Home / Video (B)Logistics / (B)logistics: DDP v. DAP Incoterms, Know Your True Shipping Costs
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.
Find yourIncoterms cost savings, as Matt Parrott explains the difference between DDP v. DAP Incoterms.
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.
