If you’re looking to move your products, but don’t know which option is right for you, it can be hard to know what exactly DDP delivery duty paid and DAP (delivered at place) mean. In this article, we will give you insights into the DDP and DAP Incoterms and the difference between the two shipping methods, and which one is the right option to move your goods.
First, let us know what DDP and DAP mean.
WHAT IS DDP?
DDP Delivery Duty Paid, also known as “Delivered Duty Paid, is a delivery method that involves the seller/shipper is responsible for all aspects of shipping and customs clearance. The seller/shipper pays for the cost of transporting goods to their destination and is also responsible for any taxes or duties.
This is an ideal situation for small businesses or individuals who need to ship internationally but don’t want to deal with calculating duty costs themselves. DDP is used by the vast majority of e-commerce sellers on the Amazon marketplace.
This is a popular method because it allows companies to avoid paying import fees on their products and saves them time that would have otherwise been spent trying to figure out what fees are owed by both parties.
Using DDP delivery services, you will avoid unexpected costs when the goods arrive.
WHAT IS DAP?
DAP Stands for Delivered at Place. In international trade, a delivered-at-place (DAP) transaction is one in which the seller agrees to cover all expenses and losses associated with the arriving means of transport of goods to a particular location.
DAP means that the seller bears all costs related to transporting their goods to the desired destination, but they do not pay any import fees or taxes. It means, once the shipment has arrived at the named place of destination, the buyer is responsible for paying import duties and all relevant local taxes, including clearing and municipal taxes, under delivered-at-place arrangements.
This type of delivery is typically used when a seller wishes to use their own mode of transportation or if they wish for their goods to be transferred from one mode of transportation to another without any additional cost incurred by themselves.
It is important that the buyer has agreed with the supplier on the DAP shipping terms before proceeding with this method.
DDP vs DAP
DDP and DAP are both terms associated with the process of delivering goods to a buyer. Here are the significant differences between the two methods:
DDP
- The seller must cover all costs of transport from packing areas to delivery locations and organize carrier contacts with all carriage companies that assist with the delivery process.
- the seller assumes the responsibility for all costs up until the point in which the goods arrived at the desired location.
- The seller must also ensure that all paperwork required for customs clearance procedures is completed before ceasing liability for their goods or products. It means, the seller is responsible for the arrangement of Tax payment, import duties and import clearance.
- The seller will be held liable for the costs for the damaged and lost item during transit.
DAP
- The buyer is responsible for the payment for goods as specified in the sales contract
- The seller is responsible for everything, including packaging, documentation, export approval, loading charges.
- The buyer will be responsible for unloading the goods and clearing them for import. If a customs inspection is necessary, the buyer is responsible for the costs of the inspection.
- The seller is responsible for the Pre-carriage and delivery to the desired location.
PROS
DDP | DAP |
Reduces the chance of paying for damages during transit, as the buyer is responsible for them | Less expensive than the other methods because it doesn’t require multiple shipping costs and customs fees. |
The buyer will be able to know the total costs involved and can forecast the profit margin. This is important as seller as you don’t have to worry about calculating taxes or duties and submitting them. | The seller is responsible for any additional charges incurred during the shipment procedure. |
Less worry in the part of the buyer as the seller will handle all the import transactions and costs. | The seller bears all risks of loss or damage to the goods until they have been delivered to the location. |
If you’re buying something large or expensive like furniture or electronics, then DDP can help you save money on shipping costs overall because those fees are included in the price already. | |
No extra fees upon delivery | |
Great for sellers who have products that might have high tariffs | |
It’s the easiest way to import products from overseas. |
Cons
DDP | DAP |
May be more expensive than other methods because it’s not as common and doesn’t have as much competition. As a result, there are fewer options for sending packages with this method, which means higher prices. | Buyer is responsible for collecting any duties and taxes on your own. |
Since all duties and taxes are assumed by the seller, they will charge you higher prices and you cannot request a refund if they are much lower than the exact cost. | If you’re not sure how much you’ll owe, it can be difficult to know how much profit margin you need while still being able to make ends meet after paying the costs. |
As a buyer, you have no control over the movement or importation of the goods. | The buyer is responsible for any risks and losses after the goods are delivered to him |
There may be additional costs involved in transporting goods from one country to another if they cannot be shipped directly |
If you are ordering from alibaba.com, it is best to contact the supplier to negotiate the shipment.
Here is a sample of DAP method on Alibaba.com:
In the image above, it shows the cost to ship 1 piece sample of hanging planter product to an Amazon warehouse is USD83.11 using DAP.
You can always use Alibaba calculator to estimate the cost. But for customized products, then you need to negotiate with them. Each supplier has different shipping method options and shipping terms. Sometimes, they don’t offer both methods and there are instances when a supplier doesn’t have shipping services. You can also use a freight forwarder option and ask for a quotation for each method so you can see which method suits your needs and requirements.
Other widely used Incoterms are CIF & FOB.
DDP vs CIF
CIF is short for “Cost, Insurance and Freight”). Under this shipping term, the seller delivers the goods, cleared for export, onboard the vessel at the port of shipment. The seller also pays for the transport of the goods to the port of destination and also obtains and pays for minimum insurance coverage on the goods through their journey to the named port of destination.
CIF is cheaper than DDP because it only includes freight costs up until the point where goods are delivered to the port. The buyer then pays all costs associated with clearing customs and delivering their goods once they arrive at their destination port—including paying any taxes and duties due to them by law.
This means that businesses using CIF must factor these extra costs into their prices when selling internationally; otherwise, they risk losing money on every sale made through this method.
DDP vs FOB
As mentioned, DDP means that the buyer has to pay for all of the costs associated with delivering a product to them, including insurance and any tariffs.
FOB stands for “Free on Board.” Under FOB terms, the seller clears the goods for export and ensures they are delivered to and loaded onto the vessel for transport at the named port of departure.
The buyer pays all costs and risks of loss or damage to the goods from that point until they are delivered to their port destination. It means, the buyer will take over the risks and costs such as tax, customs, and insurance once delivered to the named port of origin.
This is different from EXW (Ex-works) in which the seller is only required to make the goods available for pickup at the seller’s warehouse or another business location. Under EXW, the buyer is responsible for all the risk and transportation costs.
FINAL THOUGHTS
When choosing the best shipping method, it’s important to know the cost implications and the duties that will be applied to your product. In the end, it’s really up to you. There are times when one Incoterm will be preferable over another. The key to making a smart choice is to educate yourself on both and compare the two before ultimately deciding what option is best for your business and operation.
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