DDP, DDU, and DAP are terms frequently used in international logistics. However, many people may not have a deep understanding of them, leading to some complications in the import and export processes. So, in this article, we’ll explore DDP, DDU, and DAP from several perspectives:
1. What Is DDP Meaning In Shipping?
DDP incoterms (Delivered Duty Paid) is one of the most commonly used shipping terms. It means that the seller directly sends goods to your appointed destination, such as your home, your company, your warehouse, etc. When you receive the goods, the seller has already handled all relevant importing procedures for you.
Since your seller is responsible for the entire shipping process to your warehouse, he should pay all the costs, ensure the safety of transportation, and bear all the risks of loss and damage of goods during the process until the goods are delivered to you.
While all you need to do is wait for your goods at your warehouse and actively assist your seller so that he can obtain the import license or other official documents required and deal with import customs clearance for you.
DDU is also door-to-door. Though it is eliminated and replaced by DAP (Delivered at Place) in Incoterms 2010, it is still widely used in practice. The seller will also transport the goods to the final destination. They will help you deal with all importing procedures except going through customs clearance and paying import duties, while you have to do these two things. And you should bear the additional costs and risks if you fail to timely pass customs clearance.
2. What Is DDU Meaning?
The DDU term stands for “Delivered Duty Unpaid,” and like DDP shipping, it’s also a door-to-door service. The seller will transport the goods to the final destination. They’ll assist you with all the import procedures, except for clearing customs and paying import duties – those are your responsibilities. If you don’t clear customs on time, you might incur additional costs and risks.
3. What Is DAP Meaning In Shipping? Why DAP Replaced DDU?
Incoterms DAP stands for “Delivered at Place,” it means that before your seller delivers the goods to your location, the seller bears all the risks and shipping costs except for the taxes and fees associated with import customs clearance, which is similar to DDU shipping.
The term DAP in shipping covers all the functions of DDU incoterms while offering more versatility in its application scenarios. It is not limited to a specific destination, which can be a designated point at the border of two countries, on a ship at the destination port, or at a specific inland location in the importing country.
Since 2010, DAP has replaced DDU in the international trade terms. The primary purpose of introducing DAP was to create a term that covers all scenarios of DDU, DAF, and DES. Wherever these three terms can be used, DAP delivery term can also be applied. Despite DDU’s replacement, it is still commonly used in actual transportation contracts. The pricing calculations for DDU are the same as for DAP. To legally use DDU, traders must specify the delivery term “as per Inco terms 2020” in the commercial contract document.
4. What Is The Difference Between DDU (DAP) And DDP?
The main difference of DDP vs DDU (DAP) is: under DDP, the seller deals with import customs clearance and pays customs duties, while under DDU or DAP, the seller leaves import duties to be paid by the buyer.
A Real Example Of DDP And DDU
You buy 2000 clothings from Dongguan, China, and will send them to your warehouse in New York by sea.
Under the DDP delivery term, your seller will deal with all the things for you, including:
- Arrange trucks to send your goods from the factory to Port of Guang Zhou (the nearest port to Dongguan).
- Handle export customs declaration, including random customs inspections.
- Arrange shipping from Port of Guang Zhou to Port of New York.
- Handle import customs clearance and pay all import duties and taxes.
- Send your goods from Port of New York to your warehouse.
While under DDU or DAP delivery term, the seller will first ship your goods to Port of New York. After you go through customs clearance, they will help you send the cargo to your warehouse. So you have to:
- Buy customs bonds
- Declare to the customs
- Prepare and submit customs declaration documents (B/L, Commercial Invoice, Packing List, Arrival Notice, etc.)
- Pay import duties and taxes when receiving goods
5. How To Calculate DDP And DDU（DAP）Prices?
We have mentioned above that the seller pays all the fees from his warehouse to your destination. He will contact the freight forwarder, arrange transportation, pay various fees during this period, and deliver the goods to your door. But actually, he will include all these costs in the quote he gives you.
For example, in the example above, you will buy 2,000 clothings and ship them from Dongguan to your warehouse in New York. Under DDP terms, your seller will usually tell you the unit price of the product, such as 5$ per piece, and the shipping freight from Dongguan to your warehouse, such as $20,000. This $20,000 specifically includes a lot of expenses during transportation, such as:
- Cost from the factory to Port of Guang Zhou
- Export Customs Declaration fees
- Sea freight from Port of Guang Zhou to Port of New York
- Import Customs Clearance fees
- Customs Duties/VAT
- Costs from Port of New York to your warehouse
- Other fees
So, the DDP price you get from your seller is:
DDP price = 5$/piece * 2000 pieces +$20,000 = $30,000
Some sellers will spread this $20,000 shipping fee to each product, and then quote you a unit price of $15, that is (5$/piece * 2000piece + $20,000) / 2000 piece
DDP price = 15 $/piece * 2000 pieces = $30,000
If import duties and taxes in this example are totally $3300, then:
DDU (DAP) price = DDP price – import duties & taxes = $30,000 – $3300 = $26,700
The fees involved in DDP and DDP prices are very complicated. Generally, just like the example above, the seller will not tell you the cost of each importation and shipping process. If you want to know the specific fee details, then you can ask your seller.
6. When To Use The DDP And DDU Shipping Term?
International shipping is a complex and important part of import and export. Take shipping from China as an example. It involves a lot of parts, such as sending from the seller’s warehouse to the Chinese port, shipping from the Chinese port to your country’s port, delivering from the port to your warehouse, dealing with import and export customs clearance, and paying import duties, etc.
If you’re a new buyer with no experience in shipping or simply want to avoid the hassle of shipping, door-to-door delivery is the right choice for you. When your seller can handle import clearance and pay taxes, you can opt for DDP. However, if your seller is unwilling to manage import clearance and related matters, you have the option to choose DDU or DAP.
Moreover, if the tariffs on your goods are high, but your funds are limited, and you prefer not to prepay these charges, intending to reserve the money for other purposes and pay upon receiving the goods, then DDU or DAP is also suitable for you.
But if it is difficult and time-consuming for you to go through customs clearance in your country. It is not recommended to use DDU. You may not be able to complete the customs clearance procedures timely and smoothly. Then you have to pay additional costs for it and your seller can not deliver your goods on time at the destination.
What’s more, you can ask your seller CIF price and DDP price at the same time and choose a cheaper one. CIF price only covers the costs from the seller to the port in your country. You still have to pay the costs from the port to your warehouse and the import duties, which will be very high. Therefore, it is very likely that total costs under CIF will be more than DDP price. In this case, we would recommend you to use DDP, which can save you time, money, and energy.
When you are choosing which shipping terms to use, be sure to calculate all the costs from the seller to your hands. The costs are complicated and you’d better ask your seller, freight forwarder or sourcing agent directly.
7. By Truck Or By Express, Which Is Better To Get Goods From Your Port To Your Door?
We know that DDP and DDU (DAP) are door-to-door. Generally, your seller will first ship your cargo to your country by sea, air, or rail, and then send them to your door by truck or express.
Let’s take sea freight plus truck and sea freight plus express as examples. From China to the USA, the former takes about 30-40 days, and the price is $1.2/KG-$1.8/KG, while the latter takes about 20-30 days, and the price is $2/KG-$3/KG. As you can see, if both are first shipped by sea, then delivered by truck is cheaper but takes longer than by express.
By truck or express, you should make your decision based on your goods volume, time limit, and cost. Generally, if your cargo is less than 2CBM, the volume is too small and you can use sea/air/railway freight plus express. There is no need to use a truck. Otherwise, you can consider delivering by sea/air/railway freight plus truck.
Therefore, if you are e-commerce sellers, especially Amazon FBA sellers, sea/air/railway freight plus express is also more friendly to you. Because usually your cargo is small and you have higher requirements for timeliness.
For example, you can send a small cargo from China to an Amazon warehouse in the USA by sea freight plus express. It will be faster than traditional sea freight and cheaper than direct express shipping.
The Chinese freight forwarder will collect goods from several buyers, loads them together in one container, and ships them to a warehouse in Los Angeles. Then, their cooperative courier company in Los Angeles will help them deliver these goods to different buyers’ destinations, including your Amazon warehouse. In this way, you can even ship small cargo of around 50-100kg directly to your door.
The End
We hope that this article can give you a clear understanding of DDP. If you have any questions, you can leave a comment below.
We are JF Apparel, a top clothing manufacturer in China. We specialize in customizing all kinds of clothing for you at competitive prices. In addition, we can help you check the quality of the products and ship them to your destination. Please feel free to contact us whenever you need support with importing from China. We can provide you with good solutions for any problems.
