Well, DDU is a term that is internationally used for a trade agreement. This agreement says that the seller is to be held responsible to ensure the safe transfer of goods to their destination, and the buyer is responsible for paying duties and taxes.
This term has now officially been replaced with DAP (delivered at place). It is very important for us to know what are the obligations of the seller and buyer according to these incoterms for a smooth shipment.
Read the article below for a deeper understanding of DDU, the policies it follows, its pros and cons along with the other details.
For instance, if your order is marked DDU, and you do not know what the term DDU means then it might be problematic for you. So, to help you know about it we will be discussing DDU in detail here.
Before going deeper, you should know that by using DDU, you can get the goods you ordered at a location of your choice, without any hassle.
It does not matter where your supplier lives because all your goods will be transferred to you at the agreed-upon location within the given time. All you have to do is to pay the duties and the taxes.
It deals with shipping your products through different routes. It ships the items through roads, air, and also sea routes to make your goods reach their destination safely within time.
The term Delivered Duty Unpaid, commonly called DDU, is a predefined incoterm that was introduced by the International Chamber of Commerce in 2000. The International chamber of commerce is a body that makes trade terms, establishes rules, and resolves trade disputes.
DDU was introduced in 2000, and it remained in active use for ten years. At the conference of the International Chamber of Commerce held in 2010, it was officially replaced by another incoterm currently known as DAP (delivered at the point).
The current status of DDU is active under the name of DAP, because both of them are essentially the same. So, DDU is still widely used in shipping contracts as DAP.
DDU takes into account both the seller and the buyer as it implies responsibilities on both of them. The seller has to pay for all the costs for transporting the items, and after reaching the agreed location, the buyer becomes liable for the duties and taxes.
The seller has to ensure the safety of goods throughout the journey till they reach their destination. After that, the safety of the goods is up to the buyer. So, this makes both of the involved parties accountable to each other for any loss.
Everything we use comes with some advantages and some disadvantages. Similar is the case of DDU because it also has some pros and some cons. Following are some crucial points in this regard.
|Pros of using Delivered Duty Unpaid
||Cons of using Delivered Duty Unpaid
|It is easier to track shipments while DDU than any other incoterm.
||The biggest issue with the use of DDU is that despite making rough estimates of duties and taxes, the buyer may get surprised to see the final cost of shipment.
|While using Delivered Duty Unpaid the buyers can cut down the cost and have control over it. This is because they have more knowledge about their country’s shipment terms.
||The buyer may refuse to accept the goods seeing the high taxes and transportation cost leading to disputes, and so it may cause issues to the seller in that case.
|Seller is not liable for any legal issues because he is just responsible for safely transporting the goods to the agreed-upon destination. The complications are handled by the buyer once the goods reach that location.
||Sometimes the customs brokerage fee is higher than expectations.
|It is a commonly used incoterm, so more people know about it which makes it, easier to use.
||The process of shipment through DDU may get delayed.
|It is highly affordable for the seller due to easier costing procedures.
6. What are the applications of DDU?
DDU is a very smooth system of transporting goods internationally because it makes both the buyer and the seller accountable for the deal.
Both of the involved parties have some obligations to follow and rules to take care of. Shipping goods through DDU is safe and incredibly simple. It does not involve any complicated process by keeping the process easy, even for the average person.
Other than the fact that Delivered Duty Unpaid imposes equal responsibilities on the seller and buyer to make the shipment safe, DDU is also very easy to control costs and track shipments in DDU, so it is still ideally used for transporting items by people.
Chapter 2: Understanding the rules of DDU in the International Trading
Delivered Duty Unpaid, like all other things in the world, comes with some problems. There are some things you should never take for granted when using DDU. Some of them are being discussed in the next section.
1. Is DDU incoterm valid, can we still use it?
Knowing that Delivered Duty Unpaid has not been included in the 2010 Incoterms list, it is a very common confusion that is DDU still usable or not.
Well, the answer is yes, it is still valid, and you can find it under the name DAP Delivered at Point (DAP). DAP is a widely used term nowadays, so you can also use it safely.
2. Problems faced by buyer while using DDU
If you are a buyer and you want to trade through DDU terms, then you should know that you will have to obtain your import licenses and permits that you will need for the customs clearance yourself.
You will have to take care of all the customs procedures and will, once the goods reach the destination, you will handle their safety.
Being a buyer, you will handle deciding a suitable time and place for delivery, and if you don’t do so, you will have to assume all the risks of shipping.
3. Problems faced by the seller while using DDU
Delivered Duty Unpaid incoterm is more affordable for the sellers because clearing duties and taxes are the buyer’s duty. The seller has to assume all the safety risks of goods before reaching the destination.
The problem here is that if the buyer does not accept the goods due to any reason, you being the seller, can be in deep trouble. It will lead to negative feedback from the customers. You will have to pay the extra cost for the return shipment and loss of sales.
Here it should be noted that this problem only arises when you do not communicate with the buyer like you are required to. You should keep the buyer updated about the shipment.
Telling him the costs beforehand, keeping him updated about delivery time. A not adding anything without prior warning can save from a lot of trouble.
4. Does DDU incoterm cover payments or it depend on personal negotiation?
Delivered Duty Unpaid intercom is just an internationally followed set of rules. These rules were made for the comfort of sellers and buyers by making them bound to certain obligations.
It does not indulge in your personal dealings in any possible way. What will be the cost of goods you are ordering is a thing that depends on your negotiation. Similarly, delivery time is a major factor decided by the buyer and seller by negotiating.
5. How to avoid frequently made mistakes? What to take care of while using DDU?
The most frequently made mistake is, while dealing with shipping there is a lack of communication.
You should know that can do everything by yourself, but you have to keep the other party involved in dealing updated about the scenario. Not telling anything and avoiding contact cannot help.
On the other hand, if the sellers are open about chatting with the buyers and are telling them about any extra fee, they might have to pay on receiving goods. Then they will be able to win their trust as a transparent dealer and save themselves from trouble.
It is always a great idea to think and decide regionally before agreeing on DDU shipping. Different regions follow different customs, tax policies, and guidelines.
Some products are prohibited in some countries, some have special restrictions. So, knowing the basic guidelines of the region you are going to deal with, offers great help and ease.
Always check the tax rates of your destination. De Minimis value differs for different countries, and checking it before agreeing to ship is really helpful. You can check the rates at GEA Overview. It enlists the De Minimis values published in October 2019.
Chapter 3: Comparison of DDU with other incoterms
A brief comparison of Delivered Duty Unpaid and other relevant incoterms is discussed below.
1. DDU and DDP
Unlike DDU, in Delivery Duty Paid (DDP), the seller is liable to pay the import expenses along with the GST. In DDP, goods are released to be delivered immediately after paying customs while they are withheld until all the duties are paid.
2. DDU and EXW
In EXW, the seller will deliver the goods to the premises of your state. All the inland transport inside those premises is the responsibility of the buyer.
But, it should be noted that EXW incoterm is the cheapest mode of shipping. Because the seller is not obliged to send you your goods at your doorstep or even at someplace inside your country.
Buyers have to do all the hassle of picking up the parcel from the bounties of their state and clear the customs. It is the simplest of all intercoms.
EWX incoterm stands for Ex Works.
3. DDU and DPU
DPU stands for Delivered at Place Unloaded. In DPU, the seller unloads all the goods at the decided destination and pays all the transport costs.
Seller also assumes any risk to the goods until they arrive at the destination. Once the unloading has been completed, the charges are borne by the buyer. In case of delayed delivery, the seller is asked to bear the charges.
One can opt for DAP rather than DPU if the seller cannot organize unloading.
4. DDU and CIP
CIP stands for Carriage and Insurance Paid. The main difference between both these incoterms is that in CIP, the seller has to pay the freight and shipping insurances.
Just like Delivered Duty Unpaid, the Carriage and Insurance Paid incoterm also makes the buyer responsible for the safety of the goods. The buyers become the person in charge only after they have reached the destination mentioned in the contract.
5. DDU and FOB
The term FOB accounts for the words ‘Free on Board’. The major difference between DDU and FOB is that, once the seller has loaded the ordered goods on the vessels, the delivery is marked done from his side.
Now, the goods move from the country of origin to the main location you want them to reach are your responsibility. The seller has to just load the goods on the mode of transport being used. Everything else is your responsibility.
6. DDU and CIF
CIF is used to represent Cost, Insurance, Freight. According to the terms and conditions of CIF, the seller has to deliver the goods at the decided location, clear the exports, pay for the transport and De Minimis insurances, and also onboard the vessel. CIF also includes the cost, insurance, and freight.
7. DDU and CPT
In CPT (Carriage Paid to), the seller has to transfer the decided goods to the carrier, and the bill of lading confirms it. If the goods get damaged during the journey, the buyer can file an insurance claim. In DDU, the seller is bound to meet all the costs of damaged goods.
8. DDU and FCA
FCA means Free Carrier. The agreed-upon port in FCA is called the “Named Place”, and the seller is responsible for delivering the goods to that location. Shipping the goods is the responsibility of the seller.
The goods can be delivered to the representative nominated by the buyer at the port also. The seller has to deliver the goods to the location where the seller has access.
The seller is also obliged to load the ordered goods on the buyer’s carrier. Like DDU, FCA also frees the seller from the responsibilities once the goods reach the agreed destination.
Chapter 4: Step by Step process of using DDU Incoterm
Following steps are taken under DDU shipping.
1. Choosing a supplier
First of all, the buyer has to choose a supplier who agrees to his demands and budget. Then both of them negotiate over the price and the quantity of the goods to be transported.
Work with a reliable supplier is important, because he/she can handle a lot of things for you when you are not sure about the shipping terms.
And for some situation, it is difficult to check whether the products are qualified or not, so find a good supplier first can help you avoid a lot of issues in advance.
2. Paying the DDU price
After agreeing on the cost, the buyer has to pay the DDU price to make the seller move forward with the shipping. The seller needs to transport all the products to the destination.
All the costs and risks will be taken by the seller in this journey. Mainly note that this does not include customs duties, taxes, and other official fees.
The additional costs and risks that have been missed before need to be paid and accepted by the buyers.
3. Agreement between buyer and seller
Before the shipping takes place, both the buyer and the seller have to agree on the destination. The country and the place of delivery are finalized in this step.
The seller need to obtain all the export license and other official permits. Although the seller should be at his own risk and expense, the buyer must pay the price in accordance with the provisions of the sales contract.
4. Seller’s role in DDU
The next step involves the major roles of the seller that are:
- Choosing a suitable carrier
- Delivering all goods in good condition for loading
- Bearing the risk and expense before the buyer signing for the goods
As sellers have to deal with many other such shipments, so mostly they need to hire carriers. They load and transfer the goods under their own supervision to keep a safety check.
5. Handling the documentation of DDU
Once the goods reach the agreed-upon destination, the buyer has to pick the goods by themselves or hire someone to receive them on his behalf.
According to the DDU terms and conditions, the buyer pays all the customs duties and has to handle all the documentation.
So, if the buyer hires a customs broker or representative (freight forwarder) to pick the goods, then that representative will be responsible for paying customs and duties.
6. Loading and transport of goods
After the buyer signed the agreement and picked up the goods by himself/herself or by a freight forwarder, there is no longer duty problem with the seller. All the issues and charges will become the buyer’s responsibility.
Because the seller can only transport goods to the agreed destination, hence any further inland transportation will be the responsibility of the buyer.
The buyer has to load and transport the ordered goods forward himself from the destination to the warehouse or buyer’s house.
7. Clearance of customs
Before ending the DDU agreement, the buyer has the make sure that he had paid for all the taxes and duties.
The buyer is responsible for providing the certificates and procedures required for import customs clearance, paying customs duties and value-added tax, and unloading the goods.
Clearance of customs is really important to close the DDU contract.
Chapter 5: Things you must know before using DDU
Following are few important things you must know before dealing with the DDU incoterm.
1. Obligations of sellers in DDU
If you aim to sell goods through DDU incoterm, then you will be responsible for the following things:
- Negotiating with the buyer to note the exact order
- Arranging the ordered goods
- Having the necessary commercial documents used for the contract
- Arranging for the export duties and clearances
- Assume all risks and pay delivery expenses until the agreed destination
- Let the buyer know about delivery and arrival time the information
- Provide transport document
2. Obligations of buyers in DDU
Buyers are obliged to take care of the following things:
- Paying agreed amount to the seller for the goods ordered
- Having all necessary commercial documents along with licenses
- Arranging import clearance
- Picking up the goods as soon as they reach the agreed destination
- Pay the customs and duties along with all costs of the transportation
3. How safe is using DDU?
The most important confusion people have regarding DDU is that, if it is safe to use or not.
The most accurate answer to this question can be that if you keep in view all the responsibilities and deal with transparency, it is safe to use Delivered Duty Unpaid like any other incoterms.
Clear communication between the seller and the buyer makes it successful. So, less knowledge and opaque communication can be a hurdle.
4. What are the risks pertaining to the use of DDU?
As we have already discussed that, before reaching the destination, the seller assumes all risks and after that, the buyer becomes liable for them. Some goods require special care in weather change, otherwise it might be fragile.
The buyer checks the goods and then clears the customs and duties. So if he is not satisfied, he may not clear the duties and the goods will be held by the authorities. So damaged goods can impose a serious risk to the whole deal.
The buyer has to pay customs and taxes, so it is better to keep him updated about it.
In case the buyer has little or no knowledge about taxes, he can employ a freight forwarder to make the process smoother otherwise it will lead to confusion and thus the whole contract is in danger.
5. Is cargo insurance included in DDU shipping?
In DDU shipping of goods, the seller is liable for all the risks. But, it is different when we talk about cargo insurance. It should be kept in mind that cargo insurance is not included in DDU shipping.
Neither the seller nor the buyer is not obliged to pay for insurance, but in case the buyer wants to include it in the shipping contract, then both of them can negotiate and decide about this matter.
6. Is multi-modal transportation allowed in DDU?
During international shipping, when one has to transfer goods to a far-flung place, then one might need to use multiple modes of transportation. This may include transport through all three routes, i.e., land, air, and sea. Multi-modal transportation is allowed in DDU.
Using DDU, one can go for any mode of transportation or even the variety of many. The seller can also seek help from other contractors using that route to transfer goods to the buyer.
The only thing that should be kept in mind is that the goods should reach the destination safe and secure within the time decided by both parties.
Chapter 6: Frequently Asked Questions About DDU Incoterm
1. Who is liable to pay for DDU shipments?
According to the Delivered Duty Unpaid guidelines, the shipment cost can be paid by the seller or the buyer, it depends on how the contract noted. However, once the goods reach the destination, the buyer should pay the duties, customs and shipments.
2. Is it good to use DDU in 2021?
Yes, it is good to use DDU in 2021. If it aligns correctly with your requirements and you think it is suitable for you,use it directly. Otherwise, you can go for the other available options also.
3. Is Delivery at Point (DAP) the same as DDU?
According to the DAP terms, the seller is liable for the packaging, shipping expenses, and other terminal expenses until the goods reach the decided location.
Seller also clears the necessary formalities of the exporting state. Buyer has to pay for the unloading of goods and customs clearance of the country they have imported their products. These conditions are the same as DDU.
DAP is used instead of DDU in 2010 and 2020 incoterms of the international chamber of commerce. So yes, they are essentially the same.
4. What is the current legal status of DDU?
DDU was not included in the 2010 incoterms list and was replaced by DAP, but it is still valid. It is to be understood that these terms only have spirit reference.
They are used just as a reference. We see that DDU is still used by people, so it has no legal boundaries. Hence, you can also use it.
5. Does DDU term allowed in air shipping?
Yes, DDU deals with all kinds of shipping, be it air, land, or water transport of goods. The goods that you have ordered can be sent to you through any of the available transport routes.
DDU is a frequently used incoterm all over the world. It has several perks for the users and can prove to be a lot more beneficial for people.
If they use it by keeping in view all the risk elements coming with it. Knowing what good it brings and what problems you can face, can be more helpful for your business.
From this blog, you can learn a lot about DDU and consider that is it suitable for your case. Dealing with technical terms like Delivered Duty Unpaid is not difficult.
You only need to have a clear understanding of the terms, this is the only strategy to save your time and energy.