When it comes to shipping goods internationally, there are several terms and acronyms that can be confusing for businesses that aren't familiar with them.
Two of these terms are Delivered at Place (DAP) and Delivery Duty Paid (DDP). Even though they sound similar, the two incoterms are vastly different in their applications and implications.
Keep reading to learn more about the difference between DAP vs DDP, how they are used in international shipping, and which one is the better choice for your business.
What is Delivered at Place (DAP)?
Delivered at Place (DAP) is a type of Incoterm used in international trade that states that the seller is responsible for the delivery of the goods to a specific location, and the buyer is responsible for unloading and further transportation from that point.
In DAP terms, the seller covers all of the transportation costs up until delivery, and then it is the responsibility of the buyer to cover any additional costs or risks associated with getting the goods to their final destination.
What is Delivery Duty Paid (DDP)?
Delivery Duty Paid (DDP) is an international shipping term used to describe a transaction in which the seller is responsible for paying all duties and taxes associated with the delivery of the goods.
With DDP, the seller is responsible for all costs and risks associated with the delivery of the goods up until they have been successfully delivered to the buyer. The buyer must then cover any additional costs or risks associated with getting the goods to their final destination.
The Differences Between DAP vs DDP
Both DAP and DDP state the seller is responsible for the delivery of goods up to a certain point, which includes warehousing, loading, and transportation. However, there are some key differences between the two incoterms.
Import Duties and Taxes
With DAP shipments, the buyer is responsible only for import customs clearance, duties, and taxes, whereas the seller handles export customs clearance and additional costs.
On the other hand, with DDP shipments, the seller is responsible for both clearing customs and paying duties and taxes, and the buyer does not have to pay anything additional once the shipment arrives.
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.
Risks and Responsibilities
With DAP shipments, the risk of loss or damage to the goods is transferred from the seller to the buyer once they have been delivered to the agreed-upon location. It is then up to the buyer to cover any additional costs associated with getting them to their final destination.
Conversely, in a DDP shipment, all risks and responsibilities are passed on to the seller. This means the seller is responsible for any damages or losses that may occur while the goods are in transit, as well as any additional costs associated with getting them to their final destination.
Which Incoterm is Better DAP vs DDP?
As a general rule of thumb, sellers should opt for DAP if they need to save on costs or have more control over the shipping process, while buyers should use DDP if they want to save time and resources.
DAP allows the buyer to shoulder responsibility for paying customs duties and taxes. This can be a pro or a con depending on your perspective. For buyers who are located in countries with high import tariffs, DAP can be a great way to save money. On the other hand, if you're a seller who frequently ships products to multiple countries, DAP can be a hassle because you'll have to negotiate different rates with different customs agencies.
DDP's biggest pro is that the seller is responsible for all costs associated with getting the product delivered to the buyer, including customs duties and taxes. This can save the buyer a lot of money, as they won't have to pay anything additional once the product arrives. The downside of DDP is that it can be more expensive for the seller, as they'll have to factor in all of those additional costs when pricing their products.
Make The Right Choice
When it comes to shipping terms, DAP and DDP have their own distinct advantages and disadvantages. By understanding the differences between the two, you can choose the best option for your business.
Ultimately, the buyer is always going to benefit more from a DDP arrangement. However, this doesn't mean that sellers should avoid using DAP altogether. There are certain circumstances where it can be advantageous for both parties involved.
If you're ever unsure about which term to use, Cargoflip offers a great solution. Our easy-to-use platform helps buyers and sellers alike to securely negotiate shipping terms, including Incoterms, without the hassle of paperwork.
Manage all of your shipping documents in a single place and make sure you get the best deal every time. Try Cargoflip today and take your logistics operations to the next level.