Incoterms® are a set of rules for trading internationally, issued by the International Chamber of Commerce (ICC). They set out the responsibilities of buyers and sellers for things like loading and unloading, insurance, carriage, freight costs and so on.
One of the Incoterms® you may have come across is DDU, which stands for Delivery Duty Unpaid. You may also see this written as Delivered Duty Unpaid.
In short, it stipulates that the seller is responsible for delivering goods to the destination, with the buyer handling arrangements and costs for the rest of the delivery. The risk is shared fairly evenly between both parties.
A crucial point to note is that DDU is an old Incoterms® rule, which wasn’t included in the 2010 or the 2020 update of the rules. You may still see it in contracts, but it’s not recommended to use it. For maximum clarity between buyer and seller, it’s best to use the updated rules.
The closest of the new Incoterms® that best covers the same functions of DDU is DAP, which stands for Delivered-at-Place¹ – but more on that later.
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The old Incoterms® DDU rule was used to describe terms where the buyer and seller share the risks of delivery almost equally between them. Delivery Duty Unpaid refers to the duty and taxes due in the country of importation.¹
Under Incoterms® DDU, the seller or supplier is responsible for licenses, documentation and freight costs relating to shipping the goods to the agreed destination. They will also have the full risk burden of damage or loss to the goods during the journey, so are likely to have insurance too.
The seller delivers the goods to the agreed destination, and at this point responsibility for all costs and legalities passes to the buyer.
The buyer now takes on the burden of risk, as well as paying import duties and taxes, unloading and delivery costs. They will also have to handle the customs formalities in their country. ¹
If a contract was signed using Incoterms® DDU, this meant that the seller was legally responsible for covering the costs of freight. This is because the transportation of the goods is the seller’s responsibility all the way up to the point the goods are dropped off at the port of origin.¹
Incoterms® DDU is sometimes confused with another of the rules – Incoterms® DDP. This stands for Delivery Duty Paid.
Unlike DDU, Incoterms® DDP is still an active rule as per the 2020 update by the International Chamber of Commerce. It has one key difference – where DDU requires the buyer to cover import duties and taxes in their country, DDP puts this obligation on the seller.²
This means that the seller has to cover all costs, documentation and formalities for transporting the goods, including import duties, until the buyer takes over at the port of origin. The buyer will pick up at the unloading stage, when the goods have arrived at their destination.
DDP is similar to DAP, the rule now used instead of DDU. This stands for Delivered-at-Place, a rule which can be used for any mode of transport and works in much the same way as the outdated DDU.
DAP stipulates that the seller will deliver goods to the agreed destination, while unloading, duties, taxes and customs is handled by the buyer.³ As you can see, this is almost identical to how DDU worked.
It can take some time to get your head around all of the different Incoterms® rules, especially those like DDU which have been replaced by new rules over the years. But it is crucial knowledge to have if you’re involved in international shipping.
After reading this guide, you should now have a better idea of what DDU is (and isn’t) and the alternative rule to use now that DDU has been dropped from the official Incoterms® list.
Sources checked on 18-June 2020.
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