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DDP vs DDU – What do they stand for?

Question:

DDP / DDU?? What is the benefit of each method?

Why should I choose DDP and not DDU or other way around?

I read so many different agenda on that regard and hopefully someone can give me with relevant info.

Answer:

Lets start by definition:

DDP - Delivery duty paid.

DDU- Delivery duty unpaid

Both DDP & DDU are a common shipping method developed by the International Chamber of Commerce which helps to standardize shipping options throughout the world. 

Many companies will only use DDP when shipping goods by air or sea freight. Sellers benefit heavily from DDP because they assume less risk, liability, and costs. Although DDP is a good deal for the buyer, it may be a big burden for the seller because it can quickly reduce profits if handled incorrectly. 

Due to the complex rules associated with international shipping and each country having its own set of rules and laws for customs formalities, DDP is best for high-value items (i.e., an average order value of greater than $30). Incoterms are internationally recognized shipping terms. These incoterms include DDP shipping being a common practice when shipping across borders.

What is delivered duty paid (DDP) shipping?

Delivery duty paid (DDP) shipping is a delivery agreement between buyers and sellers that places the risks and responsibilities of transportation on the seller until the buyer receives them. With DDP, buyers are not liable for the actual shipping costs, making them more likely to purchase products without fear of being scammed or having to pay high taxes.

Incoterms: DDP vs. DDU

So what are they and what’s the difference?

The difference between DDP and delivery duty unpaid (DDU) is that DDU requires the seller to pay the duties incurred once the cargo enters to the destination country and per import summary according to HTS code of the product and goods value.

DDP is considered the better customer experience, as it is a cross-border option that takes all fees into consideration upfront.

Why is DDP used?

  1. Know your total cost upfront with no surprises

Main advantage using DDP method compared to DDU is by knowing in advance and prior to pick up of the cargo your total logistics overall cost.

  1. Having better overall cost for products that has high duty % ration apply on their product

Generally speaking DDP method can be a great solution to minimize duty cost for products that has high duty % ratio apply on the product itself.

Ship goods under DDP can save significant $$ for clients that produce products with high duty %.

So why should I ship as DDU if my overall cost are better under DDP??

When perform a shipment under DDP- the seller will not receive an import summary which is the only clear indication by any customs authorities and the authorities in general that you performed an import to any country.

As a seller perhaps you more focus on PPC / sales/ product pictures etc’ but eventually you are act as an importer and perform a logistics import process.

Without an import summary as a seller you do not have any proof that you import the goods to a destination country and in some day the authorities upon you import goods too can request an import summary as an indication / proof that goods has been performed correctly.

Not having an import summary is a risk that sellers need to understand and decide accordingly if they prefer working under DDP or DDU.