06 Major Drawbacks to exporter under DDP delivery terms

DDP, Disadvantages to Seller (Exporter)

The following information is about the challenges faced by an exporter when he contracts the carriage terms on DDP basis.

What are those demerits to an exporter under DDP terms? Let us discuss one by one:

01.  One of the main disadvantages for exporter is that under DDP terms, the seller undertakes high risks on movement of goods from his place to buyer’s named place contracted.  All risks and costs of local transportation, export documentation, export customs clearance process,  port handling at exporting country, main carriage, import clearance process, importing country’s tax payment if applicable, port handling in importing country, and on carriage to named destination of buyer are undertaken by the exporter under import export business when DDP delivery rules contracted.  So maximum risks are undertaken by the exporter under DDP rules of delivery. 

02. Under DDP terms of delivery, the seller has to initially invest the costs against movement of goods from his place to destination named place of buyer.  However, he gets back the said amount later only except under advance payment terms with his buyer.  The delay in getting payment from the buyer also affects the seller’s working capital replenishment.  This is a drawback for a seller when goods are moved under DDP delivery terms.

03.  Another downside for exporter under DDP terms is that the seller should be familiar with export procedures, government rules and regulations in exporting country, experience handling pre carriage etc. if fails, he may have to meet additional expenses against such responsibilities and face delay in delivering goods to buyer.

04. In an export import business, under DDP delivery rules, the exporter or his freight forwarder should be well acquainted with import customs clearance process in buyer’s country, import license procedures and import duty related knowledge.  The delay in obtaining license or delay in clearing customs process may attract additional expenses especially demurrage or detention (or both) which would be on account of exporter only under DDP terms. Additional inconvenience and loss also may occur due to delay in delivery of goods to the buyer.  The delay in delivery of goods to the importer also affects his production planning, warehousing management and affect supply chain activities. This is a fly in the ointment for exporters when contract of carriage is on DDP delivery terms.

05. One of the other disadvantages when contract of carriage are undertaken under DDP delivery terms is that the seller is liable for safety of goods till the goods are delivered to the buyer’s destination named place.  The exporter is liable for any damage or loss of goods on transit.  However, insurance coverage can be contracted at the time of placing export order by agreeing mutually between exporter and importer.

06. Nowadays, finding a reliable freight forwarder is a herculean task.  Under DDP terms of delivery, if exporter fails to appoint a best freight forwarder, it affects the business relationship with the buyer.  An inefficient freight forwarder may spoil further business of the same buyer due to worst delivery of service to the buyer, apart from money loss.  This is another stumbling block under DDP delivery terms for exporter.

The details stated above are the demerits under DDP terms from seller’s perspective. 

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