Delivered Duty Paid (DDP) and Delivered At Place (DAP) are two terms that explicitly confirm the responsibility and risk of a shipment until it reaches the intended recipient. Both terms specifically deal with who is responsible for the cost of import duties on shipments once they arrive.
What Is DAP?
With a Delivery At Place arrangement, the end recipient will pay all of the related charges, including the price, taxes, delivery fees, and duties, but they will only see the price and the delivery fee. Think of DAP as a cash-on-delivery shipment but with a hoard of unknown fees.
The customer may think they know the total of what they owe, but there will most likely be additional fees tacked on at a later point in time. However, with a DAP arrangement, import officials will calculate import taxes and duties.
From there, they will alert the carrier, who will then pass the information and cost along to the end recipient. Once paid, the shipment will be released. However, this can also end up being the first time the customer even knows that they have additional charges to pay.
Due to these unexpected expenses, customers might choose to reject the shipment, which means it will either be returned or disposed of at the shipper’s expense. With DAP shipments, the customers that accept DAP shipments will have to arrange payments with the carriers directly.
What Is DDP?
In a Delivered Duty Paid (DDP) arrangement, the end customer will see all of the related charges, including the price, taxes, delivery fees and duties. You can think of DDP as a buy-now shipment situation.
The customer knows the total amount of money that they will need to pay in order to have a shipment delivered to their door. Once customs and import officials verify the payment, the package will be delivered.
Comparing DAP & DDP
DDP is better for end consumers and first-time consumers, whereas DAP protects both the buyer and the seller equally by making sure the origin and destination requirements are adhered to in a strict manner. Though DAP shipping is great for the buyer, shippers may end up dealing with the brunt of the costs due to a tariff change, which the buyer is no longer responsible for contractually.
Their Purpose
DAP and DDP shipping are both intended to protect buyers from undue risks that are associated with international shipments. DAP shipments can instill trust in a seller from its international customers, whereas DDP shipments can help customers trust that there is no fraudulent activity taking place. Regardless of whether you opt for DAP or DDP, the shipment’s point of origin and the delivery process are airtight.
Risks Involved
In DDP transactions, the customer can be fully hands-off in the process, there is virtually no risk to the customer because the liability doesn’t exist on the buyer’s side, but that means the seller maintains all risk.
Inversely, DAP puts more risk on the seller in the case that a shipment is rejected. The main risk of DDP shipping for a buyer is that there is no visibility of what’s happening on the supply chain side of things.
Supply Chain Visibility
Unlike DDP, DAP shipping puts more of the onus on the buyer when it comes to the shipping process. Furthermore, with DAP shipping, you can track where your cargo is coming from and when, as well as the moment the package arrives at its destination.
Buyer and Seller Responsibilities
With DAP shipments, a buyer is responsible for figuring out the best carrier for themselves once the shipment is in their country of origin. This includes accepting the invoices for all of the costs that come with your package being delivered.
With DDP shipments, the seller needs to familiarize his- or herself with the terms of the country they are shipping to. They must also ensure that they correctly price their goods and all associated fees so that they don’t operate at a loss.
A Secure Solution for International Shipping
Though they both offer their own sets of pros and cons, DAP and DDP are necessary shipping options for international packages. They are two distinct ways of ensuring that both parties will get what they paid for in a timely and safe manner.
FAQ
Both solutions have pros and cons, it truly depends on what terms work better for the situation.
The main difference is the DAP puts the cost on the recipient and DDP puts the cost on the seller.
The buyer pays import duty on DAP terms.