What is DDP? Costs, Risks & IOR for China to Japan Shipping 2025
By / November 14, 2025
For any business involved in international trade, particularly on the bustling China-Japan route, the three letters “DDP” can seem like the ultimate solution—or a hidden trap. As an Incoterm, DDP (Delivered Duty Paid) represents the absolute maximum obligation for the seller.
But what does DDP really mean in practice?
DDP (Delivered Duty Paid) is an Incoterm that stipulates the seller must pay for all costs to bring the goods to the final destination, including and most importantly, all import duties and taxes.
For the buyer (importer), this is the simplest, most hands-off shipping arrangement available. The price you are quoted is, in theory, the final price you pay.
For the seller (exporter), it is the exact opposite. You are responsible for every single step of the journey, every risk, and every fee, right up to the buyer’s doorstep.
Before we dive deep, let’s immediately clarify DDP’s position against the most common Incoterms, especially its closest cousin, DAP.
1. DDP Explained: The End-to-End Process & Flow
When a seller in China agrees to a DDP contract with a buyer in Japan, they are signing up for the entire logistics marathon. The buyer’s only job is to be ready to unload the truck when it arrives.
Let’s visualize the seller’s journey:
Here is a detailed breakdown of the seller’s (exporter’s) responsibilities under DDP:
- Export Packaging: Ensuring goods are packed correctly for international transit.
- Loading Charges: Paying for the truck that picks up goods from the factory in, say, Shenzhen.
- Export Customs Clearance: Filing all necessary export declarations and paperwork in China.
- Origin Terminal Charges: Paying all port fees at the Port of Shanghai or air terminal fees at PVG.
- Main Freight: Paying the ocean carrier (e.g., from Shanghai to Tokyo) or airline for the main international transport.
- Destination Terminal Charges: Paying all port or terminal handling charges (THC) at the destination port, for example, in Yokohama.
- Import Customs Clearance: This is the critical part. The seller is responsible for filing all import documentation with Japanese customs.
- Import Duties & Taxes: The seller must pay all applicable Japanese import tariffs and, crucially, the Japanese Consumption Tax (JCT).
- Final-Mile Delivery: Paying for the inland trucking from the Port of Yokohama to the buyer’s final specified address, perhaps a warehouse in Saitama.
What is the buyer’s (importer’s) responsibility?
Unloading: The buyer is only responsible for unloading the goods from the truck once it has arrived at their specified location.
Risk in a DDP arrangement does not transfer to the buyer until the goods have arrived at that final destination and are ready to be unloaded. If the truck crashes on the way to the Saitama warehouse, it is 100% the seller’s loss.
Quick Comparison: DDP vs. DAP vs. FOB
This simple table answers the most critical questions about cost and risk.
| Incoterm | Who Pays Main Freight? | Who Pays Import Duties & Taxes? | Where Does Risk Transfer? |
| DDP | Exportador | Exportador | At Buyer’s Final Destination |
| DAP | Exportador | Buyer | At Buyer’s Final Destination |
| FOB | Buyer | Buyer | At Seller’s Origin Port |
2. The Pros and Cons of DDP: A Dual-Perspective Guide
DDP is not inherently “good” or “bad.” It is a tool. Whether it’s the right tool depends entirely on which side of the transaction you are on.
For the Importer (Buyer) in Japan
This is the “easy mode” for importing.
Advantages:
Total Cost Certainty: The price quoted by your Chinese supplier is the final, landed cost. There are no surprise invoices from customs or freight forwarders. This makes budgeting and financial planning incredibly simple.
Minimum Responsibility: You have zero logistics headaches. You don’t need to find a freight forwarder, file customs paperwork, or worry about transit delays. Your job is to order, pay one bill, and receive your goods.
Simplified Procurement: It streamlines the entire procurement process, allowing your team to focus on sales and operations rather than supply chain management.
Disadvantages & Risks:
Higher Price: This “all-inclusive” service comes at a premium. The seller is taking on massive risk, and they will build a significant buffer (a risk premium) into their DDP price. You are paying for their service and their risk.
No Control: You have zero control over the supply chain. The seller will choose the cheapest possible carrier and the slowest transit time to protect their margin. If you need the goods quickly, DDP is a bad choice.
Compliance Risk: You are trusting that your seller correctly filed all customs paperwork and paid the correct taxes. If they cut corners, it could (in a worst-case scenario) create compliance issues or delays that indirectly affect you.
For the Exporter (Seller) in China
This is the “expert mode” for exporting. It is a high-risk, high-reward strategy.
Advantages:
Powerful Sales Tool: Offering DDP pricing is a massive competitive advantage. You can quote a Japanese customer one simple, all-inclusive “landed price,” which makes your product far more attractive than a competitor’s confusing FOB quote.
Total Process Control: You control the entire supply chain from end to end. This allows you to consolidate shipments, choose your trusted logistics partners, and manage your costs effectively (in theory).
Disadvantages & Massive Risks:
Unlimited Liability: You are financially responsible for tudo: that goes wrong until the final delivery. If Japanese customs pulls the container for a random inspection (X-Ray, physical check), you pay all associated demurrage, storage, and exam fees.
Customs & Tax Complexity: You are now responsible for understanding and complying with Japanese import law. Does your product (e.g., electronics) require a PSE mark? Does your food product require a quarantine certificate? If you fail to provide this, your goods will be seized, and it is 100% your fault and your cost.
The IOR Problem: This is the single biggest risk, which we will dedicate the next section to. You, as a Chinese company, cannot legally act as the importer in Japan.
For any questions, feel free to contact GWT Shipping. Our team will provide professional, standards-compliant advice tailored to your specific needs.
3. The Greatest DDP Risk: The “Importer of Record (IOR)” Problem
This is the section that most DDP guides fail to explain, and it’s the one that costs exporters thousands.
What is an Importer of Record (IOR)?
The Importer of Record (IOR) is the legal entity (a person or, more commonly, a company) that is officially registered with a country’s customs department as being responsible for a shipment. This entity is legally liable for the accuracy of the documentation, the payment of all duties and taxes, and the compliance of the goods with local laws.
The “Pain Point“:
Japanese customs (and indeed, most countries’) requires the Importer of Record to be a registered legal entity within Japan.
A Chinese company based in Shenzhen, with no office or legal presence in Japan, cannot be the Importer of Record.
This creates a direct conflict with the DDP agreement. The seller (you) has promised to pay all duties, but you are not legally permitted to be the one who files the paperwork and pays them.
How is this problem “solved?”
Solution A (The Wrong Way): The seller asks the Japanese buyer to act as the IOR “on paper,” even though the seller is paying the bills. This is a messy, confusing arrangement. It’s not true DDP, and it creates legal and tax confusion for the buyer, who is now legally liable for a shipment they didn’t control.
Solution B (The Professional Way): The seller uses a Third-Party IOR Service. This is a specialized service, often provided by established freight forwarders or customs brokers. A compliant Japanese-registered entity (like your freight forwarder) acts as the Importer of Record on your behalf. They use their legal standing to clear the goods, pay the duties and taxes, and then invoice you (the seller) for those costs, plus a service fee.
This is the only way for a foreign-based seller to offer true and compliant DDP shipping to Japan. Attempting DDP without a solid IOR solution is a recipe for disaster—your goods will arrive at the Japanese border and be rejected by customs.
Conclusion
DDP is a term of maximums. It offers the maximum convenience for the buyer and places the maximum responsibility on the seller.
For Buyers (Importers) in Japan: DDP is a fantastic tool for simplifying procurement and locking in costs, if you are willing to pay a premium for that convenience and give up control over your shipping.
For Sellers (Exporters) in China: DDP can be a powerful sales strategy to win over Japanese customers, but it should only be attempted if you have a rock-solid grasp of your costs and, most importantly, a reliable logistics partner who can act as your Importer of Record (IOR) in Japan.
The complexities of DDP—especially the IOR requirement and tax liabilities—shouldn’t be a barrier. They should be a clear signal to partner with an expert who can navigate them on your behalf.
Whether DDP or DAP is the right choice for your next shipment, having a trusted forwarder who understands the nuances of both is key. If you have questions about structuring your shipments to Japan, our team can help you navigate the complexities and find the most cost-effective, compliant solution.
FAQ
The only difference is the payment of import duties and taxes.
DDP: The Seller pays import duties and taxes (like Japan’s Consumption Tax).
DAP (Delivered at Place): The Buyer pays import duties and taxes. Under DAP, the seller’s truck arrives at the buyer’s door, and the buyer is responsible for paying the customs bill to get the goods released.
It is 100% the seller’s responsibility and cost. The seller must pay for any storage fees, penalties, and either the cost to have the goods destroyed or the cost to have them shipped back to China.
Yes, but only if you use a third-party Importer of Record (IOR) service, like one provided by a qualified freight forwarder. You cannot legally file the import paperwork yourself.
Any product that is heavily regulated or requires complex certifications. This includes:
Electronics: (Require a PSE mark)
Food & Agricultural Products: (Require quarantine and health certificates)
Medical Devices: (Require MHLW approval)
Cosmetics: (Require specific ingredient approval) A seller should be extremely cautious offering DDP on these items, as a single missing certificate will halt the shipment at their own expense.
Not automatically. Incoterms 2020 does not obligate the seller to purchase insurance under DDP. However, since the seller bears 100% of the risk until final delivery, it would be extremely unwise for a seller not to purchase a comprehensive cargo insurance policy.
The seller is responsible for paying it. When the goods are imported, Japanese customs will assess the import duty and the 10% JCT. The seller (or their IOR) must pay this amount to clear the goods. The seller must factor this 10% tax into their DDP price.
Yes, the final price is almost always higher. The seller must price in:
The cost of the goods
The cost of freight
The cost of duties and taxes
A “risk premium” to cover potential delays, inspection fees, or other unforeseen problems. A buyer who is confident in their own logistics process can often get a cheaper final cost by using DAP or FOB.
The risk transfers at the precise moment the goods have arrived at the buyer’s named destination (e.g., “1-2-3 Chiyoda-ku, Tokyo”) and are ready for unloading by the buyer. The seller is not responsible for the physical act of unloading.
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