customs clearance and payment of import duties, which is unique within the Incoterms.

The buyer’s responsibilities begin once the goods arrive at the destination. The buyer arranges unloading and any onward transport.

For the buyer, DDP provides maximum simplicity with minimal logistics and customs obligations.

The Main Risks of DDP for the Seller

DDP appears simple for the buyer, but it places heavy obligations on the seller. The seller becomes the importer of record in the destination country. This means the seller must comply with local laws, customs regulations, and tax obligations.

These rules can be unfamiliar and difficult to manage. In countries with complex systems, this can lead to delays, additional costs, and legal issues. Many risks under DDP arise from a lack of local knowledge. If the seller has little experience with import procedures, DAP is often a safer option.

Main Risks for the Seller Under DDP:

• VAT registration risk: The seller may need to register for VAT in the destination country. This process can be complex and expensive.
• Complexity of import procedures: Customs procedures differ per country and may lead to delays and penalties.
• Unknown import duties: Tariffs change regularly, causing the seller to miscalculate costs.
• Currency risk: Import duties are paid in local currency. Exchange rates can increase total costs.
• Risk related to customs agents: The seller depends on a local customs agent. Choosing the wrong agent can result in mistakes and delays.

DDP VAT Excluded: A Practical Solution

If paying import VAT in the destination country creates problems, there is a practical solution within DDP. The seller and buyer can agree to apply DDP VAT excluded or DDP excluding local taxes.

In this situation, the seller still arranges import customs clearance and pays the import duties. The buyer pays the import VAT directly. This reduces the VAT obligation for the seller while keeping the delivery process simple.

This approach reduces the financial risk for the seller and can remove the need for VAT registration in the destination country. Both parties must clearly record this agreement in the contract before shipment.

However, in some countries it is mandatory for the importer of record to pay the VAT, regardless of what is stated in the contract. Therefore, always check local regulations before applying DDP VAT excluded.

When Should You Use the DDP Incoterm?

DDP is not suitable for every business or export situation. It works best when the seller has a presence in the destination country. The seller must understand local import regulations and cooperate with a reliable customs agent.

DDP is a strong choice when the seller wants to provide full service to the buyer. It is common in DDP e-commerce, where buyers expect a fixed final price without additional costs. It is also suitable for sellers who regularly export to the same country.

DDP is not the right choice when the seller has no local presence or cannot arrange VAT registration. It also creates risks in countries with complex import regulations. In these situations, the difference between DDP and DAP becomes important. DAP is often a safer option because the buyer handles import procedures and import duties.

Exporting Under DDP from the Netherlands? Get Expert Support

Under DDP, the seller must arrange both export customs clearance in the Netherlands and import customs clearance in the destination country. Mistakes in export documentation can delay the shipment before it even leaves the country.

Dutch exporters must correctly prepare all declarations, permits, and required documents. This is an important part of DDP export customs clearance in the Netherlands.

Working with a customs expert can reduce these risks. The Customs Company is AEO-certified and has direct integrations with Dutch Customs and Portbase.

They provide 24/7 support for DDP customs clearance. This ensures export processes run smoothly and shipments arrive without delays. Request expert support today to manage DDP shipments with confidence and avoid costly delays.

Frequently Asked Questions

1. Who Pays Import Duties Under DDP?

Under DDP, the seller pays all import duties, import VAT, and other local taxes in the destination country. The buyer has no responsibility for import-related costs.

2. What Does DDP VAT Excluded Mean?

DDP VAT excluded means that the seller arranges import customs clearance and pays the import duties, while the buyer pays the import VAT. This must be clearly specified in the contract before shipment.

3. What Is the Difference Between DDP and DAP?

Under both terms, the seller arranges and pays for transport to the destination. Under DDP, the seller also pays import duties and handles import customs clearance. Under DAP, this responsibility lies entirely with the buyer.