Incoterms DDU - Delivery Duty Unpaid – explained

When engaging in international trade, you may come across various acronyms, called Incoterms®, which play an important role between buyers and sellers when delivering goods around the world.

In this article, we’ll discuss the meaning of the Delivery Duty Unpaid (DDU) and similar Incoterms®. We’ll also briefly talk about how Wise Business could help you save when conducting international business.

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What are Incoterms®?

Incoterms® are a set of rules for trading internationally, issued by the International Chamber of Commerce (ICC). They set out the responsibilities of buyers and sellers for things like loading and unloading, insurance, carriage, freight costs and so on.

One of the Incoterms® you may have come across is DDU, which stands for Delivery Duty Unpaid. You may also see this written as Delivered Duty Unpaid.

In short, it stipulates that the seller is responsible for delivering goods to the destination, with the buyer handling arrangements and costs for the rest of the delivery. The risk is shared fairly evenly between both parties.

A crucial point to note is that DDU is an old Incoterms® rule, which wasn’t included in the 2010 or the 2020 update of the rules. You may still see it in contracts, but it’s not recommended to use it, as there are updated terms out there. For maximum clarity between buyer and seller, it’s best to use the updated rules.

The closest of the new Incoterms® that best covers the same functions of DDU is DAP, which stands for Delivered-at-Place – but more on that later.

DDU Incoterms® meaning

The old Incoterms® DDU rule was used to describe terms where the buyer and seller share the risks of delivery almost equally between them. Delivery Duty Unpaid refers to the duty and taxes due in the country of importation.²

What are the responsibilities of the seller, buyer, and carrier?

Under Incoterms® DDU, the seller or supplier is responsible for licenses, documentation, and freight costs relating to shipping the goods to the agreed destination.²

They will also have the full risk burden of damage or loss to the goods during the journey, so are likely to have insurance too.

The seller delivers the goods to the agreed destination, and at this point responsibility for all costs and legalities passes to the buyer.

The buyer now takes on the burden of risk, as well as paying import duties and taxes, unloading and delivery costs. They will also have to handle the customs formalities in their country.

Who pays for freight?

If a contract was signed using Incoterms® DDU, this meant that the seller was legally responsible for covering the costs of freight. This is because the transportation of the goods is the seller’s responsibility all the way up to the point the goods are dropped off at the port of origin.²

Can you still use DDU?

Yes, but buyers and sellers need to be clear about what set of rules they are operating under, such as 2000, 2010 or 2020. These are the last three revisions of the Incoterms®.¹

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Differences between DDU and DDP

Incoterms® DDU is sometimes confused with another one of the rules – Incoterms® DDP. This stands for Delivery Duty Paid.

Unlike DDU, Incoterms® DDP is an active rule as per the 2020 update by the ICC. It has one key difference from the DDU. In particular, DDU requires the buyer to cover import duties and taxes in their country, while DDP puts this responsibility on the seller.

With DDP, the seller covers all costs, documentation, and formalities for transporting the goods, including import duties, until the buyer takes over at the port of origin. The buyer will pick up at the unloading stage, when the goods have arrived at their destination.²

DDP is similar to DAP, the rule now used instead of DDU. This stands for Delivered-at-Place, a rule which can be used for any mode of transport and works in much the same way as DDU.

DAP specifies that the seller will deliver goods to the agreed upon destination, while unloading, duties, taxes, and customs is covered by the buyer. As you can see, this nearly identical to how DDU worked.

Advantages and disadvantages of DDU

DDU has its pros and cons. Let’s go through them here.

The advantages for the seller is that DDU doesn’t require them to worry about the various costs and considerations that go into clearing items and getting them sent to the next location. As a result, the buyer can handle these parts. In theory, they should understand the part of import clearance and duties payments, even better than the seller.

However, when dealing with new business partners, this part could be another hurdle for them to get your goods into their warehouses.

The disadvantages of DDU depend on who is buying and selling the goods. Again, if the buyer is not comfortable with the process of paying for duties and everything related to importing the goods, it could damage the overall relationship between both parties.

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Sources used:

1. https://www.searates.com/reference/incoterms/ddu/
2. http://www.dutchcivillaw.com/legislation/incoterms2000.htm
3. https://www.trustpilot.com/review/wise.com