What is Delivered Duty Unpaid (DDU)?
Delivered Duty Unpaid (DDU) is a trade term where the seller ensures goods are delivered to a specific destination. The seller pays all transportation expenses and assumes all risks during transport. The buyer is responsible for paying all import duties and additional transportation costs. DDU was removed from the official list of Incoterms® in the 2010 revision.
Is DDU Still Used?
DDU was replaced by Delivered-at-Place (DAP) as an official Incoterm by the International Chamber of Commerce (ICC) in 2010. DAP outlines many of the same buyer and seller responsibilities that were covered by DDU.
Despite this, DDU is still used by many international trade organizations in their contracts. The term is followed by a specific delivery location to ensure clarity. For example, “DDU: Port of Singapore.” Due to its continued use, it is worthwhile to understand the responsibilities covered by DDU, its benefits, and how it differs from DAP.
Responsibilities of the Buyer and Seller in a DDU Contract
The responsibilities of the seller and buyer are as follows in a DDU contract:
- Deliver goods to the agreed-upon destination in the country of import
- Assume all costs and risks up to the point of delivery
- Provide the buyer with all necessary documents for import
- Pay import duties and taxes
- Arrange and pay for unloading and handling at the destination
- Take possession of the goods at the agreed-upon location
- Insure the goods once they have taken possession
- Notify the seller of any damage or loss immediately
In practice, a DDU transaction might look like this:
A company in the UK sells electronic components to a buyer in the U.S. The seller ships the components to the Helen Delich Bentley Port of Baltimore in the U.S., covering costs and risks. Upon arrival, the buyer pays import duties, arranges unloading, takes possession, insures the goods, and promptly notifies the seller of any damage or loss. From there, the buyer is responsible for transporting the goods to its manufacturing facility in Richmond, Virginia.
Pros and Cons of DDU
In a Delivered Duty Unpaid (DDU) contract, sellers encounter distinct advantages and challenges. Primarily, sellers benefit from cost savings, as they are relieved of the financial burden associated with import duties and taxes. This expense reduction enables them to improve profit margins, or at least offer more competitive prices.
On the downside, sellers engaging in DDU contracts face certain limitations and uncertainties. While they enjoy cost-saving advantages by avoiding duty payments, they sacrifice control over the goods after delivery. The lack of control can lead to uncertainties about the handling and condition of the goods once they’re in the buyer’s possession.
The buyer has certain advantages and challenges as well. On the positive side, they gain control of the goods upon delivery, granting them autonomy in managing the shipment from the specified location. This flexibility extends to payment, allowing buyers to handle duties and taxes upon arrival, potentially aiding in financial planning.
Buyers must also be aware of some complexities and risks in DDU contracts. Managing customs clearance and ensuring compliance with import regulations become the buyer’s responsibility, which can be intricate, time-consuming, and risky. Additionally, unfamiliarity with the import process might lead to delays or disputes, impacting the timely receipt of goods.
Both buyers and sellers should bear in mind that since DDU is not an officially recognized Incoterm, the ICC will not be involved should any issues arise.
Comparison: DDU vs. DAP
DAP replaced DDU in the 2010 edition of Incoterms. The two are similar, but there are a few differences that make DAP a better solution than DDU.
DDU and DAP, plus Delivered-At-Place-Unloaded (DPU), are considered “named place” terms of sale, which means that the seller is responsible for delivering the goods to a specified location in the buyer’s country. The buyer is responsible for paying all import duties and taxes, as well as unloading and handling the goods at the destination.
The main difference between the two is the transfer of risk. Under DDU, the risk of loss, or damage to the goods, passes from the seller to the buyer when the goods are unloaded from the transport vehicle at the agreed-upon destination. In contrast, DAP places the risk of loss or damage on the seller until the goods have been delivered to the named place and unloaded from the means of transport. Under these terms, DAP provides the buyer with better protection against loss or damage during delivery.
Another difference between DDU and DAP is the handling of customs clearance. In a DDU contract, the seller provides necessary import documents, while the buyer handles and covers the costs of customs clearance. With DAP, the seller is responsible for completing customs clearance and ensuring that the goods are ready for import. This can be a significant advantage for buyers, as it can save them time and money.
What is the Difference Between Delivered Duty Paid (DDP) and DDU?
Duty Delivered Paid (DDP), where the seller pays for the duties, taxes, and customs clearance, remains a valid Incoterm. It is similar to DDU in many respects. DDP offers a more comprehensive delivery package from the seller’s side, encompassing all import-related responsibilities. As seen above, the seller’s responsibility ends at delivery to the port when using a DDU approach.
Under DDP, the seller is responsible for delivering goods to the buyer’s location and covering all the import costs. The seller handles the transportation process, bears the associated risks, and manages customs clearance. The buyer doesn’t have any responsibilities in the import process. Once the goods are delivered and customs cleared, the risk shifts from the seller to the buyer.