In the complex chess game of international trade, DDP (Delivered Duty Paid) is a crucial move. It means that the seller is responsible for all risks and costs of transporting the goods to the designated destination, including handling the import customs clearance procedures, paying tariffs, value-added taxes and other taxes and fees. The delivery is only considered completed when the goods are placed at the disposal of the buyer at the designated place in the importing country. This term has great significance for defining the responsibilities of both the buyer and the seller.

There are numerous factors influencing the implementation of DDP

From the perspective of the policies and regulations of the destination country, the customs regulations and tax rate systems of different countries vary greatly. Some countries set high tariff barriers for specific products. For example, Europe and the United States levy relatively high import tariffs on some textiles to protect their domestic industries. In some countries, the customs clearance process is long and complex, involving a large number of document reviews and certification requirements. For instance, some countries in the Middle East conduct extremely strict reviews of religious certifications and certificates of origin for imported food. Even a slight mistake can delay the delivery and increase the seller’s costs and risks.

Transportation distance and logistics conditions also cannot be underestimated. Long-distance transportation, such as from China to South America, has a long sea voyage. During the journey, the goods face a higher probability of risks such as adverse sea conditions and piracy, which may cause damage to the goods. Moreover, there is a large amount of fuel consumption and high freight costs.

If the inland transportation conditions at the destination are inconvenient and lack a complete highway and railway network, like some remote areas in Africa, it is difficult to transfer the goods from the port to the inland delivery place. Multiple loading and unloading are required, which not only easily damages the goods but also generates additional inland transportation and storage fees.

Exchange rate fluctuations also have a profound impact. International settlements are mostly carried out in foreign currencies such as the US dollar. During the period from the signing of the contract to the completion of the delivery and receipt of payment, if the currency of the seller’s country appreciates, for example, during the period when the Japanese yen appreciates, Japanese export enterprises settle DDP orders in US dollars, and the income will shrink when converted back into Japanese yen. Conversely, if the currency of the buyer depreciates, its purchasing power decreases, and the payment pressure increases, which may lead to performance disputes.

The types of goods suitable for transportation under DDP

High-value-added and time-sensitive goods are often suitable for DDP. For example, electronic chips are used in the manufacturing of high-tech products, and the upstream and downstream of the production chain are closely connected. Delayed delivery will cause the production line to come to a standstill, resulting in huge losses. By using DDP, the seller can control the entire logistics process and accurately plan the transportation time to ensure that the chips are delivered to the factory for production on time. Although the cost is slightly higher, compared with the losses caused by the shutdown, it is negligible.

Customized large-scale equipment is also a good fit for DDP. This type of equipment is designed and manufactured specifically for the needs of the buyer, such as large-scale chemical complete sets of equipment. When the seller delivers the goods under DDP, it can arrange professional installation and commissioning personnel to transport with the equipment in a coordinated manner. After the goods arrive, the installation work can be carried out immediately. The one-stop service ensures the smooth operation of the equipment and avoids delays in the project schedule due to poor coordination among multiple parties, meeting the buyer’s demand for early production.

There are methods to control the freight costs under DDP

Precise logistics route planning is the top priority. With the help of big data analysis and professional logistics software, comprehensively consider factors such as port loading and unloading efficiency, route congestion conditions, and transshipment convenience. For example, when exporting goods to Europe, compare the traditional major ports in northwestern Europe with the emerging ports along the Mediterranean coast. The emerging ports may have lower loading and unloading fees and less congestion.

Inland river transportation or railway transportation can be used to penetrate deep into the hinterland of Europe. Although the voyage is slightly adjusted, the comprehensive cost can be reduced by 10% – 15%.

Optimizing the packaging of goods can reduce costs and increase efficiency. Use standardized and lightweight packaging. On the premise of ensuring the protection of the goods, reduce the volume and weight of the packaging materials and increase the cargo capacity of the container. For example, replace the wooden packaging of industrial parts with high-strength foldable plastic packaging. Each container can load 10% more goods, and the sea and land freight costs allocated to each piece of goods will be reduced accordingly. At the same time, the plastic packaging can be recycled, saving the disposal cost.

Flexible use of logistics resources is essential. Establish long-term cooperation with freight forwarders and shipping companies to strive for bulk booking and off-season negotiated prices, and ensure priority space booking during the peak season. Integrate small-batch goods for consolidated container transportation and share the container space to avoid waste of space caused by separate shipments. For example, cross-border e-commerce sellers can pool their goods for consolidated container transportation and regularly ship goods to Europe and the United States. Compared with individual shipments of bulk goods, the freight cost can be reduced by 30%, which improves the profit margin under the DDP mode.

The DDP term provides a cooperation mode with clear responsibilities for both the buyer and the seller in the international trade arena. By understanding its connotation, influencing factors, reasonably matching the types of goods, and skillfully controlling the freight costs, it is possible to navigate steadily in the global economic and trade waves, sail towards the other side of mutual benefit, and make international business exchanges smoother and more efficient.