Last autumn a seller of small kitchen appliances in Shenzhen signed a twelve-month DDP rate to Los Angeles at USD 3.85 per kg. In March the container rate on the same lane had fallen by roughly a third, so he asked for a re-quote and got 2% off. Nobody had padded the number. What he had been watching for a year was one of the three blocks that make up a DDP rate, and it happens to be the smallest one.
This is not an argument that DDP is expensive. It is an argument that a DDP rate is a different object from a freight rate, and it has to be negotiated and reconciled on its own terms.
Block one, two, three
Sit with three recent DDP invoices and split every line into one of three groups. The proportions below are typical for consumer goods from Shenzhen to the US west coast; they are not a formula, and high-duty categories look nothing like this.
| Block | Priced per | What moves it | Can it be locked |
|---|---|---|---|
| Ocean freight, roughly 20–35% | Container, or kg and CBM | Capacity, bunker, GRI and peak-season surcharges | Yes, in an all-in rate with a stated validity |
| Destination charges, roughly 25–35% | Entry, container, trip, day | Terminal and labour tariffs, exam rate, congestion, chassis | Partly, as a fixed service fee per entry |
| Duty and import tax, roughly 30–45% | Customs value × rate | HS classification, trade policy, the value customs accepts | No: it is paid on what is declared and accepted |
Only the first block follows the index
Ocean freight is quoted against capacity and it moves weekly. The other two blocks are built from different things:
- Destination charges are per event. A customs broker charges per entry, the terminal per container, the trucker per trip, an exam per inspection, storage per day. None of these read a freight index; they follow terminal tariffs and wages, and they tend to step up in the second half of the year.
- Duty is customs value multiplied by a rate. The rate comes from the HS code and from trade policy, and the value comes from your invoice and from what the broker can defend at entry. Freight appears only indirectly, because the customs value of a DDP shipment usually has freight inside it.
The counter-intuitive half: a falling market rarely lowers landed cost
When the ocean line drops, the two other blocks often drift up. Peak-season terminal charges, tighter chassis supply, a higher exam rate after a policy change, and the seasonal move of the customs broker's fee all arrive in the same months. On a per-kg basis the curve is flatter than the freight chart by a wide margin. That is the whole explanation for a 30% drop producing a 2% rate cut, and it is the reason a landed cost review should not be triggered by the index alone.
Three ways to write the contract, and what each one really means
- All-in, twelve months. The forwarder carries the index and the exchange rate. You pay for that certainty in the base number, and it is worth it when your selling price is fixed for the season.
- Freight locked, service fee fixed, duty at actuals. The most common structure, and the one that needs a monthly statement: duty is settled on the entry summary, not on the estimate in the quote.
- Floating, re-quoted monthly. Honest for spot cargo, useless for a budget, and it moves the risk back to you without lowering the average much.
Whichever you choose, put four things in writing: which lines are at actuals, how often they are reconciled, what happens if the HS code is reclassified at destination, and whether anti-dumping or Section 301 duties are inside the number or outside it.
What to ask for at every settlement
- The entry summary, showing duty, merchandise processing fee and harbour maintenance fee as separate lines
- The terminal and trucking invoices for the container, not a lump sum labelled "destination"
- The duty assumption behind the quote: declared value basis, the rate applied, and the date it was checked
- One page per shipment splitting freight, destination and duty, so the trend is visible before the annual review
That one page is your landed cost. The per-kg headline on the quote is a marketing number until it has been reconciled once.
When the answer really is FOB
If the goods are high value, the duty rate is low, you can recover import VAT, you sell into one stable market, and your broker will give you the entry summaries, then DDP is a service you are paying for and could price yourself. The test is not the rate per kg; it is whether you can read the three blocks without help.
Send us your last three DDP invoices on WhatsApp before the next rate review. We will split them into freight, destination and duty, and tell you which block actually moved — usually not the one on the index.