What is Delivered Duty Unpaid (DDU)?
Delivered Duty Unpaid (DDU) is a term used in international trade that indicates the seller is responsible for the delivery of goods to a designated destination, assuming all transportation costs and risks during transit.
However, once the goods arrive at the named location, the buyer is responsible for import duties and any further transportation costs. The concept contrasts with Delivered Duty Paid (DDP), where the seller covers all duties, import clearances, and taxes.
Key Takeaways
- Delivered Duty Unpaid (DDU) implies the seller ensures safe delivery of goods but the buyer covers import duties post-arrival.
- Unlike DDU, Delivered Duty Paid (DDP) requires the seller to handle duties, import clearance, and taxes.
- DDU is widely used in transportation contracts despite being replaced by Delivered-at-Place (DAP) by the International Chamber of Commerce.
- DDU shipping benefits buyers by providing them control over shipping procedures while giving sellers a ‘hands-off’ approach toward destination country regulations.
- Buyers might face unforeseen duties or tax charges, a potential downside of DDU shipping.
Understanding Delivered Duty Unpaid (DDU)
The term Delivered Duty Unpaid (DDU) originated from a set of Incoterms published by the International Chamber of Commerce (ICC). Formed post-World War I, the ICC aimed to streamline international trade standards and terminologies.
Incoterms help outline who bears the costs and risks associated with international transactions, simplifying legal and logistical complexities for businesses. The term Covered by DDU was replaced by Delivered-at-Place (DAP) in recent Incoterm updates, yet DDU continues to be prevalent in trade parlance.
Responsibilities Under Delivered Duty Unpaid (DDU)
Under DDU agreements, the seller must:
- Secure licenses and other export-related formalities.
- Cover all transit country licenses and costs.
- Deliver goods and the required documentation proving legal possession can be taken.
- Assume risks until the goods reach the agreed location without an obligation for insurance.
The buyer is responsible for:
- Import licenses, taxes, duties, and inspection costs.
- All associated risks and further transportation costs upon receiving the goods.
Delivered Duty Unpaid (DDU) vs. Delivered Duty Paid (DDP)
The pivotal difference between Delivered Duty Unpaid (DDU) and Delivered Duty Paid (DDP) lies in who bears the burdens of import-related costs. In DDU, the buyer pays customs charges, duties, and taxes, unlike DDP where the seller is responsible for these costs to ensure smooth shipment delivery.
Advantages and Disadvantages of Delivered Duty Unpaid (DDU)
Advantages:
- Control: Buyers gain more control over shipping procedures, enhancing flexibility.
- Cost Management: Buyers might manage costs and tracking more effectively than under DDP.
- Simplifies Seller’s Role: Sellers can adopt a ‘hands-off’ approach regarding destination country regulations after safely delivering the goods.
Disadvantages:
- Surprise Charges: Buyers might encounter unexpected duties or tax charges upon goods arrival, potentially causing dissatisfaction.
- Risk for Buyer: Any legal complications post-arrival are entirely buyer’s responsibility, increasing risk exposure.
DDU Shipping FAQs
Is DDU Shipping or DDP Shipping Better?
Choosing between DDU and DDP depends on individual preferences and operational needs. DDU appeals to those prioritizing control and being well-versed in their country’s shipping customs, even with potential surprise charges. DDP, however, is ideal for buyers valuing a smoother process with no unforeseen costs.
Who Is Responsible for DDU Shipments?
Under DDU shipping, the seller takes complete responsibility for delivering goods to the destination country. Post-arrival, the buyer assumes the risk and covers the unloading cost.
Is DAP the Same as DDU?
The term Delivered-at-Place (DAP), introduced in the 2010 Incoterms update, essentially replaces Delivered Duty Unpaid (DDU). Despite this, both terms still capture similar responsibilities in trade contexts.
Related Terms: Incoterms, Delivered-at-Place, Delivered Duty Paid, import duties, export licensing.
References
- International Chamber of Commerce. “Incoterms Rules History”.
- International Chamber of Commerce. “Incoterms Rules 2010”.
