The Incoterms describe the game rules for foreign commerce. Eleven different conditions are specified in the Incoterms 2020 which is the currently valid version. To e-commerce, however, only two Incoterms are important: DDP vs DAP. What do importers from China need to know? In this article by ddpch, you can read all the necessary information about DAP vs DDP.
What is Delivery At Place (DAP)?
If the cargo is shipped on a DAP basis, the seller is responsible for the shipping of the goods. This includes transport costs to the purchaser’s designated destination. The costs of conducting all the necessary formalities for imports are expressly excluded. The buyer is responsible for paying such expenses. This means that the buyer or the receiver would have to pay all taxes incurred when importing from China.
What does that mean for clients abroad? If VAT and/or customs are above the exemption cap, all duties shall be paid at the door upon receipt of the consignment. If the recipient is not present at the delivery or the outstanding sum can not be charged, the shipment will be left with a collection invitation.
Further Reading: EXW vs DDP : What is the Difference? | Full Guide Version 2020
In case you do not communicate the Incoterm DAP clearly when placing an order, customs duties are likely to annoy them.
What is Delivered Duty Paid (DDP)?
For a delivery based on DDP (delivered duty paid), the vendor must deliver the goods to a destination in the importing country at its own expense and risk, taking care of all formalities and paying all import duties in addition to shipping prices. As for additional customs and tax collection, DDP is basically the same as DAP.
What does that mean for clients abroad? The shipping happens as if the commodity was a regional distribution, they no longer have to pay anything upon receipt. In this variant, the shipping agent has a partner clearing the goods. Thereafter, no additional customs duties or VAT are payable in this agreement.
Further Reading: How to find cheap shipping from China? | DHL, TNT, and FEDEX express
DAP vs DDP : What’s the Difference?
DDP is another word (an Incoterm) for foreign trade that stands for Delivered Duty Paid. In many respects, it is very similar to DAP except that DDP reflects for the seller the full liability of cost and risk estimation from start to finish.
As with DAP, the seller in a DDP arrangement bears all of the operation’s risks and costs of shipping the products to a specified place in the country of import. But in a DDP contract, it is the seller, not the buyer, who also bears the import clearance costs and taxes.
With DDP, the seller has sole responsibility for unloading the goods to the final destination.