3-5. Incoterms D Group (DAP/DPU/DDP)

Overview

What we’re learning this time is the last D group, right?

Rookie

IINO san

Simply put, in Incoterms, the D group is like Door to Door. The transportation will be arranged to the importer’s place.

Wao, it’s the opposite of EXW.

Rookie

IINO san

That’s right! The exporter is responsible for the cost and risk. Contrary to EXW, the exporter is considered the main actor in Group D.

What You Can Gain from This Topic

• Review of Incoterms
• F Group Terms and Conditions
• How to Prepare an Invoice

Review of Incoterms

As explained in the previous topic, Incoterms are broadly divided into four groups. In the D Group, the cargo is primarily handed over at the designated place of the importer.

IINO san

The delivery point is the specified delivery location at the import site!

It’s in contrast to EXW, right?

Rookie

IINO san

Oh, you’ve got it! The image below is helpful for understanding.

D Group’s Characteristics

D Group has three trading terms as the following:

・DAP (Delivered at Place)
・DPU (Delivered at Place Unloaded)
・DDP (Delivery Duty Paid)

IINO san

DDU and DAT are no longer in Incoterms 2020. But DDU is still widely used in practice.

Differences between FOB, FCA, and FAS

Now, we will explain the delivery points of the three conditions of the D group. The key points to grasp the differences in each condition of the D Group are:

• Unloading location
• Customs arrangements
• Payment of taxes (duties and consumption taxes)

DAP

In DAP, the importer is responsible for unloading at the place of import. The importer is responsible for paying the customs clearance fees and taxes, including duties and consumption taxes.

DPU

In DPU, the exporter is responsible for unloading at the destination specified by the importer. The importer is only responsible for paying customs clearance fees and taxes, which include duties and consumption taxes.

KEY POINT

 

IINO san

Let’s compare and understand the terms DAP and DPU.

In both cases, the importer is responsible for customs clearance and taxes. However, the main difference lies in the unloading process.

DAP: The importer is responsible for unloading

DPU: The exporter is responsible for unloading

IINO san

In reality, the workers of the importer tend to unload the goods by using their forklifts.

I see….

Rookie

IINO san

“When dealing with large or complex shipments, it is common to use DPU. It’s because the equipment can be arranged at the exporter’s expense.

DDP

Under DDP terms, the importer is responsible for unloading the cargo at the destination. However, all other costs and risk burdens are borne by the exporter.

DDP is the simplest.

Rookie

IINO san

Yup! The exporter bears the burden of all transportation costs and risks to the specified destination. The importer is only responsible for unloading the cargo!

When Group D is Used

Group D and Group E are the two opposite groups. The exporter pays most of the costs and risks, making DDP the most accessible trading term for the importer.

Group D is used in the following cases:

• Sample transportation
• Where the exporter is familiar with transport to a specific region

Sample Transportation

DDP is mainly used for small shipments, such as samples. In some cases, when the shipping cost is low, and the objective is to send the goods quickly, the exporter may choose to bear all the costs and send the goods.

IINO san

It’s like the case when samples are sent through shipping services like DHL.

Where the exporter is familiar with transport to a specific region

In Group D, the exporter handles trucking and customs clearance in the importing country. They often have a local partner familiar with transportation in a particular area.

If I were an importer, I would prefer to use DDP and leave all the transportation responsibility on the exporter because it is more convenient.

Rookie

IINO san

It’s okay for small-lot shipments! But be careful; Leaving everything to the exporter can result in overcharging, especially for large volumes.

KEY POINT

The exporter might include the profit on the product’s price. If you leave everything to the exporter, there is a possibility of being overcharged.

IINO san

This can vary by company, though. The importer may not be able to notice since invoices usually do not include a breakdown of expenses.

How to Prepare Invoice (DDP)

The unit price in DDP includes all transportation costs to the destination and taxes. In the “Term” section, DDP is specified, and the “Total Price” section notes the DDP price.

※ Please note that the description in red text is not necessary for practical work.

IINO san

In this example, the unit price of the product is USD20. The total transportation costs, including other taxes, are prorated and added separately (USD10).

The exporter may be adding profit on this transportation cost.

Rookie

IINO san

It’s not illegal, you know. Since they handle all the transportation arrangements, it’s natural for the fees to be higher as a service charge.

Summary

D Group conditions are less burdensome for importers. In the case of Delivered Duty Paid (DDP) terms, forwarders may temporarily cover the import duties. Whether they can handle it depends on the tax amount.

If you are proposed to transport under D Group, it is recommended that you consult with a forwarder beforehand.

Enhanced Learning with Videos

Test Yourself

Reinforce your understanding of this topic by working through the exercises. Attempting the exercises without referring to the material as much as possible is advisable.

IINO san

The act of “remembering” helps it stick in your memory.