DDP is easy to like: one price, duty and delivery included, no customs account needed. But in three situations that price costs more than running the shipment yourself on FOB — and the gap is often around 20% of the goods value.
What is actually inside a DDP price
A DDP quote is not a freight rate. It is a package. Unpacked, it usually contains six things:
- Origin charges, main carriage, destination port charges
- Import duty, calculated on the declared value and HS code
- Import VAT or sales tax
- Brokerage, inspection and storage if customs holds the cargo
- Delivery, plus any appointment or unloading charges
- Financing and risk premium — the duty is paid up front by the other side
The problem is not the package. It is that the tax inside it is priced as a fixed rate. Change the tariff, the value or your tax status, and the price no longer holds.
Case 1: you have an importer number and can recover VAT
In the EU and the UK, import VAT is recoverable — if you are the importer of record and the tax is assessed against your number. Under DDP the importer is usually the seller or its forwarder. The VAT is not yours to recover, so it becomes a real cost.
Take EUR 50,000 of goods, 4% duty and 20% import VAT (figures are illustrative only): the VAT is about EUR 10,400, or 20.8% of the goods value. On FOB, cleared under your own number, that amount is cash flow; on DDP it sits inside the price and never comes back.
Case 2: low value, bulky cargo, or a low tariff
DDP is often quoted per kilo or per CBM, and to cover a mixed book of cargo the quote tends to reserve a higher duty rate than your goods attract. If your product is duty-free or low-duty (some furniture, printed matter, certain plastics), that reserve is an overpayment.
Bulky, low-value cargo has a second problem: DDP carries a minimum charge, and a light container full of volume pays that minimum across few revenue tonnes. On FOB you book the space, pay the port and delivery charges that actually happen, and keep the difference.
Case 3: steady FCL and your own clearance at destination
If you ship full containers every month and already have a broker, a trucker and a warehouse at destination, the service fee, financing and coordination inside DDP are things you are buying twice. What you need is a booking and a bill of lading, not a full package.
For two shipments a year into a difficult tax jurisdiction, the same package is worth paying for. The test is whether the service replaces work you would otherwise do — not whether it sounds convenient.
Which term fits
| Situation | Better term | Why |
|---|---|---|
| Importer number, VAT recoverable | FOB or DAP | The tax sits under your number and can be reclaimed |
| Low value, bulky, zero or low duty | FOB | DDP prices per kilo or CBM and applies a minimum charge |
| Steady FCL, own broker and warehouse | FOB | Service fee and financing can be removed |
| No importer number, first shipment, marketplace requires DDP | DDP | Convenience is real, and the risk sits with the provider |
| Complex destination tax, local registration needed | DDP, priced carefully | Confirm the rate and declared value before accepting |
A worked example you can copy
One FCL with EUR 50,000 of goods, assuming EUR 3,800 ocean freight, EUR 500 destination charges, EUR 300 clearance, EUR 900 delivery and 4% duty:
| Item | DDP all-in | FOB, own clearance |
|---|---|---|
| Freight and destination charges | Included | EUR 4,300 |
| Clearance and delivery | Included | EUR 1,200 |
| Import duty | Included | EUR 2,000 |
| Import VAT | Included, not recoverable | EUR 10,400, recoverable |
| Service and financing | About EUR 1,200 | None |
| Cash out | About EUR 18,600 | About EUR 17,900 |
| Net cost after recovery | EUR 18,600 | EUR 7,500 |
The difference is not freight. It is whether the EUR 10,400 comes back. That is where the 20% comes from.
Before accepting a DDP price, ask for three things in writing: the HS code, the duty rate and the declared value. If any of the three is vague, the price is an assumption — and you are paying for it.
When DDP is still the better answer
- No importer number or local tax registration, and no plan to obtain one
- Small, infrequent shipments where the fixed cost of clearance outweighs the service fee
- A marketplace or buyer that requires DDP
- A destination where local tax and compliance cost more than the saving
DDP is not expensive because it is convenient, and FOB is not better because it is cheaper. Choosing a term is choosing who stands in front of customs and who carries the risk of the rate and the declared value.