Difference Between The Incoterms: DDP Vs DDU



The way domestic shipping works is completely different from that of International shipping, as it involves a lot more complicated steps to carry out while shipping.

If you are either importing or exporting goods to another country, then you will have to adhere to certain set of rules and regulation that are imposed on the goods moving across the borders by the international chamber of commerce called as international commercial terms or Incoterms.

One such most commonly used Incoterms is DDP (Delivery Duty Paid) and DDU (Delivery Duty Unpaid). DDP and DDU can be either advantageous or disadvantageous to you. Hence, you need to understand how both the Incoterms work and then choose the best that suits your company.

Below are few of the instances which gives you a clear idea on which Incoterm to choose while doing international shipping:

  • DDP is the acronym of delivery duty paid. According to this, the seller is obliged to make the delivery of the product till the customer’s destination. Here the seller takes the risk and the amount corresponding to the shipping and the customs duties. Where as in DDU (Delivery Duty unpaid) the customer takes the risk of customs clearance, transportation and the shipping charges.

  • In DDP mode, the customer is at a lower risk compared to the seller as the liability of the entire shipment along with the custom clearance is under the seller and not the customer. On the contrary, in DDU mode, the risk level of customer is high compared to that of the seller.

  • Since the customer is unaware of the customs duties and taxes which would be charged on the shipment, the chances of the consignee rejecting the package are high, if the custom duties imposed on the package are higher than the cost of the package. This situation that does not intend to happen in DDP case.

  • If you are an Amazon.com seller and are using fulfillment services by Amazon, then you will have to send your products to the FBA only through  DDP mode. This is because Amazon.com does not entertain paying duty and taxes, hence the shipment will be returned to you, if sent through DDU mode.

  • Few of the sellers add the custom duties along with the shipping charges in DDP mode. Where as DDU can be advantageous to those consignees who are well aware of the customs clearances, as this can avoid paying high shipping charges.

  • If the package is being shipped through DDU mode and if the consignee makes a delay in paying the customs duties and taxes, then an extra storage fine will be imposed along with the duties and taxes.

  • DDP mode avoids the parcel rejection by the customers when the shipment is in the customs for clearance, as this can incur double duty charges and shipping cost to the shipper, if the shipper has to bring the shipment back to the origin.  

These are the outline of the pros and cons of the DDP and DDU mode of shipping. On the basis of this insight, you can decide upon how does it work for you and choose the best option which suits your business. It is advised to have the shipping terms mentioned clearly on the website or product page or any other sales touch points, so that the consignee is clear on the payment which he would be doing.

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