DDP Shipping Terms For E-commerce Sellers

For e-commerce sellers ready to grow their customer base to other countries, a crash course in shipping options, costs, and terms are critical. You need to understand the basics of how DDP shipping works, Incoterms®, Standard import and export fees, and terms, and the International Chamber of Commerce (ICC).¹ 

If you’re already feeling overwhelmed, don’t worry! This may sound like a business course, but it’s really about defining some shorthand terms that help international businesses forge a common language to maximize their mutual success. So, think of this as your go-to vocabulary guide for everything and anything DDP. No flashcards required. 

What Does DDP Shipping Mean?

Delivered duty paid (DDP) refers to a shipping arrangement where the seller takes responsibility for getting their goods shipped and delivered to the buyer at their final destination. 

Under DDP shipping terms, the seller is responsible for: 

• Packaging, loading, and shipping the goods to the exit port, 
• Loading the goods onto the ship (or other international transport).
• Unloading the goods from the ship (or other international transport),
• Loading and transporting the goods from destination port to the final destination,
• Providing whatever legal documents are needed for both export and import clearance,
• Overseeing the customs clearance process at export (exit port),
• Managing the customs clearance process at import (destination port), 
• And handling any delays and related storage at either export or import customs.

The seller pays for all costs, taxes, duties, and fees for all the above and also assumes the burden of risk (due to loss, damage, or theft) for the entire shipment journey until delivery to the final destination. 

But can you count on everyone to understand and agree on exactly what responsibilities are defined by the label of DDP shipping? 

Quick answer: yes, because DDP is an internationally recognized Incoterm!

What Is An Incoterm?

Imagine trying to export your products halfway around the globe to a country that speaks a language you don’t know, navigating an entirely different structure of internal transportation, and managing a different set of business laws that govern international trade—you’d probably need to squish every stress ball in a 10-mile radius.

So, back in 1919, business leaders from multiple countries formed the International Chamber of Commerce (ICC) to help promote, protect, and self-govern international trade. ²Today, the ICC connects 45 million companies across all sectors in more than 100 countries across all sectors. It establishes rules, advocates for policy, and provides dispute resolution in global trade. 

When goods are shipped between countries, the different shipping methods (such as DPP) come from a universally recognized set of international commercial terms, or Incoterms, codified by the ICC. 

Incoterms establish which party (seller or buyer) is responsible for, including:

• Transport costs and logistics at each stage of the journey,
• Export costs and logistics,
• Legal documentation,
• Customs clearance management, including both EOR and IOR appointment,
• Import taxes, duties, and fees,
• Customs clearance delay, storage, and other fees, 
• The burden of risk at each stage of the shipment journey (damage, theft, loss),
• The ownership of the goods,
• And when ownership changes hands.

As of the 2020 update, there are 11 official Incoterms that help businesses across borders negotiate the transfer of sale with clarity. Of these, seven are shipping methods that apply to any mode of transport, one of which is delivered duty paid (DDP).

Importer Of Record (IOR)

In all countries, the IOR has to have a locally registered entity. So, unless you’ve got a cousin who’s an expert at import business and owes you plenty of favors, you’ll want to work with a partner who can provide IOR services and has a firm grasp of the Incoterms in the destination country. 

An Importer Of Record takes charge of the Import compliance process as follows: 

• Confirming the goods are accurately described, valued, and documented,
• Completing a commercial invoice,
• Overseeing customs clearance, including required documentation, 
• Handling any customs or transport delays, including storage and fees,
• Paying the import duties, taxes, and fees,
• Fulfilling compliance or paying for any local import laws, inspections, or fees,
• And accepting temporary ownership of the goods. 

If that last bullet point sends up a red flag, we understand—how can you trust someone you don’t know with ownership of your products? At Zee, there’s never a transfer of ownership. Our organization merely acts as the “legal guardian” or “responsible party” for the goods as they move through customs. Your items stay yours until they’re sold to your customers.

Understanding International DDP Shipping Fees

So far, we’ve told you that DDP shipping means you (the seller) will be handling the bill for the whole operation. But how exactly do these costs work? 

Let’s take a look at the different fees you can plan for when your goods hit the road to an Amazon warehouse. 

Domestic And International Freight

The seller is responsible for all stages of shipping and transportation under DDP shipping. This includes: 

• Packaging and labeling the goods as per the shipper and relevant e-commerce platforms, like Amazon FBA compliance guidelines, 
• Domestic freighting from the point of origin to the exit port,
• Loading the goods onto the vessel,
• International freighting from the exit port to the destination port,
• Unloading the goods from the vessel,
• Domestic freighting from the destination port to the Amazon warehouse,
• And labor needed to load, transfer, or unload the goods across the journey to the destination country.

Many of these steps can be bundled together to minimize administration and maximize shipping cost efficiency. Be sure to work with your partners to clarify what is or can be included.

Customs Duties, Tariffs, And Taxes

Duties and tariffs are types of government-imposed taxes that are associated with the import/export process. These can vary markedly, depending on: 

• The goods’ country of origin, 
• Which country they’re headed to,
• What kind of goods you’re sending across the border,
• And the size of the goods, by volume and/or weight.

The best way to estimate your customs costs is by trusting an IOR partner like Zee to help illuminate the nuances of these taxes and tariffs to ensure your products enjoy a smooth shipment process.

Value-Added Tax (VAT)

Value-Added Tax, or VAT, is a common practice in many countries outside of the United States. It’s a flat tax rate that creates an alternative to sales tax and typically registers when a consumer makes a purchase. With VAT, instead of the full tax burden hitting the consumer, it’s distributed between multiple actors involved in the production and consumption cycle.

Need-to-know facts about VAT include: 

• Under DDP shipping, the seller is responsible for paying VAT at the time of import,
• VAT rates range from 3% to 28% depending on which country you’re exporting to,³
• Rates may be set based on the type of good, and some goods may be exempt from VAT,
• And in some countries, VAT is known as Goods and Services Tax (GST).

Sounds complicated? We’re not going to sugarcoat it—it definitely is. But the good news is you don’t have to handle this alone. You’ve got Zee in your corner. Unlike other IORs, Zee helps clients simplify the shipping process by processing VAT payments easily. Even better? We process Amazon Sellers’ VAT payments strategically so that you can generally expect to reclaim some of your payment back in your tax returns. It’s all included in our Customs Compliance service offerings.

Shipping Insurance

Under DDP shipping, insurance is an optional cost. Because the burden of risk is on the seller, it’s up to them to decide whether to invest in the additional cost of insurance coverage to protect against: 

• Accidental loss,
• Damage,
• And theft.

Demurrage

When shipping goods by sea, demurrage is a penalty cost that can be charged if a charter company fails to load or unload their goods to or from the vessel or storage containers within the contracted timeframe. In most contracts, the time allotted (often referred to as “laytime”) is three days.⁴ After that time is up, demurrage fees are charged.

Need-to-know facts about demurrage include: 

• Fees may increase after an initial period (the longer the wait, the higher the cost),
• You must pay demurrage fees in full before taking possession of your goods,⁵
• And each carrier sets its own fee amounts, which also vary based on port.

For many partners, demurrage fees can really add up—which ultimately makes ocean freight a financially inefficient means of shipping goods, for both sellers and their customers. Because of this, many IORs elect to skip maritime travel and stick to air.

Ready To Find An IOR Partner? Meet Zee

From trying to calculate the total cost of DDP shipping to understanding the legal documents and contracts required throughout the process, shipping goods out of the country calls for specialized knowledge and contacts.

Zee is a trusted partner specializing in solutions for large scale e-commerce sellers. We connect you with affordable, end-to-end transportation services and offer Importer Of Record services in Australia, Canada, the EU, the UK, and the USA (with Japan, Mexico, and Singapore to be added soon).

There’s no better time to expand your e-commerce business internationally. Reach out today to connect with our experts and learn how we can save you time, hassle, and money in the short and long term.

As an e-commerce seller, we imagine you have plenty of questions about the shipping process. Whether you are wondering, “Do I need a broker to clear customs?” or “What does customs cleared mean for international shipping?”, we have the answers to all your questions at Zee!

Sources: 

1. U.S. Department of Commerce International Trade Administration. Know Your Incoterms. https://www.trade.gov/know-your-incoterms
2. Investopedia. International Chamber of Commerce (ICC). https://www.investopedia.com/terms/i/international-chamber-of-commerce-icc.asp
3. U.S. International Trade Commission. About Harmonized Tariff Schedule (HTS). https://www.usitc.gov/tariff_affairs/about_hts.htm
4. Investopedia. Demurrage. https://www.investopedia.com/terms/d/demurrage.asp
5. iContainers. What are demurrage, detention, and per diem fees? https://www.icontainers.com/help/demurrage-detention-per-diem-shipping-delay-charges/
6. PwC. Value-added tax (VAT) rates. https://taxsummaries.pwc.com/quick-charts/value-added-tax-vat-rates