For the past several years, an entrepreneur had been shipping Free Carrier (FCA) and had not worried about paying shipping costs or arranging for shipping, customs, or anything else. Then suddenly, his client asked about changing the terms to Delivery Duty Unpaid (DDU) or Delivered Duty Paid (DDP).
What would I do if I were him? I had been wondering when a client would ask me about DDP – Delivered Duty Paid, Incoterms® 2020.
Incoterms®, or International Commercial Terms, are a set of internationally recognized rules published by the International Chamber of Commerce (ICC) to define the responsibilities of sellers and buyers in the export transaction.
These rules are crucial for clarifying tasks, costs, and risks for both parties involved in international trade. Incoterms® are widely used in international commercial transactions as well as domestic transactions.
The “Delivery Duty Unpaid (DDU)” term went away in the 2020 revision and arguably was replaced with “Delivered at Place (DAP)” or “Delivered at Place Unloaded (DPU).”
The client was asking if I would recommend using the “Delivered Duty Paid (DDP)” term. My short answer is, “No.”
DDP requires the seller to clear the goods for export; in the U.S., this means acquiring any needed export licensing or completing the Electronic Export Information (EEI), as well as acquiring needed licensing for import, paying any import duty, and completing any customs formalities.
Why is this important?
In the current political environment, foreign countries could enact additional taxes, tariffs, or duties on imported products. If you are shipping DDP, you are responsible for payment of these additional charges – at a minimum! Many countries require the importer of record to register in that foreign country and have legal representation as well. For small companies, this means additional costs and management that may not be recoverable.
What about E-commerce companies?
DDP may be your only choice; just be sure that you are adding any extra charges, tariffs, or other costs to your customers in the initial transaction as doing so after the fact may make those charges difficult to recover.
As international trade evolves, please remember that the Go Global Initiative and the SBDC is here to help you navigate all trade-related items.Incoterms® and the Incoterms® 2020 logo are trademarks of ICC. Use of these trademarks does not imply association with approval of or sponsorship by ICC unless specifically stated above. The Incoterms® Rules are protected by copyright owned by ICC.