In international trade, choosing the right delivery terms is crucial, as it directly affects the responsibilities, risks and costs of both buyers and sellers. DDU (Delivered Duty Unpaid) and DDP (Delivered Duty Paid) are two common delivery terms. The following will introduce the difference between the two in detail.
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Definition of DDU and DDP
DDU (Delivered Duty Unpaid)
DDU means that the seller transports the goods to the buyer’s designated location, but is not responsible for import duties and taxes, and the buyer is responsible for customs clearance. The seller is responsible for transportation and export customs clearance, but the buyer needs to handle import customs clearance and pay relevant duties and value-added tax.
DDP (Delivered Duty Paid)
DDP means that the seller is responsible for transporting the goods to the buyer’s designated location, completing all customs clearance procedures, paying all import taxes and fees, and ensuring the delivery of the goods. The buyer does not need to deal with any customs clearance-related matters, just wait for delivery.
Differences in the Customs Clearance Process
DDU customs clearance process:
- The seller arranges the export of goods and transports them to the buyer’s country.
- After the goods arrive at the destination port, the buyer needs to arrange customs clearance.
- The buyer pays the import taxes and fees and completes customs clearance.
- After the goods are cleared, the buyer can arrange to pick up or deliver them.
DDP customs clearance process:
- The seller arranges the export of the goods and transports them to the buyer’s country.
- After the goods arrive at the destination port, the seller arranges import customs clearance and pays all taxes and fees.
- After the goods are cleared, the seller is responsible for the final delivery to the buyer’s address.
The Difference Between DDU and DDP
Below is a condensed overview comparing the key responsibilities under both Incoterms:
| Responsibility | DDU (Delivered Duty Unpaid) | DDP (Delivered Duty Paid) |
|---|---|---|
| Official Incoterm Status | Replaced by DAP in Incoterms, still used informally | Official Incoterm (valid in Incoterms 2020) |
| Export Customs Clearance | Seller | Seller |
| Main Transport Costs | Seller | Seller |
| Import Customs Clearance | Buyer | Seller |
| Import Duties & Taxes | Buyer | Seller |
| Risk Transfer | Generally transfers at named destination but before import clearance is done | Transfers after the goods clear customs and arrive at the buyer’s site |
| Final Delivery | Seller up to the destination; buyer must pay customs fees to receive goods | Seller delivers goods fully cleared to buyer’s premises (or agreed location) |
| Cost Visibility | Lower invoice, but additional local fees | High invoice, but near-zero surprises |
Applicable Scenarios of DDU and DDP
Choose DDU:
- The buyer has a professional customs clearance team, is familiar with the import customs clearance process, and wants to control import costs.
- The buyer has a good relationship with the local customs and can quickly clear customs.
- The value of the goods is low, and the import duties and taxes are low.
- The customs duties and VAT in the buyer’s country are high, and the buyer hopes to optimize taxes in his own way.
- The buyer hopes to flexibly choose a freight forwarder or customs clearance company to reduce costs.
- The buyer has long-term and stable import channels and experience.
Choose DDP:
- The buyer wants to simplify the procurement process and avoid delays caused by customs clearance issues.
- The goods belong to a special category and require the seller to handle special customs clearance.
- The buyer wants to ensure that all costs are transparent and avoid additional costs.
- The buyer is not familiar with the import customs clearance process or wants to simplify the transaction process.
- The value of the goods is high, and the import duties and taxes are high.
- The seller has a branch or partner in the destination country and can assist with customs clearance.
How to Choose the Right Freight Forwarder
Understand the freight forwarder’s experience
Choose a freight forwarder with rich DDU/DDP operation experience, especially one with a good customs clearance network in the target country.
Track the status of the goods
Track the status of the goods transportation in a timely manner and keep in touch with the freight forwarder to ensure that the goods arrive safely and on time.
Ask about cost transparency
Ask whether the DDP quotation includes all taxes and fees to avoid hidden fees later.
Check customer reviews
Choose a reputable freight forwarder to avoid cargo detention due to improper customs clearance.
Understand the policies of the destination country
Choose a freight forwarder who is familiar with local regulations to avoid risks caused by customs clearance not complying with regulations.
The above summary shows that choosing appropriate transportation terms can ensure smooth transportation and efficient customs clearance, thereby reducing overall logistics costs and improving trade efficiency.