Buying and selling goods internationally has never been more popular. Whether you’re a buyer or seller of products or services, it’s crucial to have a solidified awareness of the expected shipping practices of inventory or desired cargo. This guarantees that customers have a positive and streamlined experience and that items are effectively delivered to consumers. Especially for international deliveries that feature more complexities than a domestic freight, having a strong understanding of delivery and shipping procedures is key to making sure products are actually received and profits are gained in the process.
For those that commonly ship products internationally, it’s likely that you’ve come across the Incoterms “DDP”, “DDU”, and “DAP” shipping terms before. Shortly after World War I, there was a push toward mutual profitability among nations through international trade. The International Chamber of Commerce (ICC) was formed and Incoterms such as DDP and DDU were created to develop a stronger understanding of shipping practices and international commerce standards. We’ll explore the differences between DDP and DDU as well as:
- Delivery Duty Paid
- Advantages of DDP
- Delivery Duty Unpaid
- Advantages of DDU
- Delivery At Place
- Advantages of DAP
What is Delivery Duty Paid (DDP)?
DDP stands for Delivery Duty Paid within the ICC’s shipping jurisdictions. When consumers order a product to be delivered internationally, there are many steps between cargo packaging and receipt such as shipping fees, customs clearance, warehousing, and more. In a DDP arrangement, the seller assumes financial responsibilities for all transportation costs up until the point in which the consumer receives the product. Occasionally the seller will embed these charges within product prices or shipment fees for the buyer to partially cover, but will still be liable for any damages or losses before the delivery is received by the buyer.
In a DDP shipping agreement, the seller’s responsibilities that guarantee a successful delivery are to:
- Verify that all risks such as loss or damage to cargo are financially covered up to the location of the delivery.
- Handle export processes at the shipment location with all required protocol respected, such as providing permits and documentation as needed for specific cargo items.
- Assume any costs for customs clearance procedures at the delivery location. In the case of products being taxed due to a fluctuation in value (VAT), the seller will pay for any additional taxes as well.
- Check that products and goods arrive at the international location to properly cease liability.
- Assume financial liability for cost of transport from packing areas to delivery locations.
- Organize and establish carrier contacts with any and all carriage companies that assist with the delivery of cargo.
Advantages of DDP
DDP shipping services are an efficient way to build a strong direct relationship between buyer and seller, as DDP options take care of every step within international shipping. Some of the largest benefits of DDP shipping arrangements feature:
- Streamlined Process: Handling all transportation requirements in a cohesive manner allows freight forwarders some peace of mind and less unnecessary work. DDP services guarantee that the shipping entity handles cargo pickup, quality maintenance, necessary paperwork and costs, and finally the delivery logistics all under the same shipping agreement.
- Less Risks Involved: DDP agreements assume liability for cargo up until the products have been successfully delivered to the buyer’s door. DDP solutions have a streamlined freight process for international shipments so products are less likely to get lost or become unavailable to the consumer during transit.
- Financial Transparency: Another benefit of DDP services is that the final tally is known right when the customers places an order. All potential cargo taxes and fees experienced during the exporting process are already included prior to purchase. This makes receiving cargo much simpler for importers as they don’t need to be concerned about unexpected costs prior to receipt.
- Hands-Off Customer Experience: During a DDP shipping agreement, the buyer doesn’t need to worry about customs complications or additional shipping requirements after the cargo has arrived in the country of delivery. Goods arrive directly to their door, which is a huge draw for additional business.
What is Delivery Duty Unpaid (DDU)?
DDU shipping services vary slightly from DDP shipping procedures, with one major distinction separating the two Incoterms. While DDP shipping services will assure the cargo arrives at the buyer’s physical location after the cargo is imported, in a delivery duty unpaid shipping arrangement the seller is only responsible for ensuring the cargo arrives at the country’s drop-off location. The buyer then takes financial responsibility for any customs charges or transportation costs to arrange for the goods to arrive at their location.
DDU shipping and DDP shipping are very similar, but the lack of financial responsibility for the seller after the cargo arrives at the foreign location is the largest distinction between the two. Some of the key responsibilities of the seller in a DDU shipping service are to:
- Assume responsibility for providing licences, permits, and documentations needed for shipping to the buyer pickup location.
- Deliver buyer goods to the country of delivery.
- Assumes all financial responsibility for any damage, theft, or losses that occur within the shipment prior to cargo arriving in the delivery destination.
- Ensure that the buyer goods arrive at the specified location of the shipment.
- Pay for shipment charges for any transport fees regarding labour and loading costs. This can also include purchasing insurance for cargo.
- Provide the buyer with an update regarding successful deliveries.
Advantages of DDU
While DDP shipping may place more financial responsibility on the seller to successfully deliver cargo all the way to the delivery location, DDU allows the buyer to assume more control over their shipping procedures. Some of the most advantageous elements of a DDU shipping service are:
- Cheaper Options: DDP shipping services have contracted freight forwarders and shipping clients under the seller’s jurisdiction. There’s always the chance of cheaper shipping options that the seller is unaware of due to lack of experience with the country’s shipping services that the importer could access more easily.
- Avoid Legal Complications: As a seller, having the ability to take a step back from the shipping affairs of a foreign country certainly lessens the workload. While you’re responsible for getting the cargo there, DDU shipping allows the buyer who is already more aware of their country’s shipping standards to take financial responsibility, saving the seller money upfront.
- Supply Chain Visibility: Importers have scarce control over freight movement and supply chain transparency. There’s a limit to the amount of reporting you can access within a DDP shipping service, while in a DDU service you’ll be able to track every step of the cargo’s process from the moment it arrives in the country.
- Less Seller Control: Especially for international buyers that are looking to maintain a consistent inventory, having complete control over the transportation of products once they’ve been imported is often desired. Having the ability to control costs and learn of delivery delays quickly supports business growth and lets the seller take a step back from controlling the buyer’s business practices.
What is Delivered-At-Place Shipping (DAP)?
After learning more about DDP and DDU, you might be curious about what DAP shipping terms mean in comparison to them. DAP shipping, or Delivered-At-Place shipping is a trade arrangement in which sellers agree to assume financial responsibility for all costs and risks, absorbing all possible losses of transporting goods to a location. The contract in place leads to the seller being responsible for documentation, packaging, unloading charges, export approval, and delivery to the location, regardless of if it’s a warehouse, factory, or port.
The buyer assumes the cost and risk once goods arrive at their destination and are available for unloading. The buyer still pays for import duties, taxes, and unloading costs, and is expected to provide documentation to Customs and import the shipment to the given country. DAP shipping is a great arrangement for intermodal shipping. A DAP shipping arrangement allows for any transport mode to be used (ocean, land, rail, etc.), applying to any and all combinations of these transportation options.
DAP shipping terms might seem very similar to a DDP and DDU contract, and that’s because many people will use DAP and DDU shipping terms interchangeably. This is because for both arrangements, the seller responsibilities will be more involved than the buyers, such is the case for DDP. Essentially, in many cases DDU has been omitted in incoterms since 2010 by introducing the more favorable DAP shipping terms, which cover many of the same functions of DDU. As a merchant who handles freight shipping a great deal, it’s important to have a strong understanding of what the seller’s responsibilities include in a DAP shipping arrangement. For DAP shipping, the seller will be expected to:
- Handles all xport packaging/marking
- Provides goods, commercial invoice, documentation
- Provides export licenses and customs formalities
- Arranges details of pre-carriage and delivery
- Assumes financial responsibility for loading charges and pre-shipment inspection
- Coordinates the delivery to named destination
- Provides proof of delivery to the buyer
Advantages of DAP Shipping
While a DDP arrangement provides the buyer with more control over the shipping procedures, DAP shipping terms outline a contract that provides the seller with more control over the entire freight process. Similar to many of the advantages of DDU, some of the attractive features of DAP shipping includes
- Buyer Awareness of Accountability: With a DAP shipping arrangement, the buyer has the benefit of knowing who is responsible for any additional costs that incurred during the shipping process. According to the ICC, after the goods are accessible to the buyer, they are then responsible for any risks and losses connected with the cargo.
- Low Liability: DAP shipping terms also provide a low liability option and fairly broad contract for buyers who desire to transfer all risks associated with shipping onto the seller due to their reduced risk in buying goods.
- Cash Flow and Inventory Management: On the buyers side of the transaction. DAP shopping can help them with expensive commodities that need consistent restocking from sellers. Buyers can leverage a DAP shipping agreement with sellers where the seller takes care of the shipment and the buyer pays once the goods arrive at the destination. By reordering often, sellers can have a bonded warehouse at the buyer’s location, simplifying inventory management and streamlining cash flow between both parties. Buyers can place smaller orders and have them taken care of quickly this way.
ShipCalm Can Help with DDP, DDU and DAP Shipments!
Whether you’re a buyer or seller, it’s important to become aware of the differences between DDP, DDU and DAP Incoterms to determine the most cost-effective shipping solutions for your company’s needs. With many similarities but some key differences between a DDP and DDU arrangement, companies will vary in terms of which shipping service is best for their specific business model. As a trusted third-party logistics service, ShipCalm offers cost-effective shipping options for sellers that seek to focus on growing their business with streamlined supply chain management. Ship Calm works with many of the top eCommerce, EDI, ERP, and shipping companies to arrange third-party businesses to outsource their shipping logistics. Get a custom price from Ship Calm today to determine if a DDU or DDP shipping service is what your business needs to grow.