Delivered Duty Paid (DDP) / Delivered Duty Unpaid (DDU)
Categories: Company Management
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.
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Finance: What is Delivery Vs. Payment?63 Views
Finance a la shmoop what is delivery versus payment? alright this is delivery [Man delivering package to man and woman]
and this is payment and this is what happens when the whole thing fails to go
off without a hitch yeah and yeah some poor dock worker
who's gonna have to clean all that up well when it comes to selling stock
there's typically less bloodshed but it's no less important to make sure that [Stock delivery appears at door]
delivery of the goods in this case maybe it's a hundred shares of get-rich-quick
com happen simultaneously with payment for those goods or at least so that the
payment is trackable with the delivery well delivery versus payment or DVP for
anyone who's in a hurry is from the perspective of the buyer if you're
looking at things from the seller's point of view it's RVP receive versus
payment because you're receiving the dough or the payment got it [Seller and Buyer appear]
but yeah DVP is basically a settlement system it's a way of ensuring that any
transaction involving the sale of a security goes smoothly so that no one
needs to have rocks tied to their ankles no cash no stash and no splash so why do [Person moving with rock attached to ankle]
we have delivery versus payment like why is this even a thing well you could
imagine in the past that people were paying for things that didn't exist like
they thought they were buying 100 shares of whatever.com they paid the broker and
while the shares disappear the broker disappeared everyone disappeared and oh
well money's gone so what happens today is there was typically a lag in what's
basically a mini escrow account where the money sits for a few days t plus 3 [Money appears in a vault and clock ticks]
it used to be t plus 5 being sure that the seller actually had legal title to
the shares that they were selling to you and that your money was in fact good and
not Somalian warlord laundered money or at least easily identifiable Somalian
warlord laundered money that's why there's a lag and that's why delivery
versus payment has kind of two separate steps got it get it good! stay out of the water... [Man kicks other man into water]