DDP vs DAP Shipping [FAQ, Analysis & Tips] - James & James (2024)

FAQs

What is the difference between DAP and DDP shipping? ›

The main difference between DDP and DAP is delivery to destination and who is responsible for import duty, taxes and security clearance. Under DDP, the seller assumes the maximum responsibility in costs and risk from the beginning to the end. Under DAP, the buyer bears the costs and taxes of import clearance.

Many companies will only use DDP when shipping goods by air or sea freight. Buyers benefit heavily from DDP because they assume less risk, liability, and costs. Although DDP is a good deal for the buyer, it may be a big burden for the seller because it can quickly reduce profits if handled incorrectly.

If DDP is handled poorly, inbound shipments are likely to be examined by customs, which causes delays. Late shipments may also occur because a seller may use cheaper, less reliable transportation services to reduce their costs.

When the goods have reached the specified destination, the buyer takes on the risk and responsibility for the unloading of the goods and clearing them for import. The buyer in a DAP shipping agreement also has responsibility for paying import duties and any other clearance or local taxes.

Who pays freight on DDP? In a DDP agreement, the seller of the goods is responsible for all shipping costs, as well as customs clearance fees, import duties, and VAT. Essentially, the seller pays for all fees associated with getting the goods to the buyer.

The buyer is responsible for unloading the goods. Risks are at a minimum if goods are delivered DDP, but the costs are at a maximum. The risk for the shipment passes to the buyer when the shipment arrives at the named place.

Drawbacks of DDP shipping

DDP puts a lot of pressure on sellers to understand customs regulations in different countries and how much sales tax they need to charge. Moreover, they also have to assume all risks involved with sending and delivering orders, from lost shipments to damaged items.

DDP often proves to be expensive incoterm for sellers. 2. High Risk and Complexity: Seller takes up the responsibility to bear all the risk of delivery. He is responsible for obtaining import clearance and other permits from the authority of the buyer's country which may be complex and risky for the seller.

With international trade, it's important to understand which countries do not accept DDP. There are over 90 countries that do not allow packages to be shipped under DDP. This includes: Brazil, Iceland, Portugal, Nigeria, Russia, Serbia, Slovenia, and Albania.

Under the Delivered Duty Paid (DDP) Incoterm rules, the seller assumes all responsibilities and costs for delivering the goods to the named place of destination. The seller must pay both export and import formalities, fees, duties and taxes.

What are the disadvantages of DAP incoterm? ›

Disadvantages of DAP Incoterms

Transfer of risk at the destination: The buyer assumes all risks of the international trade associated with the goods once they are delivered to the named place, even if they haven't physically taken possession of the products.

Potential Hidden Costs

In the DDP, the seller is accountable for paying taxes, such as Added Tax (VAT), VAT that can amount to 20% of the price of the merchandise and duty. For example, if shipping to a nation within the European Union, the seller has to pay for the country's applicable VAT on imports.

Definition of DAP

According to the ICC, DAP means that the seller delivers the goods at a named place of destination, but the buyer is responsible for unloading the goods and clearing them through customs.

According to DAP rules, the buyer must pay for customs clearance, unloading fees and taxes. Does DAP Include Duty? Actually, yes. When the goods in question reach a specified destination, the buyer takes on both the responsibility and risk of unloading/clearing them for import.

However, as with DAT terms any delay or demurrage charges are to be borne by the seller. Under DAP terms, all carriage expenses with any terminal expenses are paid by seller up to the agreed destination point. The necessary unloading cost at final destination has to be borne by buyer under DAP terms.

Incoterms. When goods are bought or sold “Delivery at Place” (DAP) it means that the Seller delivers the goods to a place previously agreed to by the seller and the buyer. This can be any location. The agreed place of delivery (e.g. the terminal) needs to be specifically named.

What is DDP Shipping? Delivery Duty Paid (DDP) shipping is where the seller takes all responsibility for fees and risks of shipping goods until they are delivered to an agreed place by the buyer and seller.

Fortunately, by utilizing Incoterms, you can make this as simple as changing EXW to DDP [name your delivery point] destination. Domestic and international use.

Since most businesses already refer to Incoterms when they do cross border trade, they also include them by default when doing domestic shipments. This is perfectly fine in most cases, however, both buyer and seller must be clear of their costs and obligations.