DPU Incoterms: Meaning, responsibilities and advantages

DPU Incoterms: Meaning, responsibilities and advantages

The International Chamber of Commerce (ICC) introduced DPU Incoterms in 2020, replacing the older DAT (Delivered at Terminal) Incoterm.

The change aimed to provide greater clarity and better reflect modern trade practices, where delivery isn't always limited to a terminal.

The biggest difference between the DPU Incoterms and all the others is that the supplier is responsible for unloading the goods at the agreed destination.

While the supplier (exporter) bears the cost and risk of transportation and unloading, the buyer (importer) manages import clearance and any associated expenses.

In this guide, you’ll learn:

• Meaning of DPU Incoterms
• Buyer’s and supplier’s responsibilities
• An example of DPU Incoterms
• Advantages and disadvantages
• Frequently asked questions about DPU

What are DPU Incoterms?

DPU Incoterms (Delivered At Place Unloaded) rule is one of the 11 Incoterms defined by the International Chamber of Commerce (ICC).

Under DPU, the supplier's obligation is fulfilled by delivering the goods to the named place of destination and unloading them.

The risk transfers to the buyer once the goods are unloaded.

DPU Incoterms agreement is beneficial when the buyer wants the supplier to handle the transportation and unloading at the destination.

Since the destination can be virtually anywhere, from a port to the buyer's warehouse, DPU is suitable for various situations, including door-to-door deliveries.

Key features of DPU Incoterms explained:

• Point of delivery: The parties can agree on a specific address, warehouse, port, terminal, or another location within the buyer's country as the shipping destination.
• Modes of transport: Delivered at Place Unloaded Incoterms rule is applicable to all modes of transport (sea, air, rail, or road), including multimodal.
• Insurance coverage: Negotiable. The seller doesn’t need to provide insurance.

💡 The ICC revises the Incoterms every decade to align with evolving trade practices. The most recent editions are Incoterms 2010 and Incoterms 2020.

When integrating an Incoterm like DPU into a contract, you must explicitly specify the edition being referenced to avoid ambiguity and misunderstandings. 

Read more: What are the types and rules of Incoterms?

Supplier’s and buyer’s responsibilities under DPU Incoterms

DPU Incoterms rule provides a structured framework for supplier's and buyer's responsibilities.

Let's break down the specific obligations for both of them.

Supplier’s responsibilities

• Export packaging: Ensuring that the goods are securely packed for international shipment.
• Loading charges: Covering the costs of loading the products onto the initial carrier at the collection point.
• Delivery to port/place: Transporting the goods to the carrier or designated party at the specified port or location as outlined in the contract.
• Export formalities: Handling the export duties, taxes, and customs clearance processes.
• Origin terminal charges: Bearing the expenses associated with the origin terminal, including handling fees.
• Loading onto carriage: Overseeing the loading of the items onto the primary mode of shipment.
• Main freight charges: Taking care of the main transportation costs to the designated location.
• Destination terminal charges: Covering the expenses at the destination terminal, such as unloading and handling, up to the agreed-upon delivery point.
• Delivery to the final destination: Assuming responsibility for the goods once they reach the specified place, port, or terminal, and arranging further transportation to the final destination (buyer’s premises or designated place).
• Unloading at destination: Managing the costs and responsibilities of unloading the goods, unless otherwise agreed.

Buyer’s responsibilities

• Import formalities: Managing all import procedures and associated expenses, including customs duties, taxes, and clearance in the destination country.

An example of DPU Incoterms

Let's illustrate how the DPU Incoterms agreement works with a practical example. Imagine FreshHarvest Ltd., a British organic produce retailer, orders 1,000 cases of organic avocados from AndesGrowers, a Peruvian agricultural supplier. They agree to use Delivered at Place Unloaded Incoterms, specifying delivery to FreshHarvest’s distribution center in Birmingham.

Supplier’s responsibilities (AndesGrowers)

AndesGrowers handles the packaging of the avocados, preparing all necessary export documentation, and clearing export customs in Peru.

They arrange and pay for transportation from Peru to Birmingham, covering all costs associated with unloading the avocados at FreshHarvest’s distribution center.

Under DPU Incoterms, AndesGrowers assumes all risks and expenses until they unload the avocados at the agreed location in Birmingham.

This includes managing sea freight to the Port of Southampton and the subsequent road transport to FreshHarvest’s distribution center, where they oversee the unloading process.

Buyer’s responsibilities (FreshHarvest Ltd.)

FreshHarvest handles import customs clearance, duties, and taxes upon the avocados' arrival in the UK.

After the unloading at their distribution center, FreshHarvest assumes all further risks and expenses.

They also conduct a quality check to ensure the shipment meets their order specifications.

In summary, under DPU Incoterms, AndesGrowers manages and finances all transportation and unloading costs up to delivery at FreshHarvest’s distribution center.

FreshHarvest then takes over responsibility once they unload the goods.

Advantages and disadvantages of DPU Incoterms 

Like any Incoterm, DPU comes with its own set of advantages and disadvantages. Understanding these can help you determine if DPU is the right fit for your specific needs.

Advantages

• Control for the supplier: The supplier controls most of the logistics, which allows them to optimize transportation and potentially negotiate better rates.
• Predictable costs: With the supplier managing most of the expenses, the buyer can better predict their costs related to the purchase.

Disadvantages

• Higher costs: The supplier bears most of the expenses associated with transportation, insurance, and unloading, which can be significant, especially for long-distance shipments.
• Increased risk: The supplier assumes responsibility for the goods until they are unloaded at the destination, exposing them to potential risks like damage or loss during transit.
• Limited control for the buyer: The buyer has limited control over the logistics, which might be a concern if they have specific requirements or prefer to manage the transportation themselves.

💡 Keep in mind that both buyers and suppliers must carefully evaluate advantages and disadvantages within the context of their specific business needs, risk tolerance, and logistics capabilities.

Learn more: What is export finance and how can it help SMEs?

DPU Incoterms: Frequently asked questions (FAQs)

What is the difference between DAP, DPU and DDP Incoterms?

Under DAP and DDP, the seller (supplier) delivers the goods to the specified location without unloading them.

In DPU, the seller delivers and unloads at the specified location. In DAP and DPU, the buyer handles import clearance. In DDP, the supplier takes care of import clearance.

Who pays duty on DPU?

Under DPU Incoterms, the supplier manages the whole process up to the point of unloading the goods at the destination. This includes packing, loading, delivery, export duties, and all transport costs. The buyer only pays for import duties, taxes, and customs clearance once the goods arrive.

When to use DPU Incoterms

DPU Incoterms rule is ideal for scenarios where the supplier prefers to maintain control over the logistics up to the point of unloading at the specified destination.

This arrangement allows the supplier to ensure the products are handled properly during transit and unloading, and it provides an opportunity to negotiate better shipping rates.

For the buyer, DPU offers a simplified process, as their responsibilities begin only after the goods have been unloaded at the specified location.

‍If the named place is the buyer's warehouse, for example, the buyer only needs to deal with import clearance, making the process straightforward and convenient.

However, consider other Incoterms if the supplier wants to minimize costs and risks, or if the buyer prefers greater control over logistics and wants to manage transportation themselves.

Ultimately, the best Incoterm depends on the specific circumstances of the transaction and the preferences of both parties.

Carefully consider your needs and consult with experienced professionals to make informed decisions that protect your interests in the complex world of international trade.

Learn more about other Incoterms:

• EXW (Ex Works)
• FCA (Free Carrier)
• FAS (Free Alongside Ship)
• FOB (Free On Board)
• CFR (Cost and Freight)
• CIF (Cost, Insurance, and Freight)
• CPT (Carriage Paid To)
• CIP (Carriage and Insurance Paid To)
• DAP (Delivered at Place)
• DDP (Delivered Duty Paid)

At Stenn, we understand the importance of streamlining international trade processes. As the largest and fastest-growing online platform for financing small and medium-sized businesses operating in global trade, we focus on providing the necessary resources and support for business success.

If you're looking to optimize your working capital, improve trading terms, and accelerate your business growth, consider exploring Stenn's invoice financing and factoring services.