Among the historically significant terms, DDU Incoterms was widely used, establishing a clear division of duties. The term DDU (Delivered Duty Unpaid) was officially removed from the Incoterms rules in the 2010 revision and is now functionally replaced by DAP (Delivered at Place). While DDU may still be cited in old contracts, industry best practice mandates using the current Incoterms 2020 rule, DAP. Understanding the old DDU Incoterms is essential for clarity when dealing with older agreements.
What is DDU Incoterms (Delivered Duty Unpaid)?
DDU is a legacy Incoterm specifying that the seller fulfills their delivery obligation when the goods are made available to the buyer at the named destination typically the buyer’s premises or a specified terminal in the destination country.
The core principle of DDU Incoterms is its allocation of customs responsibilities: the seller covers all costs and risks associated with bringing the goods to the destination (excluding unloading), but the buyer assumes responsibility for all import duties, taxes, and customs clearance formalities. The term “Unpaid” in “Delivered Duty Unpaid” refers precisely to these import charges.
The Shift from DDU to DAP Incoterms 2020
The International Chamber of Commerce (ICC) replaced DDU Incoterms with DAP and later added DPU (Delivered at Place Unloaded) in Incoterms 2020 for simplification and better clarity. For practical purposes in most contracts today, when a party intends to use a DDU Incoterms structure, they should formally use DAP Incoterms 2020.
Obligations Under DDU Incoterms (Mapped to DAP)
The allocation of responsibilities under the original DDU Incoterms rules is nearly identical to the current DAP Incoterms 2020 rule. This table outlines the division of duties and costs.
| Area of Responsibility | Seller’s Obligation | Buyer’s Obligation |
| Export Formalities | Arranges and pays for all export customs clearance, licenses, and security. | Provides necessary information to the seller for export. |
| Main Carriage | Contracts and pays for transport to the named place of destination (e.g., buyer’s warehouse). | N/A |
| Risk Transfer Point | Bears all risk of loss or damage until the goods are delivered at the named place. | Bears all risk of loss or damage from the moment of delivery at the named place. |
| Delivery | Delivers the goods, ready for unloading, at the named place. | Unloads the goods from the arriving means of transport. |
| Import Formalities | N/A | Arranges and pays for all import customs clearance, duties, taxes (VAT), and other official charges. |
| On-Carriage | N/A | Arranges and pays for any further transportation or distribution from the named place. |
Critical Point of Risk Transfer
In a DDU Incoterms arrangement, the risk of loss or damage transfers from the seller to the buyer the moment the goods are placed at the disposal of the buyer on the arriving vehicle, ready for unloading, at the agreed-upon named place of destination.
Why Use the DDU Structure (Now DAP)?
Choosing the DDU Incoterms structure (DAP) offers distinct strategic advantages, especially when dealing with specific markets or commodities. It’s a balance of effort and control that requires a mature understanding between the seller and buyer regarding import operations.
Strategic Rationale for Adopting DDU/DAP
The primary reason businesses opt for the DDU/DAP model is to leverage the buyer’s local expertise. By pushing the complex liability of import clearance onto the buyer, the seller simplifies their export process and avoids exposure to variable, high-risk costs in a foreign country. This structure is often preferred in customized or high-value B2B trade where the buyer already has established customs procedures and strong relationships with local brokers.
Strategic Advantages of DDU/DAP for the Buyer
- Cost Control over Import Duties: By handling import clearance, the buyer can utilize their own customs broker, often negotiating better local rates or accurately utilizing special import schemes (e.g., free trade agreements or tariff codes) to minimize duty and tax costs. This level of control is often critical for large importers.
- Expedited Local Clearance: Buyers, with their deep knowledge of local customs requirements and agency contacts, are typically better positioned to manage the import process efficiently, reducing the risk of unexpected customs holds or documentation errors that delay clearance.
- Transparency: The buyer gains full visibility and control over the actual duties and taxes paid, avoiding potential markups on “duty pre-paid” services that some sellers may include in a DDP price.
Strategic Advantages of DDU/DAP for the Seller
- Simplified Export Process: The seller avoids the highly complex and often risky process of managing import customs, duties, and VAT in a foreign jurisdiction—a major administrative relief compared to DDP.
- Lower Quoted Price: Since the seller does not factor in unpredictable foreign duties and taxes, they can offer a lower, more competitive selling price (Ex Works price plus transport). This can be a key differentiator in price-sensitive markets.
- Broader Market Access: DDU Incoterms (DAP) facilitates access to markets where managing foreign duties/VAT is legally prohibited for non-residents or where local regulations strongly favor the buyer handling import procedures.
DDU Incoterms Comparison: DAP vs. DDP
For modern trade, the decision often comes down to the two primary “Delivered” rules: DAP and DDP. The key difference centers entirely on who manages the high-risk, high-cost process of import clearance and payment.
| Feature | DAP (Delivered at Place) – Replaced DDU Incoterms | DDP (Delivered Duty Paid) |
| Definition | Delivered Duty Unpaid (Buyer pays import duties). | Delivered Duty Paid (Seller pays import duties). |
| Import Clearance | Buyer’s Responsibility | Seller’s Responsibility |
| Payment of Duties/Taxes | Buyer is responsible for all import duties, VAT, and local taxes. | Seller is responsible for all import duties, VAT, and local taxes. |
| Risk Transfer Point | At the named place of destination, before unloading. | At the named place of destination, after clearance and ready for unloading. |
| Convenience for Buyer | Low (High involvement required) | High (Total peace of mind, all-inclusive price) |
| Risk/Workload for Seller | Low (Easiest “D” term for Seller) | High (Highest liability rule for the seller) |
Takeaway The DDU (DAP) model transfers significant risk and workload to the buyer in exchange for maximum control and potential cost savings. DDP offers a complete, hassle-free delivery solution for the buyer, at a higher complexity for the seller.
Best Alternatives to DDU Incoterms (DAP)
When the DDU Incoterms (DAP) structure is not suitable, B2B partners often consider the following alternatives based on required level of service and logistical capability:
DDP (Delivered Duty Paid)
As mentioned, DDP is the exact opposite of DDU. If the goal is to provide a seamless customer experience, especially for e-commerce or small-parcel shipments, DDP is the preferred term as the seller manages every aspect up to the buyer’s door.
CIP (Carriage and Insurance Paid To)
CIP is highly versatile, used for any mode of transport. The key distinction from DDU/DAP is the timing of risk transfer:
- Risk Transfer: Under CIP, the seller pays for carriage and insurance, but the risk transfers to the buyer much earlier when the goods are handed over to the first carrier in the country of export.
- CIP offers the buyer less protection than DDU Incoterms (DAP) during the main transport phase, as the buyer owns the risk during that time.
FCA (Free Carrier)
FCA is the next logical step down in responsibility from the seller after DAP.
- Risk Transfer: The seller fulfills their obligation by delivering the goods to a carrier named by the buyer at a specified location (e.g., the seller’s warehouse). All subsequent risk, cost, and logistics (including main carriage) immediately become the buyer’s responsibility.
- FCA requires much less commitment from the seller than DDU Incoterms (DAP), transferring almost the entire logistics chain to the buyer at the origin country.
Final Word on DDU Incoterms
While DDU (Delivered Duty Unpaid) remains a familiar term in legacy agreements, sophisticated B2B trade must reference and utilize its official successor, DAP (Delivered at Place), as defined in Incoterms 2020.
The DDU/DAP structure is a powerful choice when the seller seeks to minimize exposure to foreign import bureaucracy, and the buyer has the necessary local expertise and preference for controlling import costs and clearance. To ensure legal compliance and smooth operations, always clearly state “DAP [Named Place of Destination] Incoterms 2020” in your contracts.
