DDP Shipping from China

DDP Shipping From China — The Definitive FAQ Guide

DDP is a set of trade terms (Incoterms) created by the International Chamber of Commerce.

It is used quite often between trading parties.

DDP terms can become a very effective tool in your business activities if you know how to use them correctly.

How does DDP shipping work?

DDP is an abbreviation for Delivered Duty Paid. 

In such kind of a delivery agreement, the seller assumes all of the responsibility, risks, and costs connected with transporting products to the destination port.

DDP shipping is a great choice for buyers because of the above-mentioned obligations of the supplier.

The step by step process of the DDP shipping consists of the following steps:

1. The buyer pays for goods and chooses DDP as the delivery contract.
2. Parties negotiate about the place of delivery, other details of their agreement.
3. The seller chooses the carrier or carriers and places your cargo for the following delivery.
4. Seller clears your goods both in the exporting and importing countries.
5. Your products proceed through the delivery process and get to the chosen place eventually.
6. You pick up your cargo with all the connected documentation.

What are the obligations of the seller under DDP Incoterms?

In the case of DDP shipping terms, the seller has the maximum stack of obligations and responsibility.

He carries out the delivery of the goods to the buyer at the agreed destination.

In this case, the DDP shipping terms might be considered as the opposite of EXW ( Ex Works ) which involves the buyer picking up the cargo from the supplier’s premises.

So, let’s have a closer look at the seller’s obligations.

They include:

# 1. Provision of the products stated in the contract with the buyer

The seller has to provide the goods and the commercial invoice in conformity with the contract of sale.

# 2. Obtaining licenses, authorizations and going through other formalities

The seller has to gather all the needed export and import licenses and other official authorization documents.

Moreover, he has to carry out all customs formalities for the exportation and importation of the products and, if required, organize their movement in foreign countries.

# 3. Conclusion of a contract of carriage

The seller has to apply for the carriage of the goods by the most effective route and manner.

If a final destination point is not agreed with the buyer, the seller can select such a point at the place which best suits his purpose.

# 4. Completion the delivery

The seller is obliged to place the products at the disposal of the buyer on a certain date or within some period stated in the contact.

# 5. Carrying of risks until the products reach the final destination

The seller bears all risks of loss of or damage to the products until the delivery is done in full.

# 6. Paying all costs connected with the contract of carriage, delivery process, etc.

In addition to costs resulting from the carriage and delivery, the seller has to pay customs fees as well as all duties, taxes and other official charges payable upon exportation and importation of the products.

# 7. Constant notification to the buyer

The seller has to notify the buyer about the dispatch of the products on time.

He also has to provide any other notice required to allow the buyer to take all the needed measures to successfully pick up the products.

# 8. Collection of all the needed transport documentation or equivalent electronic messages

The seller has to transfer to the buyer the delivery order or another usual transport document (for example, a negotiable bill of lading , a non-negotiable sea waybill an inland waterway document, and air waybill, a railway consignment note a road consignment note or a multimodal transport document).

Such documents might be required by the buyer to achieve his products eventually.

If the agreement parties have decided to communicate electronically, the above-mentioned documents might be replaced by an equivalent electronic message.

# 9. Checking, packaging and marking procedures

Under DDP terms, the seller also pays for all the necessary checking operations (such as quality testing, measuring, weighing, counting).

The seller also has to organize the proper packaging (unless it is usual for the particular type of products to be delivered unpacked).

All packages also have to contain appropriate marks.

What are the obligations of the buyer under DDP Incoterms?

As you already may assume, under DDP rules, the buyer doesn’t have many troubles to deal with.

However, there are still things he is responsible for:

# 1. Pay for the goods

Obviously, the buyer has to pay the product price as provided in the contract between him and the seller.

# 2. Help the seller to obtain needed licenses and authorizations

If needed, the buyer has to provide additional information and other assistance in obtaining any import license and other official authorization necessary for the importation of the products.

# 4. Pick up the delivery

The buyer has to pick up his goods as soon as they are placed at the point of final destination.

# 5. Bear with risks and costs after the goods were delivered

The buyer takes all risks of loss of or damage to his products after they have been delivered at his disposal.

He also pays all costs after the products have been placed at his premises.

# 6. Pay for the inspection of your products

The buyer pays for the pre-shipment inspection unless the agreement states otherwise.

Note: the most important thing you have to keep in mind as a buyer under the DDP shipping terms is that you have to work with the supplier as a team.

Please, be sure to communicate with your partner, provide him all the needed info about your products, laws of your country, and so on.

 

What is the difference between DDP and DAP shipping terms?

The main difference between DDP and DAP contracts is that in DDP all costs and taxes of import clearance are paid by the seller while in DAP such expenses are paid by the buyer.

If you think that your supplier is not able to go through customs clearance by himself or through his representatives, you better use DAP Incoterms.

If you want to learn more about DAP shipping terms, please read the following JMS guide .

DDP vs CIP shipping: how are these two differ?

CIP means Carriage and Insurance Paid to.

The name itself gives us the first clear difference from the DDP terms: there is a clause about the insurance in the CIP terms.

Secondly, the risks under CIP Incoterms transfer much earlier – in the port of export, when the supplier gives your products to the named carrier.

What is the difference between DDP and DDU shipping terms?

DDU and DDP terms are practically the same: DDU is short for Delivery Duty Unpaid.

Under the latter terms, the seller isn’t obliged to pay duties or taxes in the buyer’s country.

All other charges are still paid by the seller, but if you don’t want to proceed through import customs clearance , you better choose DDP as your delivery contract.

CIF and DDP shipping: what is the difference?

CIF stands for Cost, Insurance and Freight.

Just like in the case of the CIP Incoterms, CIF states that the seller has to obtain insurance for the buyer’s cargo.

Another significant difference between the CIF and DDP terms lies in the modes of transport which can be used.

CIF Incoterms are applicable only in the case of maritime transport, while the DDP terms can be used anyways.

Which Incoterms to choose: DDP or CPT?

Carriage Paid To (CPT) Incoterms is quite similar to the DDP terms.

Both of them don’t have any clauses about the insurance policy, and they can be used with any necessary means of transport.

However, in the case of CPT delivery, the seller is obliged to clear your goods only on his side, while the importing process stays on the buyer.

Also, all the risks of loss or damage to goods transfer from the seller to the buyer when the products are delivered into the custody of the carrier.

If you want to learn more about the CPT Incoterms, follow this link .

How much does DDP shipping cost?

DDP shipping costs more than other types of contracts.

The reason is simple: as a buyer, you don’t have to deal with tons of paperwork, customs fees, multiple carriers, etc.

If you want to get an estimate of your DDP delivery from China, please contact JMS customers’ service .

Can I use DDP Incoterms for domestic shipping?

It might be quite confusing, but you can actually use international commercial terms for domestic shipping.

The reason is that Incoterms do not have the power of law, which makes them totally flexible.

Do DDP shipping terms contain clauses about the insurance policy?

DDP has no obligation to obtain the insurance not for the buyer, nor for the seller.

If you want to secure your goods, you can pay for the additional insurance or choose other Incoterms (like CIP or CIF).

How are risks transfer between parties signed for DDP Incoterms? When exactly such transfer happens?

In the case of DDP terms, the transfer of risks of loss or damage to the goods happens when all products get to the point of final destination.

This point has to be chosen and agreed before between parties of the delivery contract.

The exact moment when the risk transfers from the seller to the buyer are the moment when the goods become available for the pick up at such a point.

There is a clear rule which completes the above-mentioned statement: your products have to be in good shape and contain no defects.

If the seller failed to bring you goods in the needed shape, the responsibility will still be on him, no matter if you’ve already picked up your goods or not.

What kind of destination point can be used in the case of DDP delivery?

The place of the destination point should be agreed between parties before the delivery process begins.

In the vast majority of cases, it would be:

1. The warehouse of the buyer or their agent.
2. Buyer’s premises.
3. A border post.

This list is not exclusive and the point of the final destination might be practically any place decided by the buyer and the supplier.

Does DDP shipping include VAT? Who pays it?

In general, all suppliers pay VAT when it comes to using DDP for international shipment.

If parties wish not to oblige the seller to pay for it, it has to be clearly stated in the delivery contract.

Such contracts are named as “Delivered Duty Paid, VAT Unpaid”.

Who are the ultimate consignee and importer of record under DDP shipping terms?

The United States has quite complicated tax and trade systems, so you have to follow some special rules while importing from China to the US.

So, the US customs require the presence of two parties in the DDP contract.

These are the importer of record and the ultimate consignee.

The importer of record is basically the foreign shipper of the products (seller, supplier).

This entity has to obtain a foreign customs bond by a US customs broker.

This can be done either through a freight forwarder or with the help of a surety company. 

You have to obey this law regardless of whether the products are going to an Amazon fulfillment center , a warehouse, or any other location inside the US borders.

In order to obtain the customs bond, the seller provides details on the type of products being imported, their value, and the frequency of imports.

The ultimate consignee is the intended recipient of a cargo.

To act as an ultimate consignee, the buyer has to provide the EIN to the customs broker or a freight forwarding agent.

However, the U.S. buyer still can prefer not to give such info to third parties.

In this case, he has an option to use the EIN of the warehouse where the goods will be delivered.

If the goods are being delivered to a freight forwarder’s warehouse , the customs agent can use the forwarder’s EIN and give them the ultimate consignee status.

Sometimes the US customs might also require a copy of the correspondence with the buyer, as well as a copy of the Purchase Order (PO) showing who the buyer of the products is.

Note: it is also possible that the State Board of Equalization will approach the ultimate consignee to collect the Use tax.

Your customs broker can negotiate on this matter if he has the needed documentation and qualification.

Who clears import/export customs under DDP Incoterms?

DDP shipping terms make the seller the corresponding party for customs clearance procedures.

The seller does not only make the goods available for customs clearance but also pays all connected fees and taxes. 

What kind of transport can be used for DDP shipping?

Under DDP shipping terms parties can use all kinds of transport.

Also, the supplier may decide to choose multimodal transport means.

DDP shipping from China to the US/UK: what are the special rules in these cases?

We’ve already started talking about the special US rules in one of our previous questions (Who are an ultimate consignee and importer of record).

Let’s mention that besides the proper documentation, the US government requires compliance with the tax system from the seller under the DDP terms.

Besides the VAT, shippers have to pay the import TAX, which became higher in recent years.

Speaking of the UK, there are also special requirements for parties under the DDP terms.

UK customs authorities use a unique number for all imported and exported products.

It is called the Economic Operators Registration and Identification number (EORI number).

When it comes to importing goods for commercial purposes from China, all businesses within the EU are required to have this number.

An EORI number is needed even if you’re using freight or courier forwarder services.

You can apply for the EORI number online, which will take approximately three days for the whole procedure.

Another feature of the UK customs systems lies in the CHIEF system.

CHIEF is an abbreviation for the Customs Handling of Import and Export Freight.

It is used by the freight forwarders , importer and exporters to electronically input customs data, automatically check for errors and calculate payable taxes and duties.

The CHIEF system also identifies which of your consignments need documentation or examination of products, which really helps on the way of delivery.

Keep in mind that all importers are required to pay the UK duty and VAT unless the products fit for duty-free.

To Conclude

The DDP contract can offer your business needed versatility because of convenient status of the buyer.

You’ll be free from the customs hassle, and the products can be delivered in any place on a map of your country.

Even though the DDP contract of delivery costs more than others, it will save you some money eventually (especially if you are a newcomer in the international trade).

Please, keep in mind that some freight forwarders quote unusually low prices for the DDP delivery.

In the vast majority of cases, it speaks about the scam, which eventually will cost you a lot of nerves and money.

JMS is proud of its flawless reputation and amount of satisfied clients, including the successful DDP shipping cases.

Request a quote using our website forms and we will come up with fair prices in the shortest time.