For importers, exporters and those working with international clients, Incoterms are a great way to avoid misunderstandings and unexpected costs which can cause delays and client dissatisfaction. We have discussed EXW along with FCA and FOB and in our last discussion we covered the C-terms. That brings us at last to the D-terms or the delivery terms.
DDU (Delivered Duty Unpaid) and DDP (Delivered Duty Paid) are the main D–terms. In the 2010 version of the Incoterms, DAP (Delivered at Place) was added to bring clarity to the DDU term. For the purposes of this discussion we are going to say that it is most similar to DDU. There are some other D-terms, but they are used less frequently than DDU and DDP.
DDU does not include the Customs formalities, duties, or taxes. DDU does include the delivery to the door at destination and includes the origin and destination terminal handling charges. Further it should be noted that there is no specific instructions as to what party, the buyer or the seller, is responsible for the cargo insurance. It is critical to have this insurance discussion between you and your clients or vendors so that the goods are properly insured.
DDP does include the payment of the delivery to the door along with the origin and destination terminal handling charges. It also includes the duties, taxes, and the Customs entry process which contains all fees involved in those Customs formalities. It does not have specifics on what party is responsible for the insurance coverage and again, this discussion should be had so it is decided which party will be responsible to place and pay for the proper insurance coverage. When the charges are quoted, they generally do not include the cost of potential Customs examinations and/or demurrage and detention charges, but it is very important to understand they would be for your account if you have agreed to ship under DDP terms. Many countries also assess a Value Added Tax (VAT). It should be understood prior to quoting DDP the VAT is refundable to the registered party with the tax ID registration in place. In some areas, there could be local taxes due that would also be for your account and again, these need to be noted as you are the responsible party for the entire transport of the goods.
We certainly want to encourage our clients, vendors, and suppliers to become more familiar with Incoterms and use them on all of your international shipments. Please read up on all the terms and complete descriptions to understand your responsibilities.
If you have any questions, please contact us and you can speak directly with an export or import specialist.