What if you order an international brand for delivery at your doorstep and end up paying an extra amount because of the excessive import duties and taxes. People are unaware of these charges while international purchasing. This becomes a real panic for the people when they look at the final bill. To reduce the unsatisfying conditions for the customers ICC (International Chamber of Commerce) have passed different incoterm rules. Under these incoterms businesses can import and export defining the responsibility of buyers and sellers.

The terminology DDP vs DDU are the most commonly used incoterm rules but they have totally different sets of responsibilities for buyers and sellers. If you are looking for international trade or want to run an e-commerce store, then this could help you. Know the difference between DDP vs DDU incoterms to facilitate buyers in open terms.

What are the Differences between DDP and DDU?

Delivered Duty Paid shipping and Delivered Duty Unpaid shipping are incoterms for international freights that relate to the party liable for duty payments.

DDP shipping means the seller pays for the import duties, customs clearance, and taxes associated with importing goods into another country. Mainly, DDP delivery services means that the seller is responsible to pay all requisite import fees before the buyer’s import destination.

DDU shipping also known as DAP (Duties At Place) makes the buyers responsible to pay for all import duties, customs clearance, and taxes upon delivery. Moreover, DDU/DAP involves the buyer’s liability to pay for all the requisite import fees upon import arrival at their designated address.

The approach to avoid astonishing customers with sudden extra charges is managing the import product under clear three-letter international trade terms: DDP vs DDU.

As the abbreviation clearly shows Delivered duty paid shipping (DDP) and Delivered duty unpaid shipping (DDU). Both DDP as well as DDU are part of the Incoterms rules pile up by the International Chamber of Commerce (ICC) to systematize the terms of trade for the trade of goods internationally. These rules are sporadically reviewed, with the ICC latest publishing Incoterms 2020.

These trade incoterms apply to any international shipping whether personal online orders, gift packages, or commercial freight shipments. These incoterms determine who is liable for paying import duties and taxes. Let’s look a deeper to understand them more clearly:

Delivered Duty Paid Shipping (DDP)

A Delivered Duty Paid shipping agreement means the seller adopts all the responsibility, risk, and expenses associated with DDP shipping of the goods until the buyer collects them at the decided destination. This destination could be a seaport, fulfillment center, or the buyer’s living doorstep.

DDP meaning in shipping is that the buyer and seller decide on all payment details and mention the name of the place of final delivery before completing the transaction. The anticipation from the buyer is that all DDP ship costs are incorporated in the final price, with no shocks on the doorstep.

The seller is liable for:

• Import and export duties and licenses
• Shipping costs
• Taxes, including VAT
• Customs documentation
• Insurance
• Spare costs if goods are broken or lost in transit.
• Storage costs in case of delays
• Absolute delivery to the decided destination

Delivered Duty Unpaid Shipping (DDU)

The trade incoterm DDU has been obsolete by the ICC since 2010 nevertheless is still widely employed. Officially, the ICC has changed it with the Incoterm DAP (Delivered at Place). However, the trade rules are similar as they were for DDU.

DDU means the buyer is responsible to pay for any costs of the destination country’s customs charges, taxes, or duties. These costs must all be paid for duties to release the freight after it reaches a pre-agreed point. The seller takes accountability until the agreed delivery point. Later after this stage the buyer becomes responsible.

The Pros and Cons of DDP vs DDU

There are several pros and cons to each system pertaining to the realities of your marketplaces and the scope of your business.

DDP

1. Sellers may have added responsibilities under DDP shipping but they also have more authority over the process. Though, taking all the financial, legal, and official responsibility can add major costs to sellers when things go incorrect en route. Such as unforeseen delays because of port assaults, political turbulence, or bad weather.
2. DDU shipping may appear economical at checkout but if clients do not understand that there are additional costs. It could ascertain expensive both for buyer and seller. If the additional charges are unforeseen, the customer may not purchase from that seller again. Even shoddier, they may choose not to take delivery at all. The DDU shipment could be captured in customs.
3. Many countries do not permit DDP while others have complex systems in place. In such markets, sellers may desire to take a hands-off attitude and to consent customs clearance to buyers or respective agents with better knowledge of local certainties.
4. The seller pays DDP costs to take into explanation unexpected circumstances and may not practice the cheapest logistics associates, leaving the buyer with extra charges compared to a DDU freight.

DDU

This process is possibly inexpensive overall for the buyer, with an uncertain checkout price. However, if the buyer supposed to pay duties and taxes, the total may be difficult to foresee and be more than expected. Unpredicted brokerage, storage, and late payment fees may be additional.

Tips for buyers to Avoid Surprises

If the seller gives you an option of ordering DDP vs DDU delivery, make sure you comprehend the difference formally finalizing the deal! Usually, DDP is better and less complex. If you want the product and the retailer is incapable of providing you with details of extra charges, you are required to do some investigation about tax duties and customs charges.

Guidelines for Trades to Manage their Delivery Choices

• Know the Track

Each country has dissimilar rules and realities, so one needs to know while deciding whether to choose DDP vs DDU. What’s fine in any country may not be in another one, and some issues may prohibit DDP delivery for example Russia does not allow DDP imports. Also within markets, some things may have import duties while some may be duty-free.

For minor ecommerce businesses that need to grow in a specific market, taking the time to grow. For them the best DDP delivery agreements can significantly boost sales.

• Select Logistics and Delivery Partners Well

Choose reliable logistics partners who know the markets you are transporting to. DDP sellers proceed with all the risk.

• Be Upfront with Your Customers

Either you decide to ship on DDU or DDP incoterms or combination according to the delivery target, you should connect openly with your customers so they identify what to expect. Clarify how taxes and duties will be controlled on your website’s product pages, at checkout, in your shipping policy, in email confirmations, and on your FAQ page.

The thing any buyer wants, or requests, is an unwanted surprise attached to a buying, especially when the shock involves additional charges. To make certain this doesn’t happen to your consumers, choose your incoterms wisely to communicate them clearly.