What DDP means
Delivered Duty Paid (DDP) means the seller delivers the goods to the buyer, cleared for import, and bears all costs and risks up to that point, including duty, additional tariffs, import tax or VAT, and clearance. DDP is convenient for buyers and is often used for ecommerce dropshipping and small-parcel wholesale, but it shifts significant cost and risk to the seller.
The DDP price formula
Formula:
DDP Price = Factory Price
+ Inland Freight (factory to port)
+ Export Handling
+ International Freight
+ Insurance
+ Import Duty
+ Additional Tariffs
+ Import Tax / VAT
+ Clearance & Handling
+ Delivery Margin / BufferThe DDP price formula stacks every cost the seller pays between the factory gate and the buyer warehouse. Each line item is an estimate; together they produce a planning price.
Factory price
The factory price is the unit price quoted by the supplier. It usually excludes inland freight, export handling, and international shipping. Confirm whether the factory price is FOB, EXW, or another basis before stacking the rest of the DDP components.
- EXW (Ex Works): buyer takes the goods at the factory gate; seller adds nothing to the factory price
- FOB (Free on Board): seller delivers to the origin port and loads; inland freight is included in FOB
- CIF (Cost, Insurance, Freight): seller delivers to the destination port; international freight and insurance are already in CIF
- Always confirm the basis in writing on the proforma invoice and on the commercial invoice
Inland freight and export handling
Inland freight covers moving the goods from the factory to the export port or airport. Export handling covers port fees, terminal handling, document preparation, and origin customs clearance. Both vary by lane, season, and fuel surcharge.
- Trucking from factory to Shenzhen, Ningbo, Shanghai, or Guangzhou
- Origin terminal handling and documentation
- Export customs clearance or broker fee at origin
- Combine with international freight in the total logistics stack
International shipping and insurance
International freight and marine or cargo insurance depend on the shipping method. Air is faster but more expensive; sea is slower but cheaper for volume. Insurance is usually a small percentage of cargo value, often 0.3%-0.5%.
- Sea freight: FCL (full container) or LCL (less than container load), 15-40 days typical
- Air freight: 3-7 days, often used for samples and high-value goods
- Express courier (DHL, FedEx, UPS): per-parcel cost, fastest for small orders
- Insurance: typically 0.3%-0.5% of cargo value, billed separately from freight
Import duty, additional tariffs, and tax
Import duty is calculated on the customs value, which depends on the valuation basis. The duty rate is set by the HTS code. Additional tariffs (such as Section 301 on China-origin goods) are added on top. Import tax or VAT is then applied to the duty-inclusive value in most destination markets.
- HTS base duty: from USITC HTS or the destination tariff database
- Section 301: from USTR notices, applies on top of base duty for China-origin goods
- EU VAT: applied to the duty-inclusive value, varies by member state
- UK VAT: applied to the duty-inclusive value at the prevailing UK rate
- Verify rates in the destination tariff database before finalizing the DDP quote
Clearance, handling, and delivery
Clearance, handling, and last-mile delivery are usually small per-unit amounts but they stack up across a full shipment. They cover destination broker fees, port or airport handling, and delivery to the buyer warehouse.
- Destination broker or entry filing fee
- Port or airport handling, drayage, or exam fees
- Last-mile delivery or courier handoff
- Document handling, duty payment fees, and storage (if any)
Delivery margin or buffer
A delivery margin or buffer covers FX fluctuation, quote padding for unforeseen fees, customs amendments, and seller margin. Common practice is a percentage of the cost stack, calibrated to product risk and quote validity window.
- FX buffer: 1%-3% to cover exchange rate movement between quote and invoicing
- Quote padding: 2%-5% to absorb minor duty, tax, or fee differences at clearance
- Seller margin: a fixed percentage on top of cost stack
- Document the buffer separately so it can be revised without rebuilding the shipment estimate
Worked example: $4.00 factory T-shirt to DDP USA
A supplier quotes $4.00 per T-shirt FOB Shenzhen, MOQ 1,000 units. Inland freight is $0.05, export handling is $0.04, sea freight is $0.40 per shirt, insurance is $0.02, HTS 6109 base duty is 16.5%, Section 301 List 4A is 7.5%, state use tax is 8% (on duty-inclusive value), clearance and handling is $0.10, last-mile delivery is $0.20, and the margin is 10% of cost. Cost stack before margin: $4.00 + $0.05 + $0.04 + $0.40 + $0.02 = $4.51 logistics. Duty = $4.51 x 16.5% = $0.74. Section 301 = $4.51 x 7.5% = $0.34. State tax = ($4.51 + $0.74 + $0.34) x 8% = $0.45. Clearance and delivery = $0.30. Subtotal before margin = $4.51 + $0.74 + $0.34 + $0.45 + $0.30 = $6.34. With 10% margin, the DDP price is $6.34 x 1.10 = $6.97. Verify all duty, tariff, and tax rates in USITC HTS and USTR before publishing the DDP price.
Common mistakes to avoid
Five errors appear repeatedly in DDP cost planning. Avoiding them improves the accuracy of the planning price and reduces the risk of the seller under-collecting from the buyer at clearance.
- Forgetting Section 301 on top of the base duty when shipping from China, which can shift DDP price by 7.5%-25%
- Stacking international freight on top of a CIF factory price, double-counting freight in the cost stack
- Calculating VAT or state tax on customs value alone instead of the duty-inclusive value
- Treating the DDP quote as a final landing price rather than a planning estimate that requires verification
- Omitting a margin or buffer, which makes the seller absorb small FX or clearance variances