What is DDP (Delivered Duty Paid)?

DDP in one sentence

DDP (Delivered Duty Paid) is the only Incoterm where the seller carries every cost and every risk from their own factory floor to your unloading point, including export clearance, main-carriage freight, import customs entry, duty, and nominally import VAT or GST. Your single obligation as buyer is to unload the truck. That is why DDP quotes look so clean: one number, one invoice, nothing else to think about.

The clean number is the problem. DDP does not remove your import costs. It hides them inside a price you cannot audit.

Who pays what at each leg

Seller pays: factory packing and marking, inland haulage to the origin port or airport, export customs declaration and any export licence, terminal handling at origin, the main carriage (ocean or air), origin documentation fees, marine insurance if they choose to buy any (DDP does not require it), destination terminal handling, the import customs entry, import duty, anti-dumping duty and trade-remedy tariffs, merchandise processing and harbour fees, customs brokerage, and the final delivery leg to your named address.

Buyer pays: unloading at the named place, and nothing else — unless the contract says otherwise.

Risk transfers: at the named destination, on arrival of the vehicle, ready for unloading. Until that moment every loss is the seller's.

Import customs is the seller's job. That single line is where DDP breaks in practice, and it is the reason the ICC itself flags DDP as a term to use with caution.

A real DDP price, decomposed

Take a live shipment and price it both ways. 500 stainless steel kitchen tools, FOB Ningbo USD 6,000.00 (USD 12.00 per unit), 4.2 CBM, LCL to Los Angeles, US duty rate 8.5%.

Self-managed on FOB terms, every line in your own name:

• Goods, FOB Ningbo — USD 6,000.00
• Ocean freight, LCL 4.2 CBM — USD 780.00
• Marine cargo insurance, all risks — USD 45.00
• Import duty, 8.5% of USD 6,000 dutiable value — USD 510.00
• Merchandise Processing Fee, 0.3464% with a formal-entry minimum — USD 32.71
• Harbour Maintenance Fee, 0.125% ocean only — USD 7.50
• Customs brokerage, single entry — USD 150.00
• ISF 10+2 filing — USD 50.00
• Destination terminal handling and CFS deconsolidation — USD 310.00
• Drayage to your warehouse — USD 420.00
• Chassis and fuel surcharge — USD 85.00
• Total landed — USD 8,390.21, or USD 16.78 per unit

That is a 39.8% uplift over the FOB unit price. Now the supplier quotes DDP delivered to your door at USD 8,150.00 — USD 240 cheaper, one invoice, no broker to appoint. It looks like free money.

It is not. Reverse-engineer it. The supplier's real outbound cost on the same lane, buying freight at Chinese domestic rates, is roughly USD 620 for the ocean leg, USD 380 for the US inland leg, USD 120 for brokerage. Add the goods at USD 6,000 and you are at USD 7,120 before duty. To land at USD 8,150 with a normal 8% handling margin, the duty line in their model is around USD 200 — not USD 510. The only way to get there is to declare the goods at roughly USD 2,400 instead of USD 6,000.

Where the DDP margin hides

Suppliers do not quote DDP as a favour. Three levers create the apparent discount:

• Freight arbitrage. A Chinese factory shipping 40 containers a month buys space at rates you will never see as a 4 CBM shipper. Real saving, legitimately theirs to keep or share.
• Consolidation. Your 4.2 CBM rides in a container with nine other buyers' cargo, so fixed costs — brokerage, ISF, deconsolidation — divide nine ways. Also real.
• Declared value compression. The customs value on the entry is not the value on your commercial invoice. This is the lever that makes an impossible DDP price possible, and it is the one that becomes your problem.

The first two are why DDP can be genuinely cheaper. The third is why a DDP quote that beats your own arithmetic by more than about 10% should be treated as a red flag rather than a win.

The undervaluation problem

Customs value in most jurisdictions is the transaction value: the price actually paid or payable for the goods when sold for export, adjusted for assists, royalties, packing, and — in the EU and most of the world, though not the United States — freight and insurance to the border.

When a DDP consolidator declares USD 2,400 on goods you paid USD 6,000 for, an entry has been filed with a false transaction value. The under-declared duty in the example is USD 306 on a single small shipment. Repeat that across a year of purchasing and it is a five-figure exposure.

You may never see the entry. Under DDP the broker files in the seller's or the consolidator's name, the entry summary goes to them, and the first document that reaches you is a delivery note. If customs audits the importer of record, the trail leads to your goods, your purchase orders, your bank transfers, and your accounting records — which show USD 6,000 paid for goods declared at USD 2,400. In the United States that is a 19 U.S.C. 1592 exposure; the penalty ladder runs from the loss of revenue for negligence up to the domestic value of the merchandise for fraud. In the EU it is a post-clearance recovery under the Union Customs Code plus national penalties.

The practical defence is documentary. Ask for the entry number and a copy of the entry summary on every DDP shipment. A supplier who cannot or will not produce one is telling you something.

The Importer of Record problem

DDP obliges the seller to clear goods for import. In many countries they cannot legally do it.

• United States. A foreign entity can be importer of record, but needs a customs bond with a US resident co-obligor and an agent for service of process. Most Chinese suppliers do not have this, so the entry is filed under a freight forwarder's or a third party's IOR number. Your name appears nowhere.
• European Union. A seller with no EU establishment generally cannot act as importer for VAT purposes without registering and, in most member states, appointing a fiscal representative. The workaround is filing under someone else's EORI.
• United Kingdom and Australia. Similar establishment tests apply for VAT and GST registration.

If the entry is in a stranger's name, you are not the importer. That has three consequences: you have no entry paperwork for your own audit file, you cannot file a post-entry correction or a duty refund claim on goods you never imported, and in a VAT country you cannot reclaim the import VAT — because reclaim requires that you be the importer named on the customs document.

VAT and GST: the reclaim you lose

This is the largest and least understood DDP cost in Europe. Import VAT is not a cost to a VAT-registered business; it is cash-flow. You pay it at the border and reclaim it on your next return, or you defer it entirely through postponed accounting.

Under DDP the seller pays the import VAT and buries it in the price. Because the import document names them, not you, there is no deductible input VAT for your business — you have converted a fully recoverable item into permanent cost of goods. On the shipment above, German import VAT at 19% on a customs value of roughly USD 8,135 is USD 1,545. Recoverable if you import; sunk if the supplier does.

Then you charge VAT on the onward sale anyway. The DDP quote quietly cost you the full 19%.

The standard fix is DAP or DDP-excluding-VAT — often written DDP (VAT unpaid). The seller handles duty and delivery, you remain the importer for VAT and reclaim normally. It is not a formal ICC term, so spell out in the contract who is the declarant and who is named on the import document.

When DDP is genuinely the right call

• Sample and pre-production shipments where a customs registration is not worth the setup cost.
• Your first three orders from a new country, while you find a broker.
• Markets where you have no legal entity and no realistic path to one.
• Non-VAT destinations where the reclaim argument disappears.
• Small consignments where fixed brokerage costs dominate and consolidation genuinely wins.

In every other case, compare like for like before you accept the one-line price.

Price a DDP quote against your own numbers

The only way to know whether a DDP price is a discount or a disguise is to build your own landed cost first, from FOB, with the real duty rate for your HS code. Then compare. Run it in the landed-cost calculator, toggle the Incoterm, and watch which lines the supplier had to make disappear to reach their number. If your honest FOB-based landed cost is USD 8,390 and their DDP price is USD 8,150, the USD 240 gap is not efficiency. It is a duty line that was never paid.