What is DDP? Risk, cost and VAT allocation

What DDP means

DDP (Delivered Duty Paid) is the rule that places the widest burden on the seller among the Incoterms 2020 rules published by the International Chamber of Commerce (ICC). The phrase “duty paid” describes the fact that the duties arising on entry of the goods into the buyer’s country have been paid by the seller.

The rule can be used with any mode of transport: it applies to road, air, rail, sea and the intermodal combinations of these. Unlike rules such as FOB and CIF, which are specific to sea and inland waterway transport only, it works fine for container shipments too.

The rule is never written on its own in a contract; a place of delivery is added next to it and described as narrowly as possible: for example, “DDP, buyer’s warehouse in Ostim, Ankara, Incoterms 2020.” If the place of delivery is left vague, where cost ends and when risk transfers become disputable.

Incoterms rules do not govern when title to the goods passes, how the price is to be paid, or which law applies to the contract. These are separate clauses of the sales contract. Writing DDP into a contract does not secure payment.

Where cost and risk transfer

Under DDP, the two transfer points coincide, but they should still be considered separately.

Cost transfer: The seller bears all cost from preparing the goods through to delivery at the destination. Export customs, loading at origin, freight, transit-country crossing costs, destination terminal charges, import declaration costs and duties arising on import all belong to the seller.

Risk transfer: The risk of loss or damage passes to the buyer at the moment the goods are placed at the buyer’s disposal at the named destination, on the arriving means of transport, ready for unloading. Any damage occurring in transit up to that point is, as a rule, the seller’s problem. Exceptions: if the buyer fails to give the assistance needed for import clearance (B7), or fails to give notice of the time and place of delivery (B10), the resulting risk passes to the buyer — in the latter case from the agreed date, provided the goods have been clearly identified as the contract goods.

Unloading falls outside both of these: unloading from the vehicle belongs to the buyer. If the seller has paid the unloading cost under the carriage contract, it cannot recover this from the buyer unless otherwise agreed.

The difference from DAP and DPU is as follows:

• DAP (Delivered at Place): The delivery point and risk transfer are the same as under DDP — on the vehicle, not unloaded. The only difference is on the import side: import customs formalities and duties belong to the buyer.
• DPU (Delivered at Place Unloaded): The seller also performs unloading, but import customs and duties remain with the buyer.
• DDP: DAP plus import customs formalities and duties added on top.

There is no single Incoterms 2020 rule for “unloaded and duty paid.” If such an arrangement is wanted, who is responsible for unloading must be written separately into the contract.

Item	Seller	Buyer
Export customs formalities and cost	✔
Loading at origin	✔
Main carriage (freight)	✔
Transit-country crossing costs	✔
Destination terminal / port charges	✔
Cargo insurance	Not mandatory, but in practice with the seller since risk lies there	Not mandatory
Import customs declaration, permits and documents	✔
Import duties (customs duty, VAT, other taxes if any)	✔
Unloading from the vehicle at destination		✔
Transport and storage after unloading		✔
Risk of damage in transit	✔

The insurance row is a particular source of confusion: under Incoterms 2020, the only rules that impose an insurance obligation on the seller are CIF and CIP. Under DDP, neither party is required to take out insurance; but since risk stays with the seller until delivery, insuring the cargo is in the seller’s own interest.

Seller’s obligations

• Supply the goods and the commercial invoice in conformity with the contract.
• Complete export customs formalities and obtain the required permits and documents.
• Contract for carriage to the named destination and pay the freight.
• Carry out the customs formalities required in transit countries.
• Make the import declaration in the destination country and complete release into free circulation.
• Pay the customs duty, VAT and other liabilities arising on import.
• Deliver the goods at the agreed place and time, on the vehicle, ready for unloading.
• Provide the documents the buyer needs to take delivery of the goods.

Buyer’s obligations

• Pay the price agreed in the contract.
• Take delivery of the goods at the agreed place and time.
• Carry out unloading from the vehicle and bear its cost.
• Provide the seller, on request, with the information and documents the seller needs for import formalities; the cost of this assistance belongs to the seller.
• Bear all risk and cost after delivery.

Importer-of-record status and the VAT problem

The real difficulty with DDP is not logistical but lies in tax and customs law. In many countries, making an import declaration as the importer of record requires the declarant to be established or registered as a taxpayer in that country. A foreign seller is often unable to hold this status in its own name. Import into Türkiye is likewise restricted by Article 5 of Customs Law No. 4458 (representation, and the requirement that the representative be established in the Turkish Customs Territory, with limited exceptions) and secondary legislation as to who may make the declaration and under which form of representation.

The second problem is import VAT. Under DDP this VAT is borne by the seller under the contract; however, Incoterms only allocate cost between the parties and do not determine who is the VAT taxpayer towards the tax authority (in Türkiye, the taxpayer on import is the person who imports the goods, i.e. the declarant). But because the seller is not a VAT taxpayer in the destination country, it usually cannot deduct the amount it has paid; the tax turns into an irrecoverable cost. In practice, contractual clauses along the lines of “DDP, VAT excluded” are therefore seen. This clause is not part of the Incoterms rule itself; it is an exception that the parties must agree on separately and explicitly. If not agreed, VAT remains with the seller.

When it is the right choice

• When the seller has its own legal entity or branch in the destination country (in some countries a VAT registration open to non-residents may also suffice). For imports into Türkiye, however, importer status and the deduction of import VAT in practice require a legal entity or branch established in Türkiye. In that case the seller can act as the importer of record and deduct the VAT.
• For small shipments such as samples and warranty spare parts, where the buyer does not want to deal with the customs process. Exhibition material that enters under temporary admission or an ATA Carnet, without payment of import duties, is not a natural fit for DDP.
• For sales where the buyer is an end user with no import experience.
• In cross-border e-commerce. Duties and taxes are collected up front in the cart (duty and tax prepaid); this item is a component of the landed cost calculation, the total cost of the goods on arrival, so the buyer is not confronted with an unexpected bill at the door. This lowers the rate of undelivered shipments, returns and complaints. Special VAT regimes for low-value shipments into the European Union, such as IOSS, have made this model more manageable for platforms.

When it is the wrong choice

• When the seller cannot make an import declaration in the destination country. This is the most common mistake. In such a case the goods wait at customs, storage and demurrage charges start running, and the dispute over responsibility escalates. The ICC’s position is clear: if the seller cannot take on import formalities, DAP or DPU should be used instead of DDP.
• When there is a tax-registration risk. Regular DDP sales by the seller in the destination country can trigger an obligation to register for VAT there, or raise a permanent-establishment/agency dispute. Although this looks like a logistics decision for a single shipment, it produces tax consequences.
• When a special import permit, licence or quota is required. Some permits are only granted to an established importer. A seller with no legal entity or branch in the destination country can generally not obtain such a document.
• When the buyer benefits by acting as importer. If the buyer has an inward-processing permit, an exemption, or preferential tariff rights, DDP can make this advantage unusable.
• When duty rates are unpredictable. If an anti-dumping duty, additional customs duty or GTİP dispute arises, the difference falls on the seller and makes the price quote meaningless.

Common mistakes

• Not writing the place of delivery. “DDP Türkiye” is not a place of delivery. The city, address and, where possible, the facility name should be written.
• Not specifying the version of the rule. If “Incoterms 2020” does not appear in the contract, which version applies becomes disputable.
• Assuming unloading belongs to the seller. Under DDP, unloading belongs to the buyer. If a crane, forklift or ramp is needed, the buyer must arrange it.
• Assuming the rule provides insurance. DDP creates no insurance obligation. A policy must be arranged separately.
• Silently leaving out VAT. Writing “DDP” and expecting VAT from the buyer does not work. The exception must be written explicitly into the contract.
• Treating risk and cost as the same thing. The two concepts coincide at the same point under DDP but are legally distinct; damage compensation and cost-sharing rest on different provisions.
• Overlooking delay penalties. Who bears waiting time, storage and demurrage at arrival is determined relative to the moment of delivery; cost arising before delivery occurs belongs to the seller as a rule; however, if the waiting is caused by the buyer’s failure to give the assistance (B7) or notice (B10) required of it, the additional cost resulting from this falls on the buyer, provided the goods are identified as the contract goods.
• Trying to work out the process after shipment has started. Who will make the import declaration in the destination country, which documents are required, and how the tax burden will be calculated are matters that should be clarified before loading, as part of customs brokerage and regulatory advisory work.