What is DPU Incoterm
DPU, or Delivered at Place Unloaded, means the seller has to deliver the goods to the buyer after unloading them from the transport. The delivery is complete only once the goods are unloaded, so the seller bears responsibility and risks up to the point of unloading under DPU.
DPU covers transportation delivery-associated risks and costs relevant to the shipment.
The seller is responsible for the goods and all the risks and costs for unloading and delivering them to the buyer’s specified location. This location may be a warehouse, freight terminal, depot, or any other area per the buyer’s specifications.
The responsibility and risk are passed on to the buyer as soon as the goods are delivered.
Historical Context and Evolution of the Term
Before DPU, DAT, or Delivered at Terminal, was used to specify the responsibilities of buyers and sellers in the shipping business. The only concern was that DAT dealt with rules when the delivery was to be made only at the terminal.
As supply chains evolved, the need for amendment arose, which led to the revision of the Incoterms and the introduction of DPU.
DPU offers flexibility to the buyer, allowing delivery beyond the terminal point.
Seller and Buyer Responsibilities under DPU
Obligations of the Seller:
- The packaging of goods
- Preparing commercial invoices for them
- Preparing all the necessary documents
- Marking the goods for export
- Preparing export licenses
- Dealing with all the customs formalities
- Bear the pre-carriage and main carriage charges
- Loading charges
- Delivering the goods
- Paying for unloading charges
- Giving proof of delivery
- Paying for the cost of pre-shipment inspection.
- Other charges and duties, and
- Terminal handling charges
Obligations of the Buyer
- Paying for the goods per the sales contract
- Clearing import customs duties and taxes and other import formalities
- Bear the cost of import clearance
If the buyer is unable to accept the goods on the specified date, they themselves will bear all the additional costs incurred on the shipment.
Advantages of Using DPU for Sellers and Buyers
DPU has several benefits for both the buyer and seller. Since everything is streamlined, there are fewer chances of ambiguity and disputes between both parties.
Benefits for the Seller
Once the goods reach the buyer’s destination country, the seller doesn’t have to worry about customs clearance or other formalities.
- The seller controls unloading, so it’s conducted safely and efficiently.
- Seller can choose the carrier of their choice, weighing costs, time, and other benefits.
- Risk transfer is immediate once the goods are unloaded at the buyer’s premises.
- Seller can offer competitive rates and cost control for the entire transportation process.
To ensure further smooth processing, the seller must ensure they set the prices in accordance with all the costs incurred up to delivery. The proof of delivery must also be present so there’s no further chance of dispute.
Benefits for the Buyer
For the buyer, DPU makes sense as they don’t have to arrange export customs clearance. Also, they don’t have to deal with any transportation costs, etc., until the time of delivery.
Plus, since they know the goods are the seller’s responsibility until delivery, they don’t need to arrange insurance to ensure the safety of the shipment.
- Buyers only have to pick up the goods once the final delivery has been made to their location.
- The buyer is informed of the total costs, as mentioned in the contract. There are no hidden charges or expenses.
- The seller bears all charges related to any loss of goods or damage to the shipment until the point of delivery.
How DPU Differs from Other Incoterms
DPU is quite similar to other Group D Incoterms in that, in all these rules, the seller is responsible for most of the costs and risks related to the goods until they reach the destination point.
Let’s take a look at the key differences between DDP, DAP, and DPU.
DPU vs DDP
Delivered at Place Unloaded (DPU) and Delivered Duty Paid (DDP) differ in a way that:
- In DDP, the seller pays all duties and taxes relevant to the goods for export and import. In DPU, the seller only pays for export clearance, and all import duties and taxes are the buyer’s responsibility.
- In DDP, the goods may or may not be unloaded at the destination. Whereas DPU is conditional to the actual unloading of the goods at the buyer’s destination
- So, the seller is slightly more bound under DDP due to additional customs responsibilities, i.e., import formalities.
DPU vs DAP
In both DAP (Delivered at Place) and DPU the seller is responsible for the goods til they arrive at the destination. Here’s the difference between both, though:
- In DAP, like DDP, the goods may or may not be unloaded at the destination. But DPU requires the complete unloading for the delivery to be completed.
- In DPU, the seller is responsible for unloading the goods, whereas in DAP, the buyer is responsible for unloading.
- Under DAP, the goods may be delivered to even more specified locations, such as the buyer’s premises, a new construction site, etc. In contrast, DPU requires delivery to be made at a place where unloading the goods will be possible.
Scenarios where DPU is Preferred
- For instance, MNCs usually prefer DPU when importing goods into foreign markets. Since they have the right expertise and compliance teams to look into all customs regulations and can handle the import process on their own, they find DPU more cost-effective.
- Consider another scenario where an e-commerce seller is considering international shipping. The seller will prefer the DPU terms as they offer more transparency and control over the import customs duties and taxes. The customers will, in turn, have a smoother trade with them when they are assured they won’t be overcharged for these duties and taxes.
Conclusion
So, is DPU the right Incoterm for you? Or should you look into other terms for your sales contract? It all depends on different aspects, like how much risk you’re willing to undertake with the goods, your budget limitations, the duties and fees of various ports, etc.
Once you know the essential responsibilities and benefits of a seller and buyer, you’ll better decide which options work best for your business line.
