If you want to import from China, you can get different quotes under different Incoterms. And there are 11 Incoterms used in foreign trade, if you want to know more about Incoterms, please refer to this article: https://sinoinspection.com/china-import-incoterms-expalined-2021/.For many Amazon sellers, they tend to choose DDP shipping term among the Incoterms. In this article, I will tell you the risks involved in using DDP shipping term and how to avoid them.
What Is DDP?
DDP shorts for Delivered Duty Paid. If we compare the 11 Incoterms, we can figure out that under EXW shipping term, suppliers have the least responsibility as all they need to do is to put your products on their shipping dock and you need to take up the following responsibility. However, under DDP Shipping term, suppliers take the most responsibility as they need to export your products, pay the import tax and duty in your destination country and deliver the products to your specified final destination. It sounds great that you need to do nothing to get your products and that’s why many importers choose DDP shipping term. Commonly, DDP price is higher than prices under other shipping terms since the price includes the following costs:
- Product cost
- Import & Export duties
- Shipping cost
- Delivery cost to the specified destination
Risks of Using DDP
There is nothing wrong with using DDP as long as the supplier you found can be trusted. The shipping cost has gone up 3-5 times than before, which makes the DDP shipping term more risky. For example, if you put an purchase order 2 months ago, since the rising shipping freight, the supplier may not be able to send your product under that old DDP price which leads to the first risk of using DDP.
Ask for More Money
If your supplier sends the products at the previously agreed DDP price, they will lose money. Thus, it is possible they will ask you to pay more money. Under this circumstance, you have two options:
- Dispute Your Oder.
However, if you choose to dispute your order, you may lose the deposit and you have wasted a lot of time developing the products.
- Pay more
If you choose to pay more for your products, you have to think about your profit margin. It may have a significant impact on your profit. Actually, both options will hurt your interests.
As I mentioned above, a DDP price should cover all the costs from your supplier to your final destination. However, in reality, the supplier will pay for the shipping freight to the port and then you may get informed by a freight forward that you need to pay for the duty. Since you are the importer of the products, if the sender refuses to pay for the duty, you will have to pay for the duty. Otherwise, your shipment will be rejected for being unable to be cleared. It’s very annoying. If you don’t pay the duty, you can’t get your products. If you do pay the duty, you need to cover the loss yourself.
Declare Low Customs Value
In order to save costs, some suppliers will deliberately under state the quantity and value of goods when they declare at customs, which is a violation. Once discovered by the customs during customs clearance, the products may not be able to be cleared, or you may need to pay more fees.
How to Avoid the Risks?
If you want to minimize your risks when shipping your products from China, here are some tips for you.
Use EXW OR FOB
If you are cooperating with a new supplier, you’d better not choose DDP for the first time. You can use EXW or FOB shipping term to have a better control of your profit margin. You can better understand your shipping cost, have better visibility to your shipment if you’re dealing with the freight forwarder yourself. Apart from that, you can also ensure the customs value has been declared correctly.
Don’t Be Attracted By Low DDP Quote
Some suppliers may give you a price that is so attractive, please do think about whether the price is reasonable or not. Or can they honor the price down the road, especially for a new supplier? You can ask DDP prices from several different suppliers to get a reasonable price range.
Specify DDP Incoterm In Purchase Order
If you really want to use DDP shipping term because you don’t want to deal with the confusing shipping issues, or you trust your supplier and don’t mind using DDP shipping term, remember to clearly specify DDP Incoterm in your purchase order. In order to protect your interests, you’d better add an additional term for your DDP shipping . For example, you can specify the term like the supplier agrees to honor the DDP shipping price even if the shipping cost increases at the time of delivery.
Buyers can save a lot of troubles by using DDP shipping term provided your can find a reliable supplier. Thus, you need to be careful when choosing DDP shipping term to avoid risks. If you need help to deal with issues when importing from China, you can contact us for help.