Why telecommunication operators in Africa still buy DDU from radio vendors such as Ericsson?

PRLog (Press Release) - Jun 05, 2008 -
I was recently in Africa after a long absence of 2 years, and I was amazed to see that nothing had changed in the way multinational corporations are selling to local telecom providers. It is quite amazing for me that they still apply a percentage on top of the price of the equipment to cover their so-called “DDU costs”.

This leads to some awkward situations where the shipment of for example a switch costs 10 times the price of the same shipment in CFR/CPT (e.g. around 40K€ instead of 4K€ for the shipment of a 40FT container to the same destination).  
Some radio vendors will argue that this fee also covers the work of their transit agent at destination…but the funny thing is that most of the time, the transit agent does indeed do the job, but invoices the final customer instead of the seller. This is the result of a common misunderstanding/misinformation regarding the DDU Incoterm, as well as an exclusive focus on the payment of custom duties whereas there are other costs involved.

The strict definition of DDU is the following (Source ICC: http://www.iccwbo.org/incoterms/id3040/index.html): “Delivered duty unpaid (... named place of destination) “Delivered Duty Unpaid” means that the seller delivers the goods to the buyer, not cleared for import, and not unloaded from any arriving means of transport at the named place of destination. The seller has to bear the costs and risks involved in bringing the goods thereto, other than, where applicable, any “duty” (which term includes the responsibility for and the risks of the carrying out of customs formalities, and the payment of formalities, customs duties, taxes and other charges) for import in the country of destination. Such “duty” has to be borne by the buyer as well as any costs and risks caused by his failure to clear the goods for import in time.
However, if the parties wishes for the seller to carry out customs formalities and bear the costs and risks resulting there from as well as some of the costs payable upon import of the goods, this should be made clear by adding explicit wording to this effect in the contract of sales”.
Therefore, when it comes to importing some BTS, RBS, node B, switches, or other microwave equipments, we recommend telecom operators to negotiate an EXW price in order to stay in control of their logistics costs, even if at the end they buy CFR or CPT.
If they buy DDU, they should set a clear responsibility matrix detailing what they are paying for. They should leave the responsibility and costs of the transit up to the seller by making it clear in the contract; otherwise, there is no added value to buy DDU, just extra costs.

Finally, if the seller is also in charge of the installation and promote a “DDU site”, the contract should make clear that “the risk for the products shall remain with the seller until the buyer has inspected the products and confirmed the duly receipt in writing”.  

For further assistance or advice, please do not hesitate to contact AllForSite.