DDP vs. DAP: The differences explained

Understanding DDP and DAP: A breakdown of key terms and their impact

Choosing the right delivery terms is essential for a smooth shipping process. We often receive questions about the differences between DDP (Delivery Duty Paid) and DAP (Delivery At Place). Each incoterm defines where responsibility and cost transfer occur. Understanding these distinctions can help you make an informed decision for your shipments.

What Is Delivery Duty Paid (DDP)?

Under DDP, the seller takes full responsibility for:

• Transport documentation.
• Customs clearance for both export and import.
• Payment of import duties and VAT.

The seller bears all risks and costs until the goods are delivered to the agreed destination.

Important in China:

In China, it’s common for a local freight forwarder to assume the seller’s responsibilities. This means you might negotiate a ‘DDP’ arrangement with a Chinese forwarder instead of directly with the supplier. While this can be confusing, your Cargoplot forwarder can manage these responsibilities on your behalf to ensure a seamless process.

What Is Delivery At Place (DAP)?

With DAP, the seller is responsible for transporting the goods to the agreed destination. The buyer:

• Takes responsibility as soon as the goods arrive at the destination.
• Handles the unloading of the goods.
• Is responsible for customs clearance, including paying import duties and VAT.

Important in China:

Similar to DDP, local freight forwarders in China often take over the seller’s responsibilities. This can lead to a ‘DAP’ arrangement with a forwarder instead of the supplier. Again, your Cargoplot forwarder can assist you in navigating this process.

What is the difference between DDP and DAP?

The primary difference lies in customs clearance:

• DDP: The seller handles customs clearance, including import duties and VAT.
• DAP: The buyer is responsible for customs clearance and related costs.

In short, DDP includes import duties and VAT, while DAP excludes these costs.

How does this work in practice in China?

In China, local agents often consolidate multiple shipments, especially for smaller consignments. This allows them to complete customs formalities in bulk, reducing costs.

Pros and Cons of DDP in China

Pros:

• Faster than DAP, as customs clearance is pre-arranged.
• Less administrative work for the buyer.

Cons:

• No official proof of import duties and VAT payments, which could be problematic during a tax audit.

Why understanding incoterms is crucial

Knowing the differences between incoterms like DDP and DAP helps you:

• Accurately estimate your shipping costs.
• Understand risks and responsibilities.
• Prepare for a smooth import process without unexpected delays.

By understanding these nuances, you can make more informed decisions for your shipments.

Our recommendation

For small shipments, DDP is often a practical choice because it’s straightforward and fast. However, we recommend choosing incoterms that provide official proof of import duty and VAT payments. This prevents administrative complications and ensures you’re fully prepared for potential tax audits.

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Want to learn more about incoterms? Check out our guide on the most commonly used incoterms: Read now!