A Guide To Understanding The Differences Between DDU vs DDP Shipping

Getting started in international trade means understanding shipping on a deeper level than simply popping a stamp on something and sticking it in the mail. DDU and DDP are some of the international shipping terms you’ll need to understand before dipping your toe in the proverbial export and import waters.

Delivery Duty Paid (DDP) and Delivery Duty Unpaid (DDU) are methods of international delivery that take into account: 

• The cost of taxes, duties, and fees on imported goods,
• Who is responsible for those costs: the shipper or the buyer,
• And when those duties are paid.

But wait, there’s more— you’ll also need to understand Delivered-at-Place (DAP) and how it relates to the DDU Incoterm.

The Wonderful World Of Incoterms

First, let’s take a look at the origin stories of these terms. DDP and DDU come from standardized shipping rules, or international commerce terminology, called Incoterms®.¹ Issued by the International Chamber of Commerce (ICC), these international shipping terms are used universally to define the responsibilities of sellers and buyers across international borders. 

Translation? The terms help buyers and sellers recognize who has what responsibility when it comes to certain costs associated with transporting stuff internationally. 

While you might not be interested in the history of the ICC, you should be aware of one key morsel of information about DDU. Although it’s still used as a common point of reference, it’s actually no longer an officially recognized Incoterm. In 2010, “DDU” was retired and replaced by Delivered-at-Place (“DAP”).²

Here’s why that’s relevant to you—you may still see DDU in business contracts. However, to be used legally, it should always be accompanied by the clause, “as per Inco terms 2000.”³

What Does DDP Mean In Shipping?

Delivery Duty Paid (DDP) is the more common shipping method for e-commerce sellers. It places the burden of both the total cost of transport and the process and cost of customs clearance on the seller. 

Under DDP shipping terms, the seller must:⁴

• Pay export taxes, duties, and fees,
• Arrange and fund the DDP shipment, both to the destination port and final destination.
• Provide a commercial invoice and any other contract-specified documentation,
• Arrange and fund an Importer Of Record (IOR) to handle customs compliance and clearance for your products,
• Pay import taxes, duties, and customs fees,
• Pay for any storage related to a customs clearance delay,
• Own the burden of risk for the entire shipment journey (damage, theft, loss),
• And deliver the goods within the timeframe specified in the contract of sale.

On the other hand, the buyer must: 

• Pay the seller for the cost of the goods (when, how, etc., per the contract of sale),
• Inform the seller of the exact delivery destination and instructions,
• And take ownership of goods at the end destination (per the contract of sale).

While all of this may seem overwhelming, having the right Importer Of Record, or IOR, makes all the difference. An IOR is an individual or business entity in the destination country that knows everything about accepting the imported goods and guiding them through the customs process (hint: Zee can act as your IOR. Our exceptional customer service team will help guide you through the labyrinth of international laws anytime).

What Does DDU Mean In Shipping?

Delivery Duty Unpaid (DDU) basically says, “I’ll handle it in my country, you handle it in yours.” As the seller, you’re arranging for the costs and responsibility of shipping your products out of the country. But with DDU terms, clearing customs and the fate of the goods after that is in the hands of the buyer.

With a DDU shipment, the seller is responsible for:⁵

• Export taxes, duties, and fees,
• The burden of risk to the goods during shipment (loss, damage, theft),
• Delivery cost and execution to the port of origin and then to the destination port,
• Documents that allow the buyer to take legal possession of the shipment,
• And licenses and contracts required for the shipment process.

The buyer is responsible for: 

• Payment to the seller for the delivered product,
• Accepting the seller’s documentation and providing a time of receipt,
• Licensing, documentation, and authorization for import clearance at the destination port,
• Import clearance costs (customs, duties, fees),
• Taking possession of the DDU shipment at the main delivery location/port,
• And financial responsibility and management of goods thereafter, including:
  
  – Delivery to their storage or manufacturing facility,
  – Cost of transport and storage,
  – And the burden of risk to the goods (loss, damage, theft).

When To Use DDP vs DDU Shipping

When it comes to DDU vs DDP, the decision is usually based on the size of the business and the size of the shipment. 

There’s some logic to the DDU (or DAP) method, in that an exporter is tracking and arranging and paying within their own territory, where they presumably have the contacts and know-how to get things done.

Then, when the shipment hits foreign shores, the importer is the one who takes the reins, knowing both the literal and figurative language of local government, commerce, and transport. 

If you’re an Amazon FBA seller and are wondering “How does Amazon shipping work?” or “How do I know which shipping method to use?”, this is an easy decision. DDP shipping all the way. Why? As part of FBA compliance regulations, Amazon only accepts DDP shipments into their international fulfillment centers.

Ready To Take Your FBA Business International?

In a world of new terms, contracts, and fine print, your first move is finding a trusted partner for the import process. FBA sellers have a tremendous opportunity to leverage the buying and fulfillment power of Amazon and bring their goods to multiple countries—but there’s a lot that Amazon won’t do for you.

Zee can help you understand and navigate the practical steps to taking your small business across borders. We work with you on the entire process, act as Importer Of Record (IOR) in several countries, and have close relationships with reliable shippers that can deliver your goods safely and economically to the destination country. 

Contact us today to connect with our team of experts and get started on growing your business.

Sources: 

1. U.S. Department of Commerce International Trade Administration. Know Your Incoterms. https://www.trade.gov/know-your-incoterms
2. Investopedia. Delivered-at-Place (DAP). https://www.investopedia.com/terms/d/delivered-place-dap.asp
3. How to Import Export. Difference between DDU and DAP. https://howtoexportimport.com/Difference-between-DDU-and-DAP-381.aspx
4. Trade Finance Global. Delivery Duty Paid DDP – Incoterms® 2020 Rules [UPDATED]. https://www.tradefinanceglobal.com/freight-forwarding/incoterms/ddp-delivery-duty-paid/
5. Trade Finance Global. What is delivered duty paid (DDU Incoterm®)? https://www.tradefinanceglobal.com/freight-forwarding/incoterms/ddu-incoterm-delivery-duty-unpaid/