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DDU incoterms: Meaning, terms and conditions

International commercial terms, or incoterms represent a series of laws and regulations related to import and export activities.

DDU (Delivered Duty Unpaid) are old incoterms as they were replaced by the DAP incoterm in 2010. Despite being outdated, DDU remains a notable element in the world of international trade. Many businesses continue to use DDU incoterms to this day, and they do it for several reasons.

What exactly are DDU incoterms, what do they entail, and when do you use them? Let’s find out!

What does DDU mean?

Incoterms are published by the International Chamber of Commerce (ICC), which revises and updates them every ten years. In 2010, four incoterms were removed from the list: DAF (Delivered At Frontier), DES (Delivered Ex Ship), DEQ (Delivered Ex Quay), and DDU (Delivered Duty Unpaid). All of them were replaced by DAP (Delivered At Place) incoterm.

Although DDU incoterms are not official anymore since the ICC revised the incoterms in 2010, some businesses are still using them.

DDU stands for Delivered Duty Unpaid, and this incoterm specifies that the seller is responsible for managing the goods from the origin point to the delivery at a designated place in the destination country. He also pays for all transportation charges and assumes all the risks during transport. On the other hand, the buyer has to unload the goods and pay for import charges.

Like DAP incoterm, DDU is used for its simplicity and convenience, especially for the buyer who has few responsibilities. The seller is the one handling most of the shipping process, which offers cost transparency to the buyer who can budget effectively.

What are the buyers and the sellers responsibilities with DDU?

Let’s take a closer look at the responsibilities of both parties.

Seller’s obligations under DDU:

Complete the packaging and labeling of items;
Load goods onto a local carrier (truck, van, etc.) and pay the fees associated with this process;
Transport and deliver goods to the shipping terminal;
Handle the export clearance, which includes export duties, taxes, and customs clearance;
Remove goods from the local carrier and load them onto the cargo transport, then pay the Origin Terminal Handling Charges (OTHC);
Pay freight charges related to the import activity;
Transfer the items to local transportation once they arrive at the destination port/airport and pay the Destination Terminal Handling Charges (DTHC);
Deliver the goods to the final destination.

Buyer’s obligations under DDU:

Unload the goods at the final destination;
Handle the import clearance, which includes import duties, taxes, and customs clearance.

The risk of loss and damages to goods is transferred to the buyer as soon as the goods are delivered to the country of destination, alongside the ship.

When to use DDU Agreement?

Some businesses still use DDU incoterm because they are simply used to it. It could be because it was used in a long trade relationship, and since the conditions haven’t changed, neither did the incoterm. The situations in which you can use this agreement are similar to DAP incoterm ones. As a seller, you can use DDU incoterm when you want to have total control over most of the process.

To use DDU Agreement, traders should specify DDU incoterms 2000 to avoid misunderstandings between both parties.

FAQ | DDU incoterms: Meaning, terms and conditions

What is the difference between DDU and DDP?

DDU Agreement indicates that the buyer is responsible for customs fees, tariffs, and taxes incurred by the destination country, while DDP Agreement means that the seller is the one responsible for these charges.

Is freight insurance included in DDU?

Under DDU Agreement, the seller is not required to offer insurance coverage for the goods. If the buyer wants insurance, he must specify it in the contract.

When can I use DDU?

DDU incoterm can be used for any mode of transportation. It provides the seller with more control over the shipping process without the burden of having to deal with the bureaucratic procedures of the destination country.

May 23, 2024 / By leiladocshipper / Shipping tips/ export • Freight • import • Incoterms • shipping/ 0 Comments

CIP incoterms: Meaning, terms and conditions

What does CIP mean?

CIP, which stands for Cost and Insurance Paid To, is an incoterm suitable for any mode of transportation. This is one of the reasons it is interesting to use it in a multimodal shipping process.

Under CIP Agreement, the seller carries out the same responsibilities as the ones under CIF Agreement. In other words, he is responsible for managing the goods until they arrive at the designated place in the destination country. He also has to pay for freight charges, as well as provide freight insurance for the items. However, the transfer of risks occurs when the goods are delivered to the first carrier, in the origin country.

The cargo insurance level required from the seller has to cover all risks. The seller can refer to Institute Cargo Clause (A), published and managed by the Lloyd's Market Association (LMA).

All in all, CIP incoterm is used for its flexibility, and advantages for both parties.

What are the buyer's and the seller's responsibilities with CIP?

Let’s take a closer look at the responsibilities of both parties.

Seller’s obligations under CIP:

Complete the packaging and labeling of items;
Load goods onto a local carrier (truck, van, etc.) and pay the fees associated with this process;
Transport and deliver the goods to the shipping terminal;
Handle the export clearance, which includes export duties, taxes, and customs clearance;
Remove goods from the local carrier and load them onto the cargo transport, then pay the Origin Terminal Handling Charges (OTHC);
Pay freight charges and freight insurance.

Buyer’s obligations under CIP:

Transfer the items to local transportation once they arrive at the destination port/airport and pay the Destination Terminal Handling Charges (DTHC);
Deliver the goods to the final destination;
Unload the goods at the final destination;
Handle the import clearance, which includes import duties, taxes, and customs clearance.

During the process, the seller’s responsibilities for any risks of loss and damages to goods stop when the goods are delivered at the origin point to the first carrier.

When to use CIP Agreement?

CIP Agreement can be a good option for both seller and buyer because it offers a clear division of responsibilities and risks. It should be used in the following situations:

When the importer wants a secured shipping process, as solid insurance coverage is included in the CIP Agreement;
For complex logistics process that includes more than one mode of transport employed;
For high-value or perishable goods, which are items that require good insurance;
When the exporter wants to have control over most of the shipping process until the goods reach the destination terminal.

FAQ | CIP incoterms: Meaning, terms and conditions

What is the difference between CIP and CIF?

CIF (Cost, Insurance & Freight) incoterm is only used for sea transportation, meanwhile CIP incoterm (Carriage & Insurance Paid To) can be used for multi-modal transportation.

Additionally, in the case of CIF incoterm, the risks transfer to the buyer once the cargo is onboard the ship, but with CIP incoterm, the transfer of risks occurs upon delivery to the location designated by the seller in the origin country.

What is the difference between the level of insurance of CIP and CIP?

CIP incoterm requires the seller to cover all risks, meaning maximizing security for the buyer with the Institute Cargo Clause (A). CIF incoterm only requires the minimum of protection with Institute Cargo Clause (C)

What happens if the goods do not arrive at the designated location on time?

If the goods are delayed, the seller is not responsible for it, especially if the delays are beyond his control. The buyer can seek redress from the carrier or insurer, depending on the circumstances.

May 23, 2024 / By leiladocshipper / Shipping tips/ export • import • Incoterms • shipping • thailand/ 0 Comments

DDP incoterms: Meaning, terms and conditions

What does DDP mean?

Incoterms are published by the International Chamber of Commerce (ICC), which revises and updates them every ten years.

DDP, which stands for Delivered Duty Paid, is an incoterm suitable for any mode of transportation and is known for being the easiest shipping process for the buyer.

Under DDP incoterm, the seller bears all costs and responsibilities, from managing the goods at the origin point to delivering them at the designated place in the destination country. He also pays for the fees related to importation. DDP is actually the only incoterm where the seller is required to pay for both export and import charges.

Not everyone should choose to work with DDP incoterms, as most of the shipping process is managed by the seller. Having some experience and already being familiar with shipping activities is essential for sellers who use DDP.

What are the buyers and the sellers responsibilities with DAP?

As we said, under DDP Agreement, the seller has far more responsibilities than the buyer. Let’s take a closer look at both parties’ obligations.

Seller’s obligations under DDP:

Manage the packaging and labeling of items;
Load goods onto a local carrier (truck, van, etc.) and pay for the charges related to this operation;
Transport and deliver goods to the shipping terminal;
Remove goods from the local carrier and load them onto the main carrier, then pay the Origin Terminal Handling Charges (OTHC);
Handle the export clearance, which includes export duties, taxes, and customs clearance;
Pay freight charges for the transportation;
Transfer items to local transportation upon arrival at the terminal (port, airport, etc.) and pay the Destination Terminal Handling charges (DTHC);
Deliver the goods to the final destination;
Handle the import clearance, which includes import duties, taxes, and customs clearance.

Buyer’s obligations under DDP:

Unload the goods at their final destination.

With DDP Agreement, the seller is responsible for the entire shipping process, and he is responsible for any risk of loss and damages to goods. Note that with DDP incoterm, the seller is not required to pay for insurance coverage, but it is highly recommended.

When to use DDP Agreement?

As a buyer, it is interesting to use DDP Agreement when you want to simplify your shipping process. The seller, on the other hand, needs to be experienced. He also needs to make sure that he has enough knowledge in the customs regulations of the destination country.

DDP Agreement should be used:

When the exporter is experienced and familiar with the bureaucratic procedures in the destination country;
As an added value for the customer, which makes the seller more competitive;
When the exporter has a significant network and has access to competitive freight rates;
When the trade-relationship is a long-term one, and can be trusted;
For high-value items;
For new importers who want to minimize risks and focus on their core business.

FAQ | DDP incoterms: Meaning, terms and conditions

What is the difference between DAP and DDP?

Under DAP (Delivered At Place) Agreement, the seller is responsible for the goods until they are delivered at the final location. With DDP (Delivered Duty Paid) incoterm, the seller has total control of the entire process, and also has to pay for all import charges.

Is it always a safe option to use DDP?

As an importer, it can be a good option to use DDP incoterm, especially if the shipping process is not your strength.

However, an exporter should always be careful when using this incoterm, especially because he needs to be familiar with the customs procedures of the country he is working with. DDP incoterm is interesting to use in some cases, but it is not always the safest option.

Does DDP always include insurance coverage during the shipping freight?

No, the seller is not obligated to pay for freight insurance under DDP Agreement. However, since he bears all the risks during most of the process, it is highly recommended to use one.

May 21, 2024 / By leiladocshipper / Shipping tips/ export • Freight shipping • import • incoterm • transport/ 0 Comments

DAP incoterms: Meaning, terms and conditions

What does DAP mean?

Incoterms are published by the International Chamber of Commerce (ICC), which revises and updates them every ten years.

DAP, which stands for Delivered At Place, is an incoterm used for all modes of transportation.

Under a DAP Agreement, the seller is responsible for delivering the goods to the final destination. He also bears all risks and costs involved in this matter. As for the buyer, he is only responsible for unloading the goods at the designated final place and for the import clearance.

The reason why they are used is because of their simplicity and convenience.

What are the buyer's and the seller's responsibilities with DAP?

When using DAP Agreement, the seller has more obligations than the buyer. Let's examine the responsibilities of both parties.

Seller's obligations under DAP:

Manage the goods from the origin point to the expedition shipping terminal (port, airport, etc.): this includes their packaging, labeling, loading onto a local carrier, transportation and delivery to the expedition location;
Handle the export clearance, which includes export duties, taxes, and customs clearance;
Unload the goods at the shipping terminal and load them onto the container or main carrier used for delivery to the destination terminal, then pay the Origin Terminal Handling Charges (OTHC) and the shipping freight;
Unload the goods once they reach the destination terminal and transfer them to a local carrier used for delivery to the final warehouse/location, then pay the Destination Terminal Handling Charges (DTHC);
Transport and deliver the goods to the final place.

The seller is responsible for any risk of loss or damages to goods that might occur during these steps, more specifically until before unloading of the goods at the final place.

Buyer's obligations under DAP:

Unload the goods at the final destination;
Handle the import clearance, which includes import duties, taxes, and customs clearance.

Note that each DAP Agreement can differ if the contractual clauses are customized. For example, the seller can be responsible for the unloading of the goods at the final location/warehouse if it is specified in the contract.

When to use DAP Agreement?

Using DAP Agreement can be a good option for both seller and buyer because each agreement can be different according to the contractual clauses possible. These are negotiated between both parties and can be related to the place and timing of delivery, the packaging and labeling, additional services, insurance, and more.

Note that the seller is not required to include freight insurance in the contract, but it is a possibility.

It would be interesting to use DAP incoterm in the following situations:

When you are a new importer or not familiar with the country you are working with;
When the seller has a good network and is experienced: with access to competitive freight rates and the cost of DAP Agreement, which is more expensive, the seller can ensure an increase in his cash flow;
When the buyer wants to optimize his cash flow, which can be done through a contractual clause specifying that the buyer can pay upon delivery of goods at the final place, and not before.
When the final destination is a warehouse, making it easier for the buyer.

FAQ | Articles title

What is the difference between DAP and DDP?

For DAP incoterm, the seller is responsible for the goods until they are delivered at the final location, while the buyer has to unload the goods and pay for import clearance.

With DDP (Delivered Duty Paid) incoterm, the seller has total control of the entire process including unloading the goods once they arrive at the final location, and he is the one paying for import clearance.

What is the difference between DAP and CIF?

Under CIF (Cost Insurance & Freight) Agreement, the buyer has more responsibilities, as the risks of loss and damages to goods are transferred to him when the cargo is onboard the ship. Under DAP (Delivered At Place) Agreement, the buyer is only responsible for the unloading and import clearance.

Under DAP Agreement, who pays for the freight?

The seller is the one paying for the freight since he is responsible for the transportation and delivery of the goods to the agreed location, in the destination country.

May 20, 2024 / By leiladocshipper / Shipping tips/ Incoterms • international • Sea Freight • shipping • transportation/ 0 Comments

CIF incoterms: Meaning, terms and conditions

International commercial terms, or Incoterms represent a series of laws and regulations related to import and export activities. Being the fundamentals of international trade and business, incoterms are used by almost all governments, and it is essential to know them.

There are a variety of incoterms, but we will focus on CIF (Cost, Insurance & Freight) in this article. CIF incoterms simplify the shipping process by offering multiple advantages to buyers. It can also be a good and cost-efficient option for sellers, especially if they have a significant network. What exactly are CIF incoterms, what do they entail, and when do you use them? Let’s find out!

What does CIF mean?

Incoterms are published by the International Chamber of Commerce (ICC), which revises and updates them every ten years.

CIF stands for Cost, Insurance and Freight. This incoterm is commonly used for maritime transportation and inland waterway transport.

When using CIF, the seller bears all costs for the transportation of the goods from the origin point to the destination port. He also has to provide insurance coverage for the items.
On the other hand, the risks of loss and damages to goods transfer from the seller to the buyer once the cargo is onboard the ship at the exporting port. The buyer is then responsible for the rest of the process.

All in all, CIF incoterm defines a clear framework for both the seller and the buyer, making it an attractive option for the shipping process.

What are the buyer's and the seller's responsibilities with CIF?

Let’s take a closer look at the responsibilities of both parties.

Seller’s obligations under CIF:

Complete the packaging and labeling of goods;
Load goods onto a local carrier (truck, van, etc.) and pay the fees associated with this process;
Transport and deliver goods to the shipping terminal;
Handle the export clearance, which includes export duties, taxes, and customs clearance;
Remove goods from the local carrier and load them onto the cargo transport, then pay the Origin Terminal Handling Charges (OTHC);
Pay freight charges and freight insurance related to the import activity.

Buyer’s obligations under CIF:

Transfer items to local transportation once they arrive at the destination port and pay the Destination Terminal Handling Charges (DTHC);
Deliver and unload goods at the final destination;
Handle the import clearance, which includes import duties, taxes, and customs clearance.

When to use CIF Agreement?

CIF Agreement can only be used for sea and inland waterway transport, and is often employed for FCL (Full Container Load).

Using CIF incoterm is interesting for importers who are not used to working with a specific export country, or for new importers since the process is easier for them. There are also fewer risks, as they are equally shared with the other party. For the seller, using CIF means better control over the logistics process.

You should opt for CIF Agreement in the following scenarios:

The seller is certain to make higher margin profits despite all the costs related to the transportation of goods and the insurance;
The seller has a good network and enough experience to have access to competitive freight rates and make the process cost-efficient for both him and the buyer;
The trade relationship can be trusted, especially for the seller's sake, as there are risks that the buyer might back out of the agreement or engage in deceitful behavior.

FAQ | CIF incoterms: Meaning, terms and conditions

What is the difference between CIF and FOB Incoterms?

Under CIF (Cost, Insurance & Freight) Agreement, the seller is responsible for covering the costs related to goods, freight and insurance. With FOB (Free On Board) incoterm, it is the buyer who is responsible for transportation, insurance and other costs, while the seller only has to cover the cost of loading the goods on the vessel at the port of origin.

FOB Agreement provides better control over the logistics process for the buyer.

What is the difference between CIP and CIF Incoterms?

CIF (Cost, Insurance & Freight) incoterm is only used for sea transportation, meanwhile CIP (Carriage & Insurance Paid To) incoterm can be used for multi-modal transportation.

Additionally, in the case of CIF incoterm, the risks transfer to the buyer once the cargo is onboard the ship, but with CIP incoterm, the transfer of risks is extended and occurs upon delivery to the location designated by the seller. That means that the seller has more responsibilities under CIP Agreement.

Is it possible to use CIF for small parcel shipments?

Yes, regardless of the size of the parcel or the type of container in which the item is shipped, CIF incoterm can be used for both LCL (Less than Container Load) and FCL (Full Container Load) shipments.

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Category: Shipping tips

What does DDU mean?

What are the buyers and the sellers responsibilities with DDU?

When to use DDU Agreement?

FAQ | DDU incoterms: Meaning, terms and conditions

What is the difference between DDU and DDP?

Is freight insurance included in DDU?

When can I use DDU?

What does CIP mean?

What are the buyer's and the seller's responsibilities with CIP?

When to use CIP Agreement?

FAQ | CIP incoterms: Meaning, terms and conditions

What is the difference between CIP and CIF?

What is the difference between the level of insurance of CIP and CIP?

What happens if the goods do not arrive at the designated location on time?

What does DDP mean?

What are the buyers and the sellers responsibilities with DAP?

When to use DDP Agreement?

FAQ | DDP incoterms: Meaning, terms and conditions

What is the difference between DAP and DDP?

Is it always a safe option to use DDP?

Does DDP always include insurance coverage during the shipping freight?

What does DAP mean?

What are the buyer's and the seller's responsibilities with DAP?

When to use DAP Agreement?

FAQ | Articles title

What is the difference between DAP and DDP?

What is the difference between DAP and CIF?

Under DAP Agreement, who pays for the freight?

What does CIF mean?

What are the buyer's and the seller's responsibilities with CIF?

When to use CIF Agreement?

FAQ | CIF incoterms: Meaning, terms and conditions

What is the difference between CIF and FOB Incoterms?

What is the difference between CIP and CIF Incoterms?

Is it possible to use CIF for small parcel shipments?