Incoterms or international commercial terms are international contracts intend for export, import and trade. Two Incoterms CPT and DDP are different concepts that we intend in this article to review the definitions and a general comparison between each. Stay with us until the end of the article.
What is DDP
DDP or Incoterm Delivery duty paid refers to the rules that the seller assumes all responsibilities for the delivery of the goods, including all costs, insurance tax charges and delivery in general to the buyer. In this case, the seller must do both export and import. Of course, in this method, the seller can decide to not insure the goods before transportation and leave the insurance to the buyer.
In Incoterm DDP, the buyer is exempt from paying any taxes, fees or charges until the product arrives, so only has to pay the cost of the calculated product according to the transaction.
comparison between CPT and DDP , DDP is the only Incoterms that has all the responsibilities of clearance of goods after import from the buyer and all these steps will be the responsibility of the seller.
Advantages of DDP
DDP benefits are divided into two parts: buyer benefits and seller benefits:
- The risk of buying is much lower than other incoterms
- The clearance fee will be settled at the time of the transaction
- No need to pay additional costs such as administrative and tax costs
This method often does not interfere with the buyer and the seller can supply the products in any way he wants and send them to the destination for the buyer. In this case, the only advantage of the process intends for the seller.
Disadvantages of DDP
Of course, DDP also has disadvantages that we will not see in other Incoterms.
Disadvantages of the buyer
- comparison between CPT and DDP This incoterm requires accurate knowledge and ability of the seller to import details in the destination country, so if the seller is not able to clear the goods in the destination country, DDP not uses in general.
• On the other hand, some tax contracts in the destination country are only payable to certain individuals, so the seller is not able to provide DDP services to the buyer in this way.
- If there is a problem with the products or the shipping process distrubs, the buyer will have no way to change the process.
- In this incoterm, the seller may pay any additional costs to the buyer according to the work done to send the products to the destination.
Disadvantages of the seller
This method is one of the most difficult methods for the seller, so many sellers may refuse to provide a DDP for the buyer. For example, providing all customs fees, shipping and shipping costs, tax costs and even providing clearance and shipping documents and other items are all the responsibility of the seller, so the amount of work and responsibilities of the seller in this method is very high.
What is CPT
CPT Incoterms is an international standard trading term that defines the seller as the first person responsible for the transfer of the product to the shipping company or intermediary. In this Incoterms, unlike DDP, the seller is responsible for delivering the products to the shipping company, and from then on, all responsibilities transfer to the company or intermediary.
In CPT, the seller must transit the products to the destination country and deliver them to a company or person who agrees between seller and buyer. Note that the difference between this method and DDP is when the products available to the shipping companies. Suppose the seller in CPT sends the product to the buyer through three different channels. In each channel, the responsibility is assigned to the transferring company and any problems are the responsibility of the company, but in DDP, all the responsibilities in each channel will be the responsibility of the seller.
comparison between CPT and DDP the risk of transporting the goods after delivery to the sending company changes from seller to buyer with the initial condition that the channel or company or the transferor select by agreement of the parties.
Advantages of CPT
in the advantages and disadvantages of DDP, different advantages and disadvantages considers in CPT for the seller and the buyer:
- There is no need to ensure products from the seller
- When the products reach the local terminal and the transferring company, the seller loses responsibility
- The seller can also coordinate and offer his transfer company with the buyer
- The potential risk of receiving goods in this way is lower than other incoterms for shipping from China.
- The buyer does not need to manage the transit of products to the destination
- The buyer does not need to calculate the tax costs and the cost of exporting products and shipping from China
- Due to the insurance of the products by the sending company, the buyer can deliver the products more safely.
Disadvantages of CPT
Disadvantages of the buyer
- In this case, the buyer is responsible for the products when they enter the terminal or the shipping company if the buyer can not be directly involved in the delivery of goods by the company.
- The costs of the differentiated company for the transfer are never known in advance and may involve a large initial cost for the buyer.
Disadvantages of the seller
- The seller is responsible for managing and paying all costs while shipping products from China to the terminal
- Calculate all costs for sending and clearing goods is the responsibility of the seller.
Comparison of CPT and DDP
In general in the case of CPT and DDP incoterms for shipping from China, the two methods place more responsibility on the seller, but the difference arises when the product is delivered to the company or transmission channel.
In DDP, all cases and even the decision to insure or not the products and their transit in the destination country is the responsibility of the seller, which in addition to the disadvantages of providing transfer methods and calculating and paying all costs can be for The seller is very time consuming but it is a great way for buyers who do not want to get involved to get the goods. On the other hand, CPT Incoterms can leave the buyer free to choose the channels sent and the transit intermediary company to agree on this with the seller.
Both methods are very suitable for shipping from China, but if you are a buyer who wants to buy and receive only the product without the slightest interference in sending and clearing the goods, it is better to use DDP Incoterms.
our services for CPT and DDP
DDPCH Group is a leader in providing DDP services and incoterms so that customers can easily receive their products for shipping from China in the fastest possible time with high security and without the least hassle. The quality of our work process in providing DDP and CPT services is high, and you can rely on our services to purchase and clear your goods. If you have any questions about the introduced Incoterms, you can ask your questions through the contact us link on the website.