What is Delivered Duty Unpaid (DDU)?
– Delivered Duty Unpaid (DDU) is a shipping arrangement in which the seller is responsible for getting goods to an agreed destination and bears the transportation risk and costs up to delivery. The buyer is responsible for import formalities at destination, including paying customs duties, taxes, and any further local transport or unloading costs required to take possession.
Key terms (defined)
– Incoterms: standardized international trade terms published by the International Chamber of Commerce (ICC) that allocate costs, risks, and tasks between buyer and seller.
– Customs duties (duties): government charges applied to imported goods, generally a percentage of declared value.
– Customs clearance: the process and paperwork required for importing goods (including paying duties/taxes and inspections).
– DPU (Delivered at Place Unloaded): an Incoterm where the seller must also unload the goods at the named place.
– DAP (Delivered at Place): the current official Incoterm that most closely corresponds to the old DDU term; the ICC replaced DDU with DAP in 2010. DDU is still used colloquially.
How DDU works — step by step
1. Contract naming: Sales contract lists “DDU” (or, under current Incoterms, the equivalent DAP) plus the exact delivery place (e.g., “DDU: Port of Los Angeles”).
2. Seller’s responsibilities:
– Arrange and pay for export procedures, international transport, and delivery to the agreed place.
– Bear risk and cost in transit until goods reach the named destination.
– Provide required shipping documents and an invoice.
– Seller is not obliged to insure the goods (insurance optional unless agreed).
3. Buyer’s responsibilities on arrival:
– Arrange and pay for import customs clearance (duties, taxes, inspections).
– Pay any local handling/unloading and onward transport beyond the named delivery point.
– Accept the risk once goods are delivered to place and available for unloading.
4. Transfer of risk: seller’s risk ends at delivery to the named place; buyer’s risk begins there and includes customs actions.
Seller vs. buyer responsibilities (concise checklist)
Seller (under DDU/DAP)
– Export licenses and formalities: yes
– International freight to named place: yes (cost and risk)
– Insurance: not required (optional unless agreed)
– Unloading at destination: generally not required unless specified (DPU requires unloading)
– Pay import duties/taxes: no
Buyer (under DDU/DAP)
– Import licenses and formalities: yes
– Pay import duties, taxes, and inspection fees: yes
– Unloading and local delivery beyond named place: yes (unless contract assigns otherwise)
– Assume risk after delivery at named place: yes
DDU vs DDP — main difference
– DDU: buyer pays import duties, taxes, and clears goods at destination.
– DDP (Delivered Duty Paid): seller is responsible for import duties, taxes, and customs clearance — the seller effectively bears almost all costs and risks until goods are handed over cleared for import.
DAP vs DDU
– DAP (Delivered at Place) replaced DDU in the ICC Incoterms in 2010 and is the modern official equivalent. Many traders still use “DDU” in practice, but for formal contracts it’s preferable to use current Incoterms language (DAP, DPU, DDP, etc.).
Pros and cons of DDU (practical)
Pros for buyers
– More control over import process and local carriers.
– Potentially lower total landed cost if buyer can arrange cheaper clearance or benefit from local tax rules.
Pros for sellers
– Simpler: seller’s obligation ends at delivery to named place without handling foreign import formalities.
– Avoids exposure to unpredictable import duties or tax regimes.
Cons for buyers
– Risk of unexpected duties, taxes, or fees on arrival that raise total cost.
– Administrative burden of customs clearance and potential delays.
Cons for sellers
– Risk of customer dissatisfaction if buyer refuses to pay duties and shipment is returned or delayed.
Worked numeric example
Assumptions (illustrative only)
– Goods value (invoice price): $10,000
– Seller-paid international freight to destination: $1,500
– Import duty rate: 6% of goods value
– Import VAT: 12% applied to (goods value + duty)
– Local unloading/handling fee on arrival paid by buyer: $150
Under DDU (buyer pays duties/taxes)
– Seller pays: freight $1,500 (and export formalities)
– Buyer pays on arrival:
– Import duty =
Import duty = 6% × $10,000 = $600.
Import VAT = 12% × (goods value + duty) = 12% × ($10,000 + $600) = 12% × $10,600 = $1,272.
Local unloading/handling fee (paid by buyer) = $150.
Total paid on arrival by buyer under DDU = duty $600 + VAT $1,272 + handling $150 = $2,022.
Summary of cash flows (illustrative)
– Seller pays: international freight to destination $1,500 (and export formalities). Seller receives the invoice price for the goods ($10,000), but their net cash effect is reduced by the freight cost $1,500 unless that freight was bundled into the invoice price.
– Buyer pays on import: $2,022 at arrival. Buyer’s total cash outlay = invoice price $10,000 + arrival payments $2,022 = $12,022 (not including any downstream costs such as domestic transport after unloading).
Compare to DDP (Delivered Duty Paid) under same assumptions
– If seller agrees to DDP, seller would pay duty $600 and VAT $1,272 (and the $1,500 freight already). Seller would also normally arrange customs clearance. Buyer would pay only the local unloading/handling $150 on arrival (or possibly nothing if the seller handles unloading).
– Net cash effects (illustrative):
– Seller pays freight $1,500 + duty $600 + VAT $1,272 = $3,372 in addition to any goods cost.
– Buyer pays invoice price $10,000 and minimal arrival costs (here $150), so buyer’s total ~ $10,150.
Key assumptions and notes
– VAT here is assumed non-recoverable by the importer; in many jurisdictions registered businesses can reclaim VAT, which changes the practical cash burden.
– Duty is calculated only on the goods value in this example; some countries use a broader customs value (including freight and insurance) when calculating duty.
– Real-world costs can include customs broker fees, storage, demurrage, penalties for incorrect documentation, and local taxes other than VAT.
– Incoterms rules define responsibilities; commercial invoice wording, contracts, and local customs law determine precisely who pays what and when.
Practical checklist for sellers choosing DDU vs DDP
– Estimate all import taxes and duties for destination country; confirm calculation basis (CIF, FOB, etc.).
– Check whether buyer can reclaim VAT (business vs. consumer).
– Consider using a customs broker and get quotes for clearance fees.
– Decide who handles delays, returns, and nonpayment of duties — document in the contract.
– If offering DDP, build duties/taxes into the price or require prepayment.
Practical checklist for buyers receiving DDU shipments
– Confirm who will clear customs and whether you need to appoint a broker.
– Have funds ready to pay duties/taxes upon arrival to avoid demurrage.
– Verify whether VAT is recoverable for your business.
– Inspect paperwork for correct HS codes and valuation to avoid delays or extra charges.
Reputable resources
– Investopedia — Delivered Duty Unpaid (DDU): https://www.investopedia.com/terms/d/delivereddutyunpaid.asp
– International Chamber of Commerce (Incoterms rules): https://iccwbo.org/resources-for-business/incoterms-rules/
– U.S. Customs and Border Protection — Importing into the United States: https://www.cbp.gov/trade/basic-import-export
– European Commission — Taxation and Customs Union: https://taxation-customs.ec.europa.eu/
Educational disclaimer: This explanation is for educational purposes only and is not individualized legal, tax, or investment advice. For specific transactions consult a customs broker, tax advisor, or legal counsel.