Delivered Duty Paid (DDP) and Delivered Duty Unpaid (DDU) are two of the most popular Incoterms in cross-border shipping.
International commercial terms (Incoterms for short) are internationally recognized terms that govern the responsibilities of buyers and sellers when selling domestically or internationally. This includes the payment of import duties, sales tax and other fees. Incoterms are defined and published by the International Chamber of Commerce (ICC) and are subject to change.
If you’re not sure which Incoterm to use or what the difference between DDP and DDU is, we’re here to help. This guide will explain both in full and cover the benefits and drawbacks of each term.
What Is Delivered Duty Unpaid (DDU)?
The Delivered Duty Unpaid (DDU) Incoterm indicates that the seller is responsible for delivering goods to the end destination. The seller is responsible for all transportation costs and assumes all of the risk during transport.
Once the goods have arrived in the destination port, however, the buyer is responsible for everything else. That means they must handle customs paperwork, oversee inspections and pay customs duties and taxes.
Even though the term DDU is still commonly used in the logistics industry, it’s important to note that the ICC has officially replaced it with Delivered-at-Place (DAP).
DAP is essentially the agreement between buyer and seller. The seller delivers the goods to the destination port and the buyer is responsible for paying import duties.
Who is responsible for what under DDU?
Under DDU or DAP, the responsibilities for shipping goods are fairly evenly split between buyer and seller.
Sellers must pay for the cost of transport and assume responsibility for the goods while they are in transport. If something is broken, they’ll need to reimburse the buyer or pay for it to be replaced. They’ll also need to pay any storage fees in advance of shipping and insurance if it’s required.
Buyers assume responsibility for goods as soon as they arrive in port before they clear customs. They are responsible for obtaining an import licence, filling in customs paperwork, paying taxes and covering the cost of inspections. They also assume responsibility if goods are damaged at port or during onward transportation.
What are the advantages of DDU?
The benefits of DDU to the seller are obvious: less risk and a lower financial burden. Delivery Duty Unpaid means the seller doesn’t have to worry about filling out customs documents or paying import fees.
If you’re an eCommerce retailer shipping DDU, then you don’t have to worry about calculating customs and taxes at checkout, either. It also means customers see a lower price — a factor that may cause more customers to complete the process.
Buyers benefit from more control over the customs process. This is a good thing if you want your goods quickly and have a strong understanding of your country’s customs processes — or a customs clearance broker to handle everything on your behalf.
However, sellers should be aware that shipping with DDU places responsibility on the people you want to impress most: your customers. They may blame you if their goods don’t clear customs successfully.
DDU can be confusing for eCommerce customers who aren’t used to paying taxes upon receiving their goods. So, to mitigate customer complaints, make sure that you disclose that the buyer is responsible for customs and taxes.
DDU places additional risks and costs on the buyer, too. In particular, they have to plan for additional and unforeseen costs at customs, which may not be easy to calculate ahead of time.
What Is Delivered Duty Paid (DDP)?
The Delivered Duty Paid (DDP) incoterm gives the seller even more responsibility than DDU. Under DPP, sellers are responsible for goods until they reach the destination port and they must pay customs duties and taxes upon arrival.
In other words, import fees, duties and taxes must be paid in full before goods are shipped and the buyer only takes responsibility for the goods once they have cleared customs.
Delivery Duty Paid sees the buyer pay the seller a price that is inclusive of everything mentioned above. This single, transparent fee covers the goods themselves, as well as the cost of shipping, insurance and any fees due at customs. This price is almost certain to be higher than if the buyer arranged everything themselves, but you’re paying for the convenience.
Who is responsible for what under DDP?
Under the Delivery Duty Paid Incoterm, the seller is responsible for almost everything. This includes:
- Arranging travel to the destination port
- Paying all transport costs
- Assuming risk for the goods during transport
- Arranging customs documentation
- Paying import duties and other taxes, including VAT
In many cases, the seller will have a customs agent on hand at the destination port to oversee arrangements, pay duties and inspect the goods.
The seller’s responsibilities end only once the buyer has taken possession of the goods after clearing customers. From that point on, the buyer is responsible for everything else.
What are the advantages of DDP?
The disadvantages of DDU are often the benefits of using DDP. It’s often seen as a great choice for eCommerce retailers as it all but guarantees a hassle-free experience for their customers. There’s almost no chance of delays or unexpected surprises such as additional taxes or customs duties.
Some sellers also like DDP because it can be seen as a USP. By taking on additional costs and risks, you can provide a seamless experience. Stress-free service that customers want to use time and again. They don’t have to be out of pocket, either. In many cases, sellers can offset some of the additional costs in their pricing.
With DDP, buyers benefit from an easy and stress-free experience. They don’t have to worry about filling out customs paperwork or paying duties. They pay one price and know their goods will be delivered.
DDP isn’t perfect, however. While sellers can provide better service with DDP, the drawback is that they take on more risk. Because sellers are responsible for clearing customs, they also have to be knowledgeable of each country’s or trading bloc’s import regulations and tariffs.
From the buyer’s perspective, DPP limits their control over the customs process. If sellers aren’t au fait with your country’s customs requirements and there is an error with the paperwork, you could be left in the lurch. You also don’t get a say over how quickly your order will arrive or which carrier is used and whether you can track your purchase.
Weighing the balance: DDU vs DDP
Delivery Duty Unpaid often looks like the best option at first glance. Sellers get to save money and shit some of the responsibility onto the buyer. Buyers get to choose their preferred delivery method and may get their goods faster.
But DDU isn’t always the best Incoterm to use. While DDU can save money and paperwork in the short term it’s often better for both parties to ship DDP. Despite the additional cost and risk associated with Delivery Duty Paid, sellers are actually able to provide their customers with a more reliable and consistent experience.
With DDP, buyers don’t have to worry about handling customs or paying surprise customs duties. There’s minimal administrative work for them, too, even if that means they don’t get to choose their preferred carrier or have the final say over shipping times.
DDU is still an option for buyers who really do want greater control and who have the know-how to handle customs matters. But for most, DDP is probably the best course of action.
Make the best choice with Pro Carrier
Whether you want to ship white goods DDU from a supplier in the Far East to the UK or ship clothing DDP from the UK to cross-border eCommerce customers in Europe, Pro Carrier is here to help.
We work closely with a range of importers, exporters and eCommerce retailers to ship DDP to the continent and DDU across the world. Our experts can handle the entire process in a straightforward manner, helping you to save as much time, money and stress, regardless of what you’re shipping.
For more information on how we can help, speak to a member of our team today or give us a call on +44 (0)800 054 1123.