(B)logistics: DDP v. DAP Incoterms, Know Your True Shipping Costs (2024)
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Knowing your Incoterms can help you more reliably project true shipping costs and establish your product pricing. Matt Parrott, Deringer’s Director of Transportation, provides insight regarding the differences between DDP (Delivered Duty Paid) and DAP (Delivered at Place).
Under DDP, the Buyer is only responsible for unloading. The Seller is responsible for everything else including packing, labeling, freight, Customs clearance, duties, and taxes. Conversely, under DAP, the buyer is responsible for not only the unloading, but the Customs clearance, duties, and taxes as well. Depending upon which Incoterms you and your supplier negotiate, will determine a which point you become responsible for certain risks and costs.
If you’re the seller under DDP or the buyer under DAP, you will need to be familiar with the Customs clearance, and duties and taxes of the importing country. For more than 160 countries around the world, taxes may include a value-added tax (VAT). At an estimated 20% to 30%, VAT could change dramatically impact your product pricing.
As a seasoned logistics professional with extensive expertise in international trade and shipping, I have a comprehensive understanding of the intricate details surrounding Incoterms, particularly the distinctions between DDP (Delivered Duty Paid) and DAP (Delivered at Place). My hands-on experience in managing transportation operations, coupled with a deep knowledge of customs regulations and global shipping practices, positions me as a reliable source to shed light on the critical aspects of these Incoterms.
In the realm of international trade, Incoterms play a pivotal role in defining the responsibilities and liabilities of buyers and sellers throughout the shipping process. The article in question, dated March 13, 2018, underscores the significance of knowing your Incoterms to accurately project shipping costs and formulate precise product pricing strategies.
Under DDP, the article notes that the buyer's responsibilities are limited to unloading the goods. In contrast, the seller assumes a comprehensive role, encompassing tasks such as packing, labeling, freight, Customs clearance, duties, and taxes. This places a significant burden on the seller, but it also provides the buyer with a higher level of convenience and reduced risk.
Conversely, DAP shifts a considerable portion of the responsibilities to the buyer. Not only is the buyer responsible for unloading, but they also bear the duties of Customs clearance, as well as the payment of duties and taxes. The choice between DDP and DAP in negotiations with suppliers dictates the point at which these risks and costs transfer from one party to the other.
For those acting as sellers under DDP or buyers under DAP, a crucial aspect highlighted in the article is the need for familiarity with the Customs clearance procedures and the duties and taxes applicable in the importing country. This involves navigating the complexities of more than 160 countries, where taxes, such as the value-added tax (VAT), can have a substantial impact on product pricing. The article suggests that VAT, estimated at 20% to 30%, could dramatically alter the cost structure of your products.
In essence, the insights provided by Matt Parrott, Deringer’s Director of Transportation, emphasize the importance of making informed decisions when choosing between DDP and DAP Incoterms. Understanding these distinctions is crucial for optimizing cost savings and ensuring a smooth and efficient international shipping process.
Under DDP, the Buyer is only responsible for unloading. The Seller is responsible for everything else including packing, labeling, freight, Customs clearance, duties, and taxes. Conversely, under DAP, the buyer is responsible for not only the unloading, but the Customs clearance, duties, and taxes as well.
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.
Delivered At Place (DAP) shipping is an international trade term describing a deal where the seller is responsible for all costs related to deliveries until they reach their destination.
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.
Under DAP, the buyer only pays the unloading fees and the import duty, taxes, and customs clearance, and the seller is responsible for all other costs.
What is Delivered at Place (DAP)? An Incoterms® rule, applicable to any form or forms of transport (air, ocean, ground, or multimodal), under which the seller is responsible for delivery of the goods, ready for unloading, at the named place of destination (often the buyer's place of business).
DDP: The customer sees all charges, including product price, sales tax, delivery fee, and duty rates. They know exactly how much they'll have to pay to get the product delivered to their door and can make an informed purchasing decision. DAP: The customer sees the product price, and delivery fee.
DAP shipping offers security and protection to both parties, at different stages of the journey. The buyer can have confidence knowing that their goods will be delivered from the origin to their delivery location (agreed on by both parties), and will be ready for unloading.
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.
Options: FedEx DDP offers faster shipping speed and up to date tracking. DDP AIR is our own shipping method that we contract with multiple carriers for a more economical shipping experience if you are in no rush to receive your package.
Under DDP terms, the DDP charges are borne by the seller, including packing and loading cost, transportation & delivery cost, freight charges for freight forwarding fees, terminal and loading charges till port, insurance, and duty charges, and custom clearance charges (both for export & import).
In a DAP shipment, the seller is only responsible for the delivery of the goods to an agreed-upon location. With DDP shipments, the seller is responsible for delivering the goods to the buyer's final destination, which is typically their warehouse or store.
Delivered-at-place (DAP) is an international trade term used to describe a deal in which a seller agrees to pay all costs and suffer any potential losses of moving goods sold to a specific location.
It imposes the highest risk of loss on sellers because they have to assume all charges to the point of delivery. This does give the seller control over the shipment, but it also means they are responsible for the goods from the time of purchase until they reach their port of destination and are ready for unloading.
The DAP Incoterm can be used for any mode of transport, such as sea freight, air freight, road freight, and rail freight. The Incoterm for DAP is highly flexible as the named place can be anywhere, such as a port, airport, seaport, or border crossing.
Fortunately, by utilizing Incoterms, you can make this as simple as changing EXW to DDP [name your delivery point] destination. Domestic and international use.
Introduction: My name is Tish Haag, I am a excited, delightful, curious, beautiful, agreeable, enchanting, fancy person who loves writing and wants to share my knowledge and understanding with you.
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