DDU means Delivered Duty Unpaid. DDP means Delivered Duty Paid.

In a DDU shipment, except duty or taxes of importing country, all other charges hasDifference between DDP and DDU terms of delivery copy to be paid by the seller of goods. In other words, the selling cost of goods included all charges to deliver goods up to the door of consignee except duty or tax of importing country. In a DDU shipment, the seller takes care all necessary transportation, customs clearance charges, and shipping charges etc. at load port and destination port inclusive of handling charges at port of loading and port of discharge.

Who pays for DDP shipments?

DDP means the sender is responsible for paying the duties. Often, the eCommerce seller includes these fees at checkout, directly collecting the payment from the customer.

Who pays for DDU shipments?

DDU (delivery duty unpaid) means that the customer is responsible for paying the taxes and duties. They will be contacted by customs once their shipment arrives to settle any charges in order for the shipment to be released and delivered.

Who Pays Customs Duties?
Both DDU and DDP require the seller to take full responsibility for damage or loss during any transportation route until the agreed-upon destination. However, DDU terms place the responsibility for paying customs clearance duties or taxes solely on the buyer. While the seller pays shipping charges, insurance costs, and other international shipping fees, the buyer must pay the destination country’s actual duties.

DDP terms require the seller to pay for the duties and taxes in addition to all other fees and costs associated with shipping. All the buyer has to do is wait for the shipment to arrive.

With DDP shipments, sellers may charge slightly more to recoup the cost of duties and other fees. However, they are still responsible for paying the appropriate parties on-time and with no delays.

The seller also has to absorb any unexpected costs, even if the duties are much higher than expected. If there are paperwork-related delays at customs, the seller is also responsible for any storage or additional administrative fees.

Using a Freight Forwarder
Freight forwarders help sellers navigate the intricacies and occasional changes to DDP and DDU shipping. They take care of the logistics required for DDP shipping, including working with customs brokers to ensure all duties and taxes are paid as quickly as possible. Using a freight forwarder makes subsequent connections to drayage and intermodal shipping hubs as seamless as possible.

Freight forwarders can also help with DDU shipping. The seller’s freight forwarder is responsible for everything up to the customs clearance process, where the buyer’s freight forwarder or customs broker takes over. In many cases, the responsibility for the goods transfers back to the seller’s freight forwarder if further transportation over land is required.

What is DAP?
DAP stands for Delivered-at-place and essentially means that a seller has agreed to pay all the costs, including transportation costs, and is ready to incur any probable losses of moving cargo from origin to destination. The buyer’s responsibilities include carrying out all import formalities and paying for unloading, import duties, and clearance or local taxes after the shipment arrives at the destination port.

What is DDP?
DDP stands for Delivered Duty Paid. This Incoterm states that the seller is responsible for all costs and risks related to the goods’ movement from origin to destination port until the buyer receives them. This is the Incoterm that places maximum responsibility on the seller while the buyer is only responsible for receiving his cargo and unloading it.
Just like Delivered-at-place, DDP applies to all modes or a combination of modes of transportation. DDP must also be accompanied by the destination port’s name wherever mentioned within the agreement or other shipping documents.

DDP vs DAP
DDP shipping services vary only slightly from DAP shipping procedures. The significant distinction separating the two Incoterms is that DDP shipping services ensure the cargo arrives at the buyer’s physical location after the shipment is imported. By comparison, DAP shipping services are only responsible for ensuring the cargo arrives at the country’s drop-off location.
While DDU is usually the standard, some sellers use a DDP model.

How to make your customers happy
What are the consequences for foreign customers? If VAT and/or customs exceed the exemption limits, all duties must be paid on the doorstep upon receipt of the consignment. If the recipient is not present at the time of delivery or the outstanding amount cannot be paid, a collection invitation will be left for the consignment.

Please note: If you deliver your goods DAP and do not communicate this clearly when the order is placed in the online shop, the resulting customs duties may irritate your foreign customers.

When a supplier (or seller) of a product commits to a sale, they enter into a contract with a buyer. Depending on the terms of the sale contract, either the seller or the buyer may be responsible for the costs to ship the product. This sale term can be referred to as FOB shipment, or free on board shipment. There are two types of FOB shipment terms: FOB shipping point and FOB destination. Depending on what terms were outlined during the initial product sale, there are a few key differences that may affect the seller or buyer, respectively.

In this article, you will learn what FOB shipping point and FOB destination mean in regard to the sale of goods, as well as the key differences that set these two terms apart.

What is FOB Shipping?
FOB shipping is also called FOB shipping point or FOB origin. As soon as the goods arrive at the transportation site, and are placed on a delivery vehicle, or at the shipping dock, the buyer is liable for any losses or damage that occur after. The buyer would then record the sale, and consider their inventory increased.

With FOB shipping point, the buyer pays for shipping costs, in addition to any damage during shipping. The buyer is the one who would file a claim for damages if needed, as the buyer holds the title and ownership of the goods.

As an example, U.S. Company A buys watches from Vietnam and signs a FOB shipping point agreement. The cargo arrives at the receiving dock and the buyer takes ownership and liability. The watch glass breaks during transport overseas. The buyer is responsible, even though the watches were damaged before arriving on U.S. soil.

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What is FOB Destination?

FOB destination, sometimes called FOB destination point, means that the buyer takes ownership from the shipper upon delivery of goods, usually at the buyer’s receiving dock. To be crystal clear whether a shipper is referring to UCC or Incoterms, a shipper might include the final destination name and specify Incoterms definitions, by referring to FOB Savannah (Incoterms 2020) in the contract. That means the delivery port is Savannah and Incoterms definitions are referenced. Incoterms 2020 considers delivery as the point when the risk of loss or damage to the goods is transferred from the seller to the buyer.

This is also the moment that the supplier should record a sale since they’re taking ownership at the receiving dock. It’s common for high-value goods to be sent via FOB destination designation. That allows the buyer to ensure they arrive in good condition and can be inspected upon receipt. The seller retains liability until the buyer accepts the goods, ownership, and liability at the receiving dock, office or agreed-upon place of transfer, after inspecting for damage.

What is the Difference Between the Two Types of FOB?
The key difference between the two terms is which point they transfer responsibility for the goods. FOB Shipping Point means the buyer takes responsibility when the goods arrive at the shipper, but with FOB Destination the buyer doesn’t take responsibility until the goods arrive at their port.

Variations of FOB Destinations
There are four variations to FOB Destination.

Freight Prepaid and Allowed
The seller pays the freight charges and continues as the owner of the goods during transit.

Freight Prepaid and Added
While the seller pays the freight charges, they are billed to the buyer. The seller continues as the owner of the goods during transit.

Freight Collect
The buyer pays and bears freight charges when the goods are received, but while in transit the seller remains the owner.

Freight Collect and Allowed
The buyer pays the freight charge when the goods are received and deducts the freight charges from the invoice. The seller bears the freight charges and is the owner during transit.

Accounting Differences
It’s important, buyers and sellers have a point in time where the buyer takes ownership of the goods for accounting and capital assets. The moment of product transfer is needed, so it can be accurately entered in company records.

With FOB Shipping Point, the seller and buyer record the delivery when the shipment leaves the warehouse or shipping dock, but with FOB Destination, the seller and buyer record the sale/purchase when the shipment reaches the buyer’s dock. Ownership of the goods is defined by the bill of lading.

What is CFR?
CFR terms require the seller to arrange and pay for sea freight to the buyer’s indicated location. It also demands the seller to provide any necessary documentation the buyer will need to accept the goods from the carrier.
Once the vessel docks at the destination, liability rolls over to the buyer. The buyer is charged with unloading costs, import fees, duties, and any additional transportation expenses.

What is CIF?
Similar to CFR, CIF requires the seller to arrange sea freight but also necessitates the purchase of marine insurance to protect the order. The minimum agreed-upon insurance, any extra shipping costs, and mandatory documents are all handled and paid for by the seller.

CIF – Cost, Insurance, and Freight
Starting with CIF, it stands for Cost, Insurance, and Freight. In essence, it covers three factors; freight cost, risk transfer, and insurance.
1. Freight cost
Under CIF, freight costs are the seller’s obligation. Namely, the seller must arrange to deliver the goods to the destination port named in the contract, and pay the related costs.
2. Risk transfer
However, any potential risk is transferred from seller to buyer early during the shipment process; namely, when the goods are on board the shipping vessel. Such risks include the risks of damage or loss of the shipment.
3. Insurance
In terms of insurance, the seller is also obliged to pay for insurance cover. It is noteworthy, however, that said insurance is defined as the ICC’s tax payment amount, which is the minimum coverage.
Thus, if the buyer wishes to have more insurance protection, be it due to cargo value or other reasons, it will need to be arranged outside of basic CIF coverage. Namely, it will either need to be expressly agreed to with the seller in the transaction contract, or the buyer will need to make their own additional insurance arrangements.
Thus, to consolidate the CIF template;
The seller’s costs end at the export port and include export customs, freight, and insurance costs.
The buyer’s costs begin at the destination port and include import customs and transportation to their warehouse or other desired destination.
The transfer of risk occurs once the goods are on board the export ship.
Any additional insurance or other arrangements must be expressly agreed to in advance.

CFR – Cost and Freight
CFR, then, stands for Cost and Freight. Just like CIF, in essence, it also covers three factors; freight cost, risk, and insurance.

1. Freight cost
Freight cost remains the seller’s responsibility under CFR. Thus, the seller is obliged to arrange for and pay the costs and freight of goods to the destination port named in the contract.
2. Risk transfer
Also similarly to CIF, risks are also transferred from seller to buyer early – specifically, once the goods pass the rail of the shipping company’s vessel in the port of shipment. Such risks include the risks of loss, damage, or destruction of goods.
3. Insurance
However, while the two share the similarity of freight cost and risk transfer point, CFR differs from CIF in terms of the insurance. Under CFR, marine insurance is not among the seller’s obligations.
The seller is not liable for damages after the goods have been loaded on the export ship, and insurance costs affect the buyer’s inventory costs instead. Therefore, insurance will be the primary factor to consider when contemplating if CIF or CFR is better or preferable for either party.

What is a Bill of Lading?
A bill of lading is a document accompanying freight that states the agreement between the shipper and the carrier and governs their relationship when goods are transported. It details the cargo in the shipment and gives title or ownership of that shipment to the receiving party specified on the document. That party is usually the organization the cargo is being shipped to.

The bill of lading accompanying a shipment is signed by the carrier when it picks up the shipment. The signature acknowledges that the shipment is on board the carrier, whether it’s truck, rail, air, or ship. When it’s signed by the recipient, often referred to as the “consignee,” it confirms that the goods were received as described on the bill of lading. It also serves as proof of delivery.

What is a purchase order？
A purchase order is issued by the buyer (or client) at the start of a business transaction. It documents the client’s expectations in regards to products or services required, quantities, and price. The client sends this purchase order to the seller for approval. Upon approval, the purchase order becomes a legally binding document.

What’s a Purchase Order Number?
A purchase order number is a unique number found on the purchase order form. It is used only once, to distinguish a purchase order from all other orders. Most accounting software will automatically generate this number when a new invoice is being prepared. The number is referenced by both the client and seller throughout the buying transaction process, and is later used by the seller when it is time to send an invoice.

What’s a Purchase Order Number?
A purchase order number is a unique number found on the purchase order form. It is used only once, to distinguish a purchase order from all other orders. Most accounting software will automatically generate this number when a new invoice is being prepared. The number is referenced by both the client and seller throughout the buying transaction process, and is later used by the seller when it is time to send an invoice.

What is a Quotation?
A quote is created and issued before any work is done or products sold. It is a formal estimate that indicates the dollar amount for the products or services needed and it ensures that you only owe that amount (not a completely random number) for the products or services. It can be verbal or written.

A quote is often valid for 30 days from the date we issue it. But, it can be adjusted or revised upon a customer’s request. Issuing a quote does not change the inventory. This is because the work or product is not fulfilled yet. You can Request for Quote (RFQ) from different agencies and respond to your desired RFQ with a Purchase Order.

What is an invoice?
On the other hand, an invoice is a detailed list of products that have already been sold or services that have already been completed. Aside from the list, the invoice also includes dates as to when the products were sold or the services were completed, along with the dollar amount owed for each line item, and the total amount that is owed from the customer.

When you’re looking for work to be completed or products to purchase, a quote would come first, then the job would be completed, and an invoice would follow. After the amount on the invoice is paid, a receipt would complete the business transaction.

First the quotation, then the invoice
Let’s say you have a car repair business. The cold and wet UK winters can have an impact on any number of things in a vehicle. Dead batteries, weak spark plugs, not to mention the fender benders that can occur with just a little ice on the road.

The cost of repairs for a vehicle can quickly skyrocket, so it’s typically not common for someone to drop off their car to be fixed then pick it up and be presented with a hefty bill. In these situations, a quotation is the document needed.

A quotation provides your customer with an outline of what will need repairing and the total costs for the work to be done. The quote can then be approved, amended or refused by the customer before actual work commences.

Elements to include in your invoice or quotation
Document number
Document date
Quotation/Payment due date
Contact information
Itemized list of Products or Services
Dollar amount for each item line
Information about Taxes and Fees
Payment terms
Discount (if any)

There are several points of difference between a receipt and payment account and an income and expenditure account. These differences fall under the following categories:

(1) Nature

Receipts and Payments Account : It is a summary of cash and bank
It is a summary of current year transactions.
Income and Expenditure Account: It is a summary of current year
transactions. income and expenses.

(2) Commencement
Receipt and payment account: It must start with the opening balance of cash brought over from the preceding period (if any).
Income and expenditure account: It does not start with any balance.

(3) Recording

All cash and cheque receipts are recorded on debit side of receipts and payments account where as all cash and bank payments are recorded on credit side. In income and expenditure account all expenditure of revenue nature are recorded on debit side and all incomes of revenue nature are recorded on credit side.

(4) Capital And Revenue Items

There is no distinction between capital and revenue receipts and payments in receipts and payments account. All expenses and incomes of revenue nature are recorded on accrual basis in income and expenditure account.

(5) Items Included
Receipt and payment account: It may include receipts and payments relating to the period immediately before or after.

Income and expenditure account: It must include only income and expense items belonging to the period under review.

(6) Balance Sheet Requirement

Receipts and payments account is not required to prepare balance sheet. Income and expenditure account is required to prepare balance sheet.

(7) Adjustments

No adjustments are required in receipts and payments account. In income and expenditure account adjustments are made because it is prepared on accrual basis.

(8) Placing of Items
Receipt and payment account: Receipts are shown on the debit side and payments on the credit side.

Income and expenditure account: If it is prepared in accounts form, all revenue appears on the credit side and expenditures on the debit side.

(9）Balance of Account
Receipt and payment account: The difference between receipts and payments represents the balance of cash in hand or at bank (or bank overdraft at the closing date).

Income and expenditure account: The difference between income and expenditure represents either surplus or deficit balance.

What is an invoice?
An invoice is a payment request (either electronically or in physical form) issued by the seller after completing the sale of goods/services but before payment. Essentially, invoices are used to make sure your business gets paid. They include information about the transaction, such as details of work completed, payment terms, your company’s unique identification number, invoice date, and total amount due. If you or the business you’re invoicing is VAT registered, you’ll also need to include some additional information on your VAT invoice.

Invoices can be created using invoicing software or drawn by hand, and since timely payments play a key role in healthy cash flow, it’s important to have the invoicing process in place from the start.

How to write an invoice
Writing an invoice is actually fairly simple, but you must include some important elements in every invoice you create. These elements are one of the biggest differences between an invoice and a receipt; an invoice usually contains more information about a transaction and its terms than a receipt. These items include:

your company name, logo and contact information;
the customer’s name and contact details;
unique invoice number;
the date the invoice was created;
Payment due date and any other payment terms;
all acceptable payment methods;
A detailed description of all purchased goods and services, including price and quantity;
The total amount owed, including any taxes.
Since invoices call for payment and record transactions, all of this information is necessary to give customers exactly what they’re being charged for and what you can expect from compensation.

What is a receipt?
A receipt is a proof of transaction provided to a customer after the customer has paid for the goods or services. Receipts typically include information about the goods/services sold, including quantity, price, and discounts, and may also provide details of the payment method used in the transaction. However, it’s important to note that there are no specific legal standards for what’s on a receipt, which means it can actually be a simple handwritten note stating the amount paid.

In brick-and-mortar businesses, receipts are often printed on-site, while e-commerce businesses are more likely to send electronic receipts via email.

How to write a receipt
Creating receipts is even simpler than creating invoices because they are much less detailed. However, they still contain important information about the transaction. They don’t need unique identification numbers or customer information, but every receipt you issue should include:

your company name, logo and contact information;
sale date;
A detailed list of products and services sold;
the price of each product and service sold;
any discounts or coupons;
The total amount paid, including any sales taxes or fees.
Some receipts may also include payment methods, terms of sale, or your organization’s return policy, as this information may be useful to customers if they wish to return or exchange an item. Order errors and returns can have a huge impact on your customers and their business experience; providing as much detail as possible makes it easier for both of you to resolve any issues that may arise.

Difference Between Invoice and Receipt
Invoices and receipts are issued at different stages of the sales process and therefore serve different purposes. Invoices are issued before customers pay, while receipts are issued after payment is received. Invoice as payment request and receipt as proof of payment.
This also means that each file requires different information. Invoices should include details of products and services, while payment receipts only need to show the amount paid and the balance due. Both documents should be clearly marked “”Invoice”” or “”Receipt””.

How are invoices and receipts written differently?
Understanding how invoices and receipts are written and formatted helps highlight their differences.

Formatting invoices:
Invoices include details about both the seller and the buyer. Most follow a standard format with the vendor’s details, such as business name, trading address and phone number, in one of the top corners of the page. The same information is provided for the customer on the opposite side of the page.
Providing invoice numbers at the top of the page makes it easier to identify invoices and payments with your accounting team.
Invoices give specific details on the products or services bought. There should be a name and description along with the rate and the quantity purchased.
There are usually other details like payment terms, discounts for cash or early payment*, the date of the invoice, payment due date, acceptable payment methods, VAT (if you’re VAT registered) and more.