Table of contents:
1. What is DDP?
2. What is DDU?
DDP means delivery duty paid.
A Duty Paid Agreement means that the seller bears all responsibility, risk and costs associated with transporting the goods until the buyer receives the goods at the agreed destination (which could be a port, fulfillment center or the buyer’s doorstep).
The buyer and seller agree on all payment details and indicate the name of the delivery location before completing the transaction. Buyer's expectation is that all DDP charges are included in the final price and there are no surprises upon delivery to your door.
Seller is responsible
· Shipping fee
· Import and export duties and licenses
· Customs documents
· Taxes, including VAT
· Storage charges in case of delays
· Replacement costs for goods damaged or lost in transit
· Final delivery to the agreed destination
DDU means Delivery Duty Unpaid. It has been discontinued by the ICC since 2010, but is still widely used. The ICC has officially replaced it with the Incoterm® rules DAP, "Delivered at Place", but the trading rules are the same as DDU.
DDU means the buyer is responsible for paying any customs fees, duties or taxes in the destination country. These fees must be paid to customs in order to release the goods once they arrive at a pre-agreed location (such as on-site delivery at Jebel Ali Port). The seller is responsible until the agreed delivery point, at which time the buyer is responsible.
Under the DDP, sellers may have more responsibility, but they also have more control over the process. However, when things go wrong along the way, such as unexpected delays due to port strikes, political unrest or bad weather, shouldering all the financial, legal and bureaucratic responsibilities can come at a huge cost to the seller.
DDU may appear cheaper at checkout, but it can be expensive for both buyers and sellers if the customer doesn't understand there are additional fees involved. If the additional charges are unexpected, the customer may not buy from that seller again. Worse, they may decide not to pick up the shipment at all and the shipment may be abandoned by customs.
Some countries do not allow DDP, while others have complex systems. In these markets, sellers may prefer to take a hands-off approach and leave customs clearance to buyers or their agents who have a better understanding of local realities.
The seller may pay DDP costs to take into account unforeseen circumstances and may not use the cheapest logistics partners, leaving the buyer with significant extra charges compared to a DDU delivery.
This method is potentially cheaper overall for the buyer, with an unpadded checkout price. However, even if the buyer expects to pay duties and taxes, the amount may be difficult to predict and be more than anticipated. Unexpected brokerage, storage, and late payment fees may be incurred.
So, which is the better of the two? Should the Delivery Duty Paid (DDP) be used instead of the Delivery Duty Unpaid (DDU)?
Read on to discover which of the two will help further the opportunities your business may have in the international business market.
DDP is costlier
For a business like yours that is looking to cut down on costs, using DDP can be one of the ways to increase your expenses. That is because you, as the seller, will be bearing many of the expenses, such as the duties paid to the customs and other underlying fees.
Besides, the seller tends to pay additional fees when the buyers/receivers fail to come to pick up or claim their goods.
DDU can take buyers unawares
Using the Delivery Duty Unpaid (DDU) can save your business some costs, but it can also have negative impacts on your customer experience.
That is because many customers may not even be aware that there is a customs duty to be paid. So, by the time the customers figure out, it may be late, and they may be short of cash to make the payments.
DDU bolsters shipment abandonment
You have succeeded in reducing your shopping cart abandonment figures by making use of a robust international trade model to get customers to buy from you.
However, if you stick to using the Delivery Duty Unpaid (DDU) model, you tend to trigger an increase in shipment abandonment. It is possible because many customers may be short of cash to pay the customs duty.
Besides, when the customers abandon the shipment, the shipment company/courier tends to return the shipment to you at an additional fee.
DDP increases customer satisfaction
As DDP covers all risks and uncertainties, it smooths the entire shipping process. It's a worry-free option. So for most of time, buyers can be satisfied.
International shipping is a complex and important part of import and export. Take shipping from China as an example. It involves a lot of parts, such as sending from the seller’s warehouse to the Chinese port, shipping from the Chinese port to your country’s port, delivering from the port to your warehouse, dealing with import and export customs clearance, and paying import duties, etc.
If you are a new buyer and do not have any transportation resources, or you are afraid of trouble and do not want to worry about these things, then door-to-door delivery is suitable for you. You can choose DDP when your seller is willing and able to complete import declarations and pay duties. But when your seller is unwilling to do these things, you can choose DDU.
Additionally, if your goods have very high tariffs but your funds are limited, you don't want to pay this fee up front, but rather keep the money for other purposes and pay when you receive the goods. Then DDU is for you too.
But if you clear customs in your own country it is difficult and time consuming. DDU is not recommended. You may not be able to complete customs clearance in a timely and smooth manner. Then you have to pay extra for it, and your seller won't be able to deliver your goods to the destination on time.
Also, you can ask the seller for both CIF price and DDP price at the same time and choose the cheaper one. The CIF price only covers the cost from the seller to the port in your country. You still need to pay the cost from the port to the warehouse as well as import duties, which will be very high. Therefore, the total cost under CIF is likely to be higher than the DDP price. In this case, we recommend you to use DDP, which can save you time, money and effort.
When you choose which shipping terms to use, be sure to account for all costs from the seller to your hands. Fees are complicated and you'd better ask your seller, freight forwarder or purchasing agent directly.
Hope this article can give you a clear understanding of DDP and DDU. If you have any questions, you can contact us.