LDP vs DDP: Differences in Shipping Terms

Compared with LDP, DDP should be more familiar to everyone, and sometimes people may even talk about the two together. Although both LDP and DDP represent delivered duty paid at the port of destination, their essence is quite different. In order to make everyone understand the difference between the two more clearly, let's start with their basic concepts.

Here is the list of contents:

· LDP vs DDP: Differences in Shipping Terms

· Why are so many US guests requested for LDP terms to trade in recent years?

· What issues should be paid attention to when operating LDP?

· What are the risks of LDP incoterms?

LDP vs DDP: Differences in Shipping Terms

DDP (full name Delivered Duty Paid) means that the seller transports the goods to the place designated by the buyer after completing the import customs clearance procedures at the designated destination. "The goods that have not been unloaded are handed over to the buyer. After the delivery is completed, the seller must bear all the risks and costs of transporting the goods to the designated destination, including any "taxes" that should be paid at the destination when customs formalities are required. (Including the responsibilities and risks of handling customs procedures, and paying handling fees, duties, taxes and other fees.) It can be seen that under the DDP term, the seller bears a lot of responsibility.

LDP (full name Landed Duty Paid) is a kind of trade term, which is the same as the delivery price at the dock where the seller pays the import tax. The seller provides the import license at his own risk and expense, and bears any import tax, including customs inspection fees. , and any other dues or charges payable on account of the importation of the goods and their delivery to the buyer.

That is to say, you are not only responsible for the export procedures, but also responsible for the import procedures at the destination port of the importer, including import licenses, customs clearance, customs inspection fees, and customs duties that need to be paid by the import destination, etc. These fees Quotations must be included. This trade method is very risky for the exporter. If there is a mistake in the import place, it is all your responsibility, and the importer is not responsible.

LDP/DDP=FOB price + tax of destination country + freight + miscellaneous customs clearance fees. The sender is responsible for all costs and corresponding responsibilities, and the receiver only needs to wait for the delivery at the warehouse.

Simply understand, door-to-door delivery is required. The whole process is from the factory to the US warehouse, including cargo transportation, insurance, US customs clearance, tax payment, and delivery.

U.S. LDP incoterms is equivalent to U.S. DDP incoterms, which is often encountered by U.S. customers when trading, and more and more. Officially, DDP requires the designated port of destination customs clearance company to do customs clearance, but LDP does not. Americans are usually confused. What they say is that they hope that the supplier can do the whole process to the door. DDP is generally used internationally, and most Americans call it LDP.

At present, LDP incoterms is often used for transit through third countries. In order to solve the problem of European and American quotas for Chinese textiles and clothing, and to facilitate domestic clothing enterprises to deal with trade barriers that Europe and the United States have re-restricted the export of textiles and clothing, they all use third-country transit. Most of the transit countries are Southeast Asian countries.

First of all, LDP incoterms includes: sea or air freight, quota, customs duty (double customs clearance), delivery fee and other miscellaneous expenses. Generally, an all-inclusive price is given instead of a single tariff, and many specific operation methods are not very simple to explain in a few words.

Now when LDP trade incoterms in the United States, the goods are not shipped to the United States by re-export. The safest and most convenient way is to directly use China’s quotas, and export them directly to the United States instead of using quotas and certificates of origin from other countries such as Bangladesh, Indonesia, Singapore, Malaysia, etc., because now the United States is re-exporting to the United States from several places. The clothing is basically checked by the ticket, and it will be returned if it is not checked. And it takes quite a long time - the time to transfer to the United States will be much longer.

For example, it will take at least one and a half months to reach the port of destination and two months to reach the consignee if it is transshipped to LA in the United States. During this period, you can't grasp the news about the direction of the goods. It is bound to be worried about this product. So now our company adopts the domestic quota to directly ship to the port of destination in the United States, which is fast and safe. No transit required. Exporting to the United States for LDP requires the cooperation of freight forwarders. In fact, it is a mode of transportation! It’s a bit of a cut corner, to help the payer save the cost of transportation + tariffs + quotas!

Now, let’s talk about DDP incoterms here: "Delivery Duty Paid (...named destination)" means that the seller will deliver the goods that have not been unloaded on the delivery means of transport after completing the import customs clearance procedures at the designated destination. Buyer, complete delivery.

The seller must bear all risks and costs of transporting the goods to the named destination, including any "taxes" payable at the destination when customs formalities are required (including the responsibility and risk of customs formalities, and the payment of handling charges, duties, taxes and other charges).

The seller bears the minimum liability under the EXW term, while the seller bears the maximum liability under the DDP term. This term should not be used if the seller cannot directly or indirectly obtain an import license. However, if the parties wish to exclude from the seller's obligations any import charges such as VAT, this should be expressly stated in the contract of sale.

If the parties want the buyer to bear the risks and costs of importation, the DDU term should be used. The term applies to all modes of transport, but when the goods are delivered on board or at the port of destination, the term DES or DEQ should be used.

Why are so many US guests requested for LDP terms to trade in recent years?

Now many garment companies have reported that many American customers have recently requested to change the FOB delivery terms to LDP delivery, because American customers want to lock in their costs, reduce their risks, and conduct trade transactions in the most convenient way for them, and more importantly I want to reduce my own cost, and I hope that the exporter can supply the goods at a low price and deliver them to the door. Simply put, everyone in business wants to maximize profits and minimize risks. Therefore, American customers prefer the consignor to deliver directly to the door. Generally, buyers who want to do LDP place relatively large orders. As long as the goods are not contraband and the goods and information are accurate, China and the United States are both legal and clear, and there is no risk of deception and false declaration. As long as the seller and the buyer formulate a comprehensive sales contract and control the payment process, the risk can also be reduced.

Due to the increasingly fierce market competition in recent years, domestic garment and textile export enterprises can only survive in the cracks, wandering on the edge of the critical point of zero profit. The trade form of LDP occupies a very important place in the current textile export trade. Due to the flexible and reasonable form of tax avoidance, it has been favored by both buyers and sellers of many Sino-US trading companies. Under such a form of trade, the guarantee of cargo rights and customs clearance rate become the key in all transportation links.

I learned that most foreign compradors or buyers in China will choose DDP/LDP trade terms for procurement, because the cost is controllable. The gross profit margin of the apparel and textile industry is between 5% and 10%. Because of the low gross profit, exporting to the United States pays more attention to the price of logistics and freight, and saves logistics costs to increase the gross profit of the apparel and textile itself.

That is to say, most American customers now want suppliers to use this method to make deals. Current market feedback: now customers generally ask suppliers to quote FOB and LDP prices, and let them choose a way to make deals based on price and advantages. .

What issues should be paid attention to when operating LDP?

Under such special terms, the following five points will become the places that need attention throughout the transportation:

1. Smooth customs clearance at the port of destination: Since all the overall transportation matters are handled by the freight forwarder, the smoothness of customs clearance at the port of destination depends entirely on: whether the local customs import records of the third trading party are good; Whether the freight forwarder's operation record in the local customs is good; whether the local customs clearance bank's customs clearance qualification in the local customs is good;

2. Due to strong seasonality, LDP clothing transportation often has strict requirements on transportation time. Under normal circumstances, the FCL goods can be delivered within 3 working days after arriving at the port, and the LCL distribution will be 1-2 days later.

3. In the actual operation process, the requirements on the documents are relatively high, and the data should be as accurate as possible during the export declaration of China Customs (in the form of a piece of paper), and AMS and ISF should try not to change them. If it is LCL, if the number of air freight containers is incorrect, it must be changed. If the difference in sea freight FCL data is not large, do not change it. The bill of lading is concise and clear at a glance.

4. If you are making branded goods, you must ask the consignee to prepare the authorization in case the customs inspection can provide it in time, so as to avoid high storage costs and demurrage fees caused by untimely issuance.

5. In case of random inspection by the customs, after the unpacking inspection is completed and the goods are normal, the goods can be picked up in about 5 working days after arriving at the port. If it is X-RAY inspection, under normal circumstances, it will take 3 working days, and NY will be a little slower. Documents are available for all inspection fees.

What are the risks of LDP incoterms?

I understand that many suppliers are not willing to touch this clause. Most of the reasons given are "the risk is too high, we don't do it", "we only do FOB, we don't want to do LDP", "what if something happens to LDP? , we dare not take risks” and other reasons, in fact, I understand everyone, FOB has been doing it for many years, and it was only a matter of easy delivery on board, and there was nothing, but suddenly said to be LDP, and delivered to the customer’s door, and took care of everything. There are bound to be fears and worries about transportation and risks.

The main risks of LDP are divided into three segments:

1. Transportation risks exist in the entire transportation process, and the transportation methods include land transportation, sea transportation and air transportation. Transportation risks can be insured by commercial insurance, which can be covered for the whole process or for a period of time.

2. The risk of customs clearance. LDP suppliers are very important. We must choose a reliable and powerful supplier, understand the establishment time, qualifications, professional capabilities, and market reputation. It is best to conduct on-site inspections for office space. Missing things, resulting in various additional costs for the goods at the port of destination.

3. The risk of collection. As a supplier, all the work in the early stage is for the purpose of receiving payment. It is recommended to use Sinosure, which guarantees the risk of collection. Even if the buyer goes bankrupt, the buyer’s bank goes bankrupt, or even political turmoil occurs in the country, Sinosure can pay compensation, including malicious rejection.

For exporters, LDP is relatively risky. The more links you are responsible for, the greater the responsibility you bear. You must bear the production link of the entire batch of goods, and you must also bear the cost of the entire transportation, as well as the additional costs of various accidents, and you must master the overall transportation time. The seller is responsible for both China's import customs clearance and the US's import customs clearance, which will involve risks brought about by changes in the trade policies and customs regulations of the two countries. Fortunately, the laws in the United States are relatively sound, and the trade relationship between China and the United States is relatively stable. As long as the goods are not counterfeit or contraband, the customs will not randomly seize the goods. If you are worried that the buyer will default on the payment, let alone LDP, even FOB or even the ex-factory price may be scammed. So it is not the shipping terms that determine the buyer's credibility.