International business transactions requiring the delivery of goods can result in misunderstandings if the sellers do not clearly agree on terms in advance. The International Chamber of Commerce (ICC) developed the International Commercial Terms, or Incoterms, to give all parties in a transaction clear sets of rules for which costs a buyer or seller is responsible for paying.
Two of the most popular Incoterms for international trade are DDU and DDP. DDU means Delivered Duty Unpaid or Delivery Duty Unpaid, and DDP means Delivered Duty Paid or Delivery Duty Paid. However, the division of responsibilities and effects on shipping timelines are not always clear from these basic names.
Who Pays Customs Duties?
Both DDU and DDP require the seller to take full responsibility for damage or loss during any transportation route until the agreed-upon destination. However, DDU terms place the responsibility for paying customs clearance duties or taxes solely on the buyer. While the seller pays shipping charges, insurance costs, and other international shipping fees, the buyer must pay the destination country’s actual duties.
DDP terms require the seller to pay for the duties and taxes in addition to all other fees and costs associated with shipping. All the buyer has to do is wait for the shipment to arrive.
With DDP shipments, sellers may charge slightly more to recoup the cost of duties and other fees. However, they are still responsible for paying the appropriate parties on-time and with no delays.
The seller also has to absorb any unexpected costs, even if the duties are much higher than expected. If there are paperwork-related delays at customs, the seller is also responsible for any storage or additional administrative fees.
One of the perks of DDP shipping is that the import customs clearance process becomes more straightforward. It takes the guesswork out of cross-border shipping by putting all logistics into the seller’s hands and the seller’s designated agent, like a shipping agent or freight forwarder.
DDU shipments can still arrive on-time if the buyer is experienced in importing and has a relationship with a good customs broker. However, any delays could end up straining the relationship between the buyer and the seller, even if the delay isn’t the seller’s fault.
Not all countries make DDP shipping easy, and in some cases, DDU shipping may be the only feasible option. However, for importing into the U.S. and North America, DDP and DDU shipping are viable options.
Using a Freight Forwarder
Freight forwarders help sellers navigate the intricacies and occasional changes to DDP and DDU shipping. They take care of the logistics required for DDP shipping, including working with customs brokers to ensure all duties and taxes are paid as quickly as possible. Using a freight forwarder makes subsequent connections to drayage and intermodal shipping hubs as seamless as possible.
Freight forwarders can also help with DDU shipping. The seller’s freight forwarder is responsible for everything up to the customs clearance process, where the buyer’s freight forwarder or customs broker takes over. In many cases, the responsibility for the goods transfers back to the seller’s freight forwarder if further transportation over land is required.
Gaps in communication can occur and cause delays, so it’s ultimately best for a single freight forwarder to handle the whole process using DDP terms. The cost incurred by the seller often pays for itself by establishing a healthier business relationship with the buyer.
Providing Reliable Freight Forwarding
Asiana USA handles a full range of shipping logistics, including freight forwarding, perishable shipping, drayage services, warehouse and fulfillment services, and more. We work with multiple types of Incoterms to provide you with customized solutions, whether you ship large quantities regularly or need to send a one-time large shipment.
We can help you figure out the best combination of services to keep your goods moving with as few delays as possible. Call our team today at 855-500-1808 to learn more about what we can do for you.