Delivered Duty Paid (DDP) / Delivered Duty Unpaid (DDU)

Ever wonder why duty free shops at international airports do such brisk business? Because items bought from these shops are “duty free,” meaning not subject to customs or other taxes in the buyer’s home country upon return.

Read our lips: No taxes.

Customs are the enforcement arm of collection, and duties are the taxes that are collected as a result of tariffs on goods originating in specific countries. Much of the controversy over U.S. and China trade negotiations and over the Brexit terms between the UK and EU are about tariffs, which are notionally meant to protect domestic producers from international competition being given an unfair advantage from their own respective governments.

When negotiating international trade contracts in the private sector, Delivery Duty Paid (DDP) means that the seller will bear the responsibility for the costs of shipping, duties, and any other associated delivery expenses to the designated port. Usually, a seller will do this when there is sufficient margin built into the selling price. Concurrently, a buyer may be willing to pay the slightly higher price in return for not having to deal with the headaches of customs in his or her country.

A Delivery Duty Unpaid (DDU) contract will often involve the buyer assuming the costs of duties at the port of delivery, or taking the cargo to a free trade zone. Shenzhen, Hong Kong, New York City, Los Angeles, Stockholm, Copenhagen, and Singapore exist as shiny examples of major port cities with free trade zones.