International Commercial Terms, also known as Incoterms, are set contractual terms designed by the International Chamber of Commerce to help importers and exporters determine who is responsible for paying which costs. Since shipping, storage, and customs fees can add up to tens of thousands of dollars, these terms are very important to decide in advance.
DDP (Delivered Duty Paid, or Delivery Duty Paid) is almost the same thing as DDU (Delivered Duty Unpaid, or Delivery Duty Unpaid.) However, with DDP terms, the seller is responsible for potentially thousands of dollars more. Bearing the cost of customs fees and duties can be worthwhile because it saves precious time.
Delivery Duty Unpaid
With the DDU terms defined by the International Chamber of Commerce, the seller pays for the shipment’s entire journey, but the buyer pays for all customs clearances duties or taxes. This requires the buyer to complete paperwork and arrange for a customs broker.
DDU carries a risk of significant delays if the buyer does not complete their end of the transaction on time. This risk is especially high if the buyer is inexperienced in dealing with customs or does not enlist the help of an experienced broker. This added variable makes DDU an undesirable option for many international shipping scenarios.
Delivery Duty Paid
DDP shipments require the seller to assume all responsibility for shipping, storage, customs duties, and other costs across all modes of transportation up until it reaches the buyer’s warehouse. This means that the DDP pays duties in advance, and any last-minute storage fees or other additions will be handled by a customs broker authorized by the seller.
The actual shipping process is the same for DDU as it is for DDP. However, DDP requires less action on the part of the buyer and the customs broker responsible for managing the shipment. Usually, the seller arranges for a freight forwarder with licensed customs brokers to handle the entire shipping process from start to finish.
Which One Should I Use?
DDP minimizes delays, making it the better option for shipping. However, DDP does assume some additional risk on the part of the seller. Any extra fees like administrative and storage costs will fall solely on the seller. If the seller is concerned about balancing the risk and costs, DDU Incoterms or Free on Board Incoterms can be used to share some of the risk with the buyer.
It’s wise to enlist the help of an experienced freight forwarder to help you decide which Incoterms to use. Even DDP Incoterms can run into difficulties without help from experts to help you navigate import customs clearance. Using incorrect tariff codes or insufficient paperwork can undo all the hard work you put into arranging and paying duties in advance.
Import and Export Specialists
Business ventures that cross borders are a unique challenge, but entrepreneurs and industry veterans have risen to the challenge as the world has changed. Even in times of crisis, the reliability of international shipping and customs brokerage support is what keeps goods moving to whoever needs them.
Asiana USA is an experienced freight forwarding specialist with services including drayage, customs clearance, and even perishables logistics. We are dedicated to providing the best customer experience possible, and put our knowledge and skills to use making sure you get your goods as quickly as possible in any scenario.
Since we can customize our services to provide exactly what you need, give us a call at (855) 500-1808 to talk about what we can do for you. Our team members can walk you through the best options for your unique business, based on what you’re importing or exporting and where it’s coming from.