Useful Information - Incoterms

Incoterms - DDP

DDP (Delivered Duty Paid) is a Multimodal term that must be qualified by naming the place to which the seller is taking responsibility for transport costs and the risks of transit. These risks and costs include the payment of domestic duties in the buyer's country and any ancillary charges associated with the import clearing process at destination.

As with all of the D prefixed terms, this term is not easy to use in conjunction with a Documentary Credit and in the case of DDP this payment difficulty extends to any form of Exchange document. As a multimodal term, DDP requires the use of Multimodal transport documents over monomodal documents such as Bills of Lading or Airwaybills.

Sellers are cautioned that the payment of foreign duties and taxes may be contrary to the Exchange Control regulations of their country and that they should seek clarity on this point from their bank or appropriate authority.

Equally, both parties should consider VAT if payable in the buyer's country. DDP may be modified to exclude the seller from having to pay a VAT that the buyer could recover directly. If this is not done, the seller's price may include this amount which otherwise could actually be recovered by the buyer.

Regulations regarding sellers claiming VAT paid to foreign revenue services vary from country to country, and there is no clear-cut position in this matter. Both parties should seek guidance in this.

Additionally, although the seller will pay Duties, the buyer would be named on the import customs entry and will have the obligation to the domestic Customs Authority for the accuracy of the declared tariff headings used and the rates of duty applied. Should these subsequently prove to be incorrect the buyer will have the obligation to bring any under recovery to account.

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