Delivered duty paid (DDP) is the incoterm, which is most convenient for buyer as seller has the entire burden. Under DDP delivery term seller has maximum and buyer has minimum risk and responsibilities.
In case of DDP seller arranges everything including import clearance at destination where buyer arranges only the unloading at the place of delivery. In other word you can say under DDP incoterm except unloading at delivery point (which is arranged by buyer) seller arranges everything. Cost: All costs are to be borne by seller; the only cost borne by the buyer is unloading at the place of delivery. Risk: Maximum risk remains with seller as they perform all operational activities. Insurance: Seller arranges insurance under DDP incoterm. Example: Now we shall understand DDP incoterm with the help of a simple example. Let us assume a distributor in Mumbai, India (buyer/ importer) needs PVC tiles (flooring materials), they check for the manufacturers (seller/suppliers/ exporter) across the globe and found a suitable one in Seoul, South Korea who has the manufacturing unit of PVC carpet tiles in Seoul. Indian distributor sends their requirements and request for quotation to the PVC carpet tile manufacturer, they also request supplier for few samples. As per the request supplier sends few sample tiles and they share product details along with their price range. After samples are received buyer checks all the parameters like product quality, thickness, colour, texture, pattern etc. and shortlist 3 variants. Negotiation: Seller/supplier sends the quotation for the shortlisted tiles and both parties have multiple rounds of discussion on the price. Buyer in India does not know much about international trade, they do not even have team to handle the operation as they were completely dependent on the domestic market till now and this is the 1st time they have decided to import. This is the reason buyer want the materials to be delivered at their warehouse without any hassle and they don't want to get involve much into import process and they are ok to pay for this, so they request supplier to deliver the materials at buyer's warehouse. Supplier quote accordingly and finally both parties agree on a price which is known as DDP price. Both parties agreed for 50% advance and 50% at the time of delivery. Seller also shares finished goods readiness date (ex-factory date) to buyer. Contract: As per buyer and seller's verbal agreement, one contract is prepared where all terms and conditions along with description of the goods, price, incoterm, mode of shipment any more details are documented. Delivery term: DDP Buyer's warehouse, India Payment term: 50% advance and 50% before delivery. Both parties (Seller & Buyer) sign contract. Buyer issues purchase order to seller accordingly. Operations: Once contract is signed seller starts the production so that the production of PVC tiles can be completed on or before readiness date given to buyer. Meanwhile seller contacts freight forwarder who has good contact in India also, because the forwarder needs to arrange the operations at destination including custom clearance, freight forwarder places booking for the containers simultaneously they speak to their counterpart in India and issue work order for all activities at destination. Once production is completed and quality check is done, finished goods are taken to the packing area and after packing is completed (packing mode for these tiles is carton box with wooden pallates) those are sent to the loading bay. As per agreement forwarder sends the containers to supplier's premises, goods are stuffed into containers and sent to the port. Clearing agent submits all documents at customs and coordinates with customs for clearance, if everything found satisfactory custom clears the cargo and the containers are taken to the terminal for loading into the vessel. Vessel sails as per the schedule, forwarder, share on board confirmation & shipped on board date to the shipper and approaches shipping line for issuance of Bill of lading, simultaneously shipper and their clearing agent approaches various offices for other post shipment documents.
Documents issued: 1. Commercial invoice 2. Packing list 3. Bill of lading 4. Certificate of origin 5. Phytosanitary certificate 6. Fumigation certificate 5. Insurance certificate 6. Other documents if any Once above documents are received supplier sends copy docs as well as originals to their freight forwarder's counterpart/ agent in India. They also send copy docs to buyer and confirm vessel sailing date as well as ETA. Once courier received by the agent in India they send the same to the CHA (Custom house agent) appointed by them. After arrival of containers in CFS, CHA contacts liner's office and collects Delivery order by submitting original Bill of lading and destination liner charges (THC) if any, then they approaches custom officials available in CFS and submits the file with all documents related to that shipment, usually this file has documents like original post shipment documents received from origin, verified copy of Bill of entry, duty payment challan. Custom officials verify the documents and go for physical verification of the cargo, if they found everything satisfactory then they issue Out of charge. Out of charge received means custom clearance is over and the cargo can be taken out. Once clearance is completed, CHA informs the Indian agent who arranges vehicles to carry the goods to buyer's premises in Mumbai. Once vehicles are placed goods are offloaded from containers and loaded into the trucks. Empty containers are returned to the yard. Goods are taken to buyer's premises as per the delivery term, at this point seller's responsibility ceases. Buyer arrange unloading of the trucks and signs on POD documents (proof of delivery), the POD is shared to the seller by it's agent.
Once goods are received buyer makes the payment for remaining 50% amount and share the SWIFT copy.
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