Incoterms (international commercial terms) are a series of 11 internationally recognised, universal terms that define and clarify the obligations between buyers and sellers, and is published by the International Chamber of Commerce (ICC).
Incoterms clarify the responsibilities of buyers and sellers in international trade contracts. They are used to avoid confusion. Incoterms are separated by modes of transport, including any mode of transport and sea or inland waterway transport. Some important points are that incoterms are not a substitute for a complete contract, and the 2020 version updated some security cost responsibilities.
❝First published by ICC in 1936, Incoterms® rules are a set of eleven three-letter trade terms, reflecting business-to-business practice in contracts for the sale and purchase of goods.❞
📚 Read more from the International Chamber of Commerce
This article explains the most common incoterms. For information on how to manage your incoterm settings, see the Incoterm settings article.
Shipping DAP/DDU or DDP
There are 11 different incoterms, each of which applies to a different mode of transport and set of responsibilities. The most common incoterms used for retail international shipping are:
Delivered at place, or delivered duty unpaid (DAP/DDU)
The seller delivers the goods to the buyer's designated place at the destination. The buyer is responsible for all costs and risks associated with transporting the goods to the destination, including customs clearance fees, duty fees, and taxes when the import arrives.
When you ship DAP/DDU, the price your customer sees at the checkout is not the final price that they need to pay. This has the potential to cause confusion, and so it is important that you communicate to your customers that additional fees and charges could be applied as their order moves through the network.
Delivered duty paid (DDP)
The seller delivers the goods to the buyer's designated place at the destination, pays all customs duties and taxes, and is responsible for all costs and risks associated with transporting the goods to the destination, including unloading the goods from the carrier.
When you ship DDP, the price your customer sees at the checkout is the final price that they are charged, including all fees, duties, and taxes. This means they see a higher shipping price, but that they are not surprised by additional fees later on.
For more information about shipping DDP or DAP/DDU with Shippit, see the Shipping DDP and DDU article.