Delivered Duty Unpaid - DDU

AAA

DEFINITION of 'Delivered Duty Unpaid - DDU'

DDU was not included in the 2010 publication of the International Chamber of Commerce's Incoterms, however it is still used in international trade parlance. The official term that best describes the function of DDU is now Delivery At Place or (DAP).

DDU is an international trade where the seller is responsible for making a safe delivery of goods to a named destination, paying all transportation expenses and assuming all risks during transportation except for the duty once it arrives to port. When the goods arrive at the agreed upon location, the buyer becomes responsible for paying the duty and other customers clearing expenses. On paper, the incoterm is followed by the location of delivery (DDU: Port of Los Angeles). The seller bears the risks and costs associated with supplying the good to the delivery location. 

VIDEO

Loading the player...

BREAKING DOWN 'Delivered Duty Unpaid - DDU'

While DDU is no longer an official term, the more granular parts of a DDU deal specified: 1) that the seller must provide goods being sold along with an invoice (electronic copy or analog), obtained at their own cost; 2) export licenses and other formalities like insurance on the cargo (though insurance is not required).

If an agreement couldn't be met, the seller was allowed to choose one that best meets their needs, and the seller had to agree to provide to the buyer at their own expense assistance in obtaining any necessary documentation from the country of dispatch or origin. The buyer in a DDU deal was required to pay for the inspection of goods, obtain import licenses and other formalities at their own cost. If the buyer failed to do this, they were responsible for all additional costs and risks. They were also required to move the goods at their own cost from port as soon as they arrived and provide proof of received delivery to the seller.

​The International Chamber of Commerce (ICC) is an organization that was originally formed in the wake of the first World War with the goal of helping foster prosperity in Europe by setting standards for international trade. It was this group that in 1936 that published a set group of terms for types of arrangements set up to ship goods from place to place. Since then, the organization has grown to consist of 13 commissions. It has also become a key player in international trade by serving as consultant to the United Nations and advocating for open trade.

Incoterms and Shipping

Incoterms like DDU are contract specifications outlining who bears the costs and risks of international transactions and are subject to change at the discretion of the ICC. There have been only 8 changes since the first set were published. Some incoterms specify where in the transaction process the delivery risks shift from seller to buyer, while others determine who incurs expenses. These terms can apply to specific modes of transportation or across the board.

Because of the legal and logistical intricacies of international shipping, the ICC seeks to simplify matters for businesses by standardizing its terms. Shipping internationally from point-to-point has been greatly simplified by the container shipping revolution of the mid-20th century. Before standardization, loading and unloading goods for transport required quite a lot of human labor. Transferring goods from land conveyances to the docks and onto the ships and then loading them onto ships was a piecemeal process, and ports across the world maintained a large supply of surplus labor to handle the work.

In the 1950s, Malcom McLean invented the first "broken stowage" vessels for his overland shipping business. He realized that massive efficiencies could be realized if broken stowage could be organized in containers from place to place, rather than from port to port. The containers based on his insight can be loaded and sealed by the exporter, loaded on a truck for overland shipping, hoisted by a crane onto a ship and sailed around the world. The system sends goods from buyer to seller in a fraction of the time and at a fraction of the cost of the old, unstandardized system.

Incoterms​ like DDU signify the legal obligations between buyers and sellers, though the terms have evolved over the last sixty years, just as the shipping industry has evolved. Where, in former times there may have been cost advantages to the shipper to leave the duty on their goods unpaid until they arrived at the destination, paying duty and negotiating insurance claims has been automated to the point that this method is no longer necessary. 

While DDU is no longer used in the language of deals, it's still important to realize that because this is a legal term, its exact definition is much more complicated and differs by country. It is suggested that you contact an international trade lawyer before using any trade term.

RELATED TERMS
  1. Delivered Ex Ship - DES

    A trade term requiring the seller to deliver goods to a buyer ...
  2. Delivered At Frontier - DAF

    In international trade, a contract specification requiring the ...
  3. Incoterms

    Trade terms published by the International Chamber of Commerce ...
  4. Delivered Ex Quay - DEQ

    In international trade, a contract specification where the seller ...
  5. Purchasing Power

    The value of a currency expressed in terms of the amount of goods ...
  6. Monetary Policy

    The actions of a central bank, currency board or other regulatory ...
Related Articles
  1. Economics

    Understanding Delivery Duty Unpaid (DDU)

    Delivery duty unpaid (DDU) is a legal and international shipping term.
  2. Personal Finance

    What Is International Trade?

    Everyone's talking about globalization, so we explain what is it and why some oppose it.
  3. Economics

    Globalization: Progress Or Profiteering?

    Proponents of globalization argue that it helps the economies of developing nations and makes goods cheaper, while critics say that globalization reduces domestic jobs and exploits foreign workers. ...
  4. Mutual Funds & ETFs

    Getting Into International Investing

    Diversifying can mean not only investing in various asset classes but also venturing beyond domestic exchanges.
  5. Economics

    What Is An Emerging Market Economy?

    Emerging markets provide new investment opportunities, but there are risks - both to residents and foreign investors.
  6. Economics

    Calculating the Consumption Function

    The consumption function shows the level of consumer spending as it relates to disposable income.
  7. Fundamental Analysis

    Examining Mexico's Trillion-Dollar GDP

    Examining the gross domestic product growth and composition of Mexico, the second largest economy in Latin America
  8. Fundamental Analysis

    What Causes Inflation in the United States

    Inflation is the main catalyst behind U.S monetary policy. But what causes this phenomenon of sustained rising prices? Read on to find out.
  9. Term

    Understanding Net Exports

    Net exports are the difference between a country’s exports and imports.
  10. Active Trading Fundamentals

    The Top 5 Impact Investing Firms

    Learn what impact investing is and obtain information on some of the top impact investing firms ranked by total assets under management.
RELATED FAQS
  1. When do I need a letter of credit?

    A letter of credit, sometimes referred to as a documentary credit, acts as a promissory note from a financial institution, ... Read Full Answer >>
  2. When has the United States run its largest trade deficits?

    In macroeconomics, balance of trade is one of the leading economic metrics that determines the trading relationship of a ... Read Full Answer >>
  3. Which is more important to a nation's economy, the balance of trade or the balance ...

    There is no question the composition of a country's balance of payments is more important than its balance of trade. This ... Read Full Answer >>
  4. What is the difference between cost and freight (CFR) and cost, insurance and freight ...

    The difference between cost and freight (CFR) and cost, insurance and freight (CIF) is essentially the requirement under ... Read Full Answer >>
  5. What is the difference between Cost and Freight (CFR) and Free on Board (FOB)?

    The difference between cost and freight (CFR) and free on board (FOB) lies in who has responsibility for various shipping ... Read Full Answer >>
  6. What are the ethical arguments against government subsidies to companies like Tesla?

    The ethical argument behind government subsidies is that they should be put into place to help industries that will, in turn, ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Recession

    A significant decline in activity across the economy, lasting longer than a few months. It is visible in industrial production, ...
  2. Bubble Theory

    A school of thought that believes that the prices of assets can temporarily rise far above their true values and that these ...
  3. Stock Market Crash

    A rapid and often unanticipated drop in stock prices. A stock market crash can be the result of major catastrophic events, ...
  4. Financial Crisis

    A situation in which the value of financial institutions or assets drops rapidly. A financial crisis is often associated ...
  5. Election Period

    The period of time during which an investor who owns an extendable or retractable bond must indicate to the issuer whether ...
  6. Shanghai Stock Exchange

    The largest stock exchange in mainland China, the Shanghai Stock Exchange is a nonprofit organization run by the China Securities ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!