If you are importing goods and dealing with the DDU shipping incoterms with your supplier, then you need to read this guide, DDU shipping is not common compared with other incoterms like FOB or CIF.
But some people like it, so read this guide to understand deeply for this ship terms.
What does DDU mean in shipping terms?
The term DDU can be deciphered as Delivery Duty Unpaid.
DDU means that the seller meets all costs except taxes and duties of importing country.
In the case of DDU, the cost of goods includes all delivery expenses to the buyer’s door.
When title transfer takes place under DDU Incoterms?
None of the Incoterms covers title transfer and ownership fact.
The only thing that transfers under DDU Incoterms is the responsibility for products.
Does DDU Incoterms cover revenue recognition?
Remember, Incoterms are not written for revenue recognition and the ICC (The International Chamber of Commerce) guide specifically says that’s not what they do.
Keep in mind that Incoterms cover the supply chain delivery, transfer of risk and very little else.
How are risks reparated between parties signed for DDU Incoterms?
Under DDU terms, the seller has to provide you goods needed to be cleared in import on board of some vessel at your country.
This is the place where all the risks of loss and damage to goods transfer from the seller to the buyer.
So, after your products were delivered to the named port of destination and are ready for import customs clearance, you will be responsible to carry all risks connected with their loss.
What is DDU (delivery duty unpaid)?
DDU is commonly known as “Delivery Duty Unpaid” and has a considerable impact on the responsibilities of the seller.
For you the buyer, this shipping contract bears very minimal responsibilities.
Now, DDU shipping contracts define that a seller delivers goods to the buyer’s designated destination.
From this point onwards, the buyer becomes responsible for costs including transportation to final destination and insurance.
Everything prior is the seller’s responsibility except import processes.
Here, the buyer must bear the “taxes and fees” and the costs and risks caused by the failure to timely import and export goods.
This can, however, be negotiated so that the seller also goes through import formalities.
The negotiation can also include the seller bearing the costs and risk incurred, as well as the fees that should be paid when the goods are imported.
Note that whatever you agree upon should be stated clearly in the sales contract.
The incoterm DDU applies to all modes of transport.
Also, the DDU is a part of the initial set of incoterms known as Incoterms 2000.
In 2010, however, the international chamber of commerce made some changes to these terms.
Here, among others, the term DDU was tweaked to include the named destination place.
So currently, the official term that replaces DDU shipping is DAP “delivered at the place.”
In the contract, the term DAP is followed by the designated destination, i.e., DAP: Port of Memphis, Tennessee.
With that understanding, let’s now look at the specific obligations of the seller in DDU shipping.
Seller Obligations in DDU Shipping
As I said, DDU shipping has a huge impact on the responsibilities of the seller.
1. Provide goods as agreed in the contract
The seller must provide goods and commercial invoices or its equivalent in soft copy as per the terms of the contact.
He/she should also provide any other documents that the contract may require to ascertain the goods compliance with the contract.
2. Licenses and permits
The seller must bear the risks and expenses of obtaining the right licenses and other export documents.
He/she must also handle all customs formalities required for the export of goods and transit through countries where customs formalities are necessary.
The seller must bear all the risks and costs of transporting the goods from origin country to the designated destination.
If the buyer has not given a named place, the seller is free to choose a suitable destination to which he/she will deliver the goods.
4. Delivery of goods
The seller must deliver the goods to the buyer or other person designated by the buyer at the chosen location on the agreed date.
Note that the seller still bears all the risks of delivery.
5. Risk transfer
Unless stated otherwise, the seller must bear risks of loss or damage to the goods up to the designated delivery point.
6. Cost division
The seller must bear all costs incurred in the delivery of goods at the agreed place and time, and the customs expenses before delivery at the designated location.
7. Notify the buyer
The seller must sufficiently notify the buyer of the shipment.
He/she must also inform the buyer of any other information relevant to the delivery of the goods.
8. Proof of delivery and transport documents
At his/her own expense, the seller must provide the buyer with a bill of lading and the required shipping documents.
And, any other relevant documents that are necessary for the receipt of the goods upon delivery.
These other documents include;
- Negotiable bills of lading
- Non-negotiable sea waybills
- Air waybills
- Railway bills
- Road orders
If both parties agree that the documents be provided electronically, then all of the above shall be substituted with respective EDIs.
EDIs (electronic data interchanges) are equally suitable for use in this case.
9. Check, package, mark
The seller must bear all costs for checking the quality and quantity of the goods as they should meet the terms of the sales contract.
At his/her own expense, the seller must also provide the right packaging for goods.
Note however that some goods can be delivered without packaging, based on industry practices.
If this is the case, then the seller can forfeit this obligation.
- The seller can assist the buyer to obtain any necessary orders for import clearance at the destination country.
- At his/her own expense and risk, the seller must obtain and provide the buyer with all the relevant shipping documentation.
- In the case of insurance, the seller must provide all documentation required to obtain the insurance coverage.
- Or, transmit the same electronically if the buyer is okay with it.
Well, that’s it about the seller obligations in DDU shipping.
What of the buyer’s?
Let’s find out.
The Buyer’s Obligation in DDU Shipping
While DDU shipping doesn’t put much responsibility on the buyer, the little he/she has to do is crucial to the shipping process.
So here is what the buyer has to do:
1. Pay for goods
The buyer has to pay the agreed DDU price of goods as stipulated in the contract.
2. Licenses and permits
The buyer, at his own risk and expenses, has to obtain any import licenses and any other permits required for customs clearance.
He/she shall also take care of all customs procedures necessary at the importing country.
3. Receive goods
Once the seller delivers the goods at the agreed location, the buyer must receive them.
He/she can receive the goods personally or nominate someone else to do.
The latter must be stated in the contract.
4. Risk transfer
After goods have been delivered at the designated location, the buyer must assume all risks of damage or loss of the goods.
Note that it is the responsibility of the buyer to notify the seller on a suitable place and time of goods delivery.
Failure to do so will result in the buyer assuming all risks and responsibility of shipping from the date of agreed delivery or the expiration delivery period.
Also, if the buyer doesn’t obtain the necessary documentation, he/she shall bear the consequences that come with it.
5. Cost division
The buyer must pay for all costs accrued from the time goods are delivered to the named place of destination.
He/she shall also bear all the cost of customs clearances at the importing country as well as other charges related to the shipment from the time of delivery.
6. Notify the seller
The buyer has the first right of determining the suitable time and place of delivery of goods.
This is because DDU obliges the buyer to sufficiently notify the seller about this within the agreed time limit.
7. Proof of delivery and transport documents
The buyer must receive all the shipping documents that the seller provides as long as they comply with the sales contract.
And, if it’s agreed that electronic transmission is used to supply the documents then the buyer to be ready to receive them.
In case of any pre-shipment inspections that the buyer organizes, he/she must pay all costs.
The buyer is however under no obligation to bear any costs associated with inspections mandated by authorities in the exporting country.
Just like the seller, the buyer in a DDU contract must pay all costs incurred in obtaining importation documents.
He/she must also reimburse the seller of the costs incurred by the seller for assistance in obtaining the documents above.
Issues to be Aware of when Using DDU Terminology
Now, DDU as I already said is an international commercial trade term.
This together with 12 others were established help create a happy medium between the buyer and seller.
Without them, the buyer and seller would be at constant negotiation. As such, international trade would simply not be as efficient.
You need to understand that a generic standard set of rules are invaluable and can be thought of as cost-saving measure.
Once a term like DDU is agreed upon, the parties can continue without having to worry who is responsible for freight, insurance or other related costs in the shipping process.
Port of Guangzhou
But before that, DDU shipping is quite a comprehensive term and using it requires a lot of considerations.
It requires that both the buyer and seller fully understand its basics and application for successful shipping.
Among the many things that you have to keep in mind when shipping DDU are:
- DDU applies to trade between free trade zones or customs union countries.
This is because sellers deliver goods after customs clearance, and if they are not free trade zones or customs unions, the risks are high.
- If the buyer fails to obtain an import license or other official documents as required and handles the customs formalities as are necessary for the import of the goods, it shall bear all additional risks of damage or loss caused by the goods.
- DDU is the actual delivery , the seller bears the risk before delivery, so not only does the seller has to handle the transportation, but also to apply for insurance and pay the relevant fees.
- In DDU shipping, the risk and responsibility of the seller end once the goods have been available at the named destination.
The buyer’s risk and responsibilities start after receiving the goods at the named destination.
He/she becomes responsible for the clearance of goods at imports customs, payment of duties and shipping to final destination.
- The DDU terminology applies to any mode of transport.
DDU Shipping with BanSar
If you want to deliver goods from China to a specific port in your destination country, just let us know.
We will be happy to ensure that the goods are transported safely, timely and affordably to your chosen destination.
Don’t worry about anything.
We understand the stipulations of DDU shipping fully and are ready to execute them to our best knowledge.
So contact us now and let’s give you a free quote.
All you need to know about the DDU shipping term.
As you can see, each risk factor in DDU shipping has been defined so well.
Both parties can clearly understand what their obligations are.
There is simply no room for confusion or misunderstanding if one understands the DDU term well.
So, when you want to ship DDU from China to an international destination, make sure that you understand what the term means to you first.
This will help do away with any doubts or misunderstandings later on.
DDU Incoterms – The Definitive FAQ Guide
There is a lot of confusion when it comes to using Incoterms among inexperienced trade parties.
The reason is that such parties already have to deal with tons of paperwork, and it might be unclear from the first glance why you have to focus on Incoterms.
However, it is extremely important to determine the type of Incoterms with your supplier beforehand.
This guide is dedicated to one of Incoterms – DDU.
Read further to find out, what is DDU and how can you use it when buying goods from China.
Are DDU Incoterms still valid?
DDU rules were introduced to the publicity in the 2000’s version of Incoterms.
However, in 2010, the new set of rules were created which excluded DDU as a thing.
However, it doesn’t mean that you and your supplier can’t use them.
Let’s mention that Incoterms have recommendations spirit only, which means that you can use them as you think will be better for your business.
Following this rule, no one can disallow you to use old Incoterms.
What are the obligations of buyer and seller under DDU Incoterms?
- Arranges the goods and commercial documents as required by the sales contract.
- Arranges for export clearance.
- Fully pays all goods delivery expenses to the destination point.
- Assumes all risks associated with possible damage or loss of goods.
- Seller is obliged to notify a buyer that the goods have been delivered to the carrier and provide the buyer with correct arrival information.
- The seller has to provide the buyer with transport documents allowing the buyer to take possession of the goods at the named destination point.
- Buyer must pay the goods according to the sales contract.
- Buyer must have all commercial documentation, licenses, and authorizations required for import and arrange import clearance at own cost.
- Buyer must take delivery of the goods after they have been transported to the named destination point.
- Buyer must assume all risks for the goods as soon as the goods have been delivered at the named destination point.
- Buyer pays for all costs of transportation, import customs formalities, as well as all duties from the time the goods have been transported to the named destination point.
- Buyer must accept the seller’s transport documents if they accommodate the sales contract and will allow the buyer to take possession of the goods after delivery to the named destination point.
Who will pay the freight charge, local destination, and destination charge if the Incoterms is DDU?
Under DDU Incoterms, all charges connected with the transportation of cargo to the named point of destination will be on the supplier’s side.
However, such goods will be not cleared in customs, so you won’t be able to order this cargo to your doorsteps for example.
This means that after you clear these goods in your country, you’ll have to pay for their later delivery to your premises.
Which Incoterms to choose: DDU and DAP?
At the checkout stage, it seems cheaper to use DDU. DDU does not imply processing fees linked with the duty that the seller must pay.
But it is the seller’s responsibility to inform the customer that duties will apply when the freight arrives in customs.
Often, a customs payment request becomes a surprise to customers.
In this case, customs will contact an independent customs broker and forward them the duties package.
This leads to additional costs.
DAP fees are fixed and can be 3-4 times cheaper than DDU brokerage fees.
Additionally, DAP reduces the chances that customers will abandon goods in customs.
This prevents you from paying additional costs for saving the goods.
What is the difference between DDU and DDP Incoterms?
DDP term stands for Delivery Duty Paid.
DDP means that the seller arranges to pay for import duties and taxes in advance, such as a Goods and Services Tax (GST).
So If you’re using DDP, goods can be released for last-mile delivery immediately upon clearing customs.
It is opposed to DDU goods where the item could be held at customs until the relevant duties and taxes are paid.
Another key difference is that in the case of DDU seller meets all delivery expenses except GST (general sales tax) in importing country.
In the case of DDP seller must pay for GST and other import expenses.
DDU and EXW Incoterms: how are these two correlate?
EXW (Ex Works) is the simplest of Incoterms.
Under these rules, the seller fulfills his obligations when he provides the goods at his enterprise or in another specified place (for example a factory, warehouse, store, etc.).
In practice, if you buy from a Chinese supplier, you have to be ready to pick up your goods from his premises in China.
EXW is always the cheapest contract because the seller is obliged to do practically nothing to deliver your goods.
However, it is also the way with the most hassle for you, because all the following processes (e.g. transportation to your country, customs clearance, etc.) will be on you.
What is the difference between DDU and CIP Incoterms?
The seller’s DDU delivery obligations are deemed to be fulfilled after he delivered the goods at the disposal in the country of the importer.
The CIP (Carriage and Insurance Paid to) incoterms means that the seller pays the freight to the destination and pays the minimum shipping insurance.
In the case of CIP, the buyer bears the risks for the goods from the moment he obtains the goods from the seller.
In the case of DDU, the seller bears the risks to the place specified in the delivery.
How DDU and CPT Incoterms differ?
iI case of CPT (Carriage Paid To), the seller fulfilled its obligations by transferring the goods to the carrier (confirmation of which is a bill of lading or similar document).
If the goods are damaged or destroyed during transportation, the buyer shall bring an insurance claim.
In the case of DDU, the seller fulfilled its obligations when the goods are delivered to the buyer at the indicated place.
If the goods are damaged or destroyed during transportation, the seller meets all costs.
DDU and FOB Incoterms: how to differ them?
FOB stands for Free on Board.
FOB terms state that the seller has completed the delivery when your goods get on board of certain vessel at the country of origin.
The risks under FOB terms transfer at the same time.
Basically, FOB and EXW terms are quite similar: as a buyer, you have to carry out the delivery from China by yourself.
What is the difference between CIF and DDU Incoterms?
Cost, Insurance, and Freight (CIF) are easy to understand.
Actually, the answer to it lies in the name: under CIF terms the supplier has to pay all costs connected with the freight and insurance.
In particular, the supplier has to pay all fees and duties connected with export customs clearance and delivery to your country, as well as with minimal insurance for your cargo.
But, keep in mind that the CIF terms don’t oblige the supplier to clear goods in your country.
It would be fair to mention that under DDU Incoterms you have to proceed through import clearance procedure as well.
What kind of Incoterms 2010 can be used instead of DDU?
As it was said earlier, Delivered Duty Unpaid (DDU) was actually not included in the most recent (2010) edition of the International Chamber of Commerce’s Incoterms.
The current official term that best describes the function of DDU is Delivered At Place (DAP).
However, DDU is still commonly used in international trade sphere.