When it comes to business, there are specific terms that guide it. For example, the DDU and the DDP terms/concepts are one of the most talked-about and for the right reasons too. Because of their massive influence as terms of trade, it doesn’t come as a surprise why the discrepancies between DDP vs. DDU are now the talk of the town.
It is essential to mention that both concepts are terms of trade/business, and so, they have specific roles they perform when it comes to easing the ways of doing business.
Therefore, it would be ideal for explaining both terms before looking at the differences that exist between them.
What Is DDP?
Delivery Duty Paid, otherwise known by the acronym “DDP,” is a shipping terminology/incoterm that entails that the seller of goods/products will have to foot the entire bills required for the shipment of the goods/products to the buyers.
To that end, the concept of Delivery Duty Paid (DDP) means that the sellers will have to bear the risks, pay the entire fees, and do all they can to ensure that the goods/products get to the buyers in good condition.
When we look at the complete expenses to be footed by the sellers, it is clear that they are huge. For example, the sellers have to pay the duty or tax under goods, and all other fees that will aid in the successful delivery of the goods/products.
What is DDU?
Delivery Duty Unpaid (DDU), which is also called DDU Shipping, is a shipping model that is the direct opposite of the Delivery Duty Paid (DDP).
Contrary to the DDP model, where the seller is responsible for the entire charges, the DDU Shipping model implies that the buyer or receiver of the goods/products is responsible for paying the whole fees.
Hence, if the seller didn’t pay off the fees before shipping, the responsibility for the payment will fall on the buyer/receiver.
Exceptions to DDP vs. DDU
However, there may be instances for exceptions in the DDP vs. DDU shipping models. Such exceptions are commonplace when the seller decided to include the duties and fees at checkouts.
In such cases, the added duties will then be sent across to be collected from the receiver/buyer before the DDU shipping can be released.
The Implications and Key Takeaways of the DDP and DDU Shipping
The first point to note here is that going by the specifications of the International Chamber of Commerce, DDP and DDU are Incoterms. That also means that both of them are essential in the success or failure of the global e-commerce trades.
The second and the most important takeaway is that the seller has key roles to play; whether it is for the DDP shipments or the DDU shipping. Here, the concentration is that in terms of the DDP terms, the sellers of goods/products will be responsible for handling the payment of the duties on the goods before the same can be brought into the destination country of the buyer.
However, things may take a different shape when it comes to the DDU terms. In this instance, the seller’s responsibility in the entire shipping process is to ensure that the goods/products safely arrived at the buyer/receiver’s destination country. Once that has been made possible, the buyer will be contacted to foot the bills of the import customs clearance.
The last but not the least is that the International Chamber of Commerce has since renamed and replaced the DDU shipping commercial terms. Now, DDU that has been hitherto used solely in transportation contracts has been replaced with a more robust term called “Delivered-at-Place (DAP.) The idea is to posit that the international trade and cross border activities carried out based on DDU can only be completed after the buyer/receiver has paid the customs duty and taken the delivery.
Which Is Better – DDP or DDU?
So, which is the better of the two? Should the Delivery Duty Paid (DDP) be used instead of the Delivery Duty Unpaid (DDU)?
Read on to discover which of the two will help further the opportunities your business may have in the international business market.
DDP Is Costlier
For a business like yours that is looking to cut down on costs, using DDP can be one of the ways to increase your expenses. That is because you, as the seller, will be bearing many of the expenses, such as the duties paid to the customs and other underlying fees.
Besides, the seller tends to pay additional fees when the buyers/receivers fail to come to pick up or claim their goods.
DDU Can Take Buyers Unawares
Using the Delivery Duty Unpaid (DDU) can save your business some costs, but it can also have negative impacts on your customer experience.
That is because many customers may not even be aware that there is a customs duty to be paid. So, by the time the customers figure out, it may be late, and they may be short of cash to make the payments.
DDU Bolsters Shipment Abandonment
You have succeeded in reducing your shopping cart abandonment figures by making use of a robust international trade model to get customers to buy from you.
However, if you stick to using the Delivery Duty Unpaid (DDU) model, you tend to trigger an increase in shipment abandonment. It is possible because many customers may be short of cash to pay the customs duty.
Besides, when the customers abandon the shipment, the shipment company/courier tends to return the shipment to you at an additional fee.
DDP Increases Customer Satisfaction
If you can afford to pay the duties, do so because it has a way of increasing your customers’ satisfaction.
As you already know, “a happy customer is a returning customer.”
Tips on Communicating the Shipment Conditions
Because you do not want to take your customers unawares by their responsibility to pay the import customs clearance, you must inform them on time. That will also help you figure out if it is better to continue with the delivery or not.
Some of the channels to communicate the conditions for the shipment include but are not limited to:
- On your page’s FAQ page
- Product pages
- State the shipment conditions in your “Shipping Policy” page
- Email confirmations before shipment
DDP Is Better
The Delivery Duty Paid (DDP) shipment model is the better of the two. It does not only help to stop taking your customers unaware; it also makes sure that the customers wouldn’t abandon the shipment, thereby forcing you to pay the additional fees for returning the shipment to you.
For the successful implementation of the Delivery Duty Paid (DDP) in cross border trades, we advise that you use the tips above to increase your customer experience.