DDP incoterm: meaning, DAP vs DDP and who pays the duties

DAP and DDP both belong to the arrival family of incoterms, in the Incoterms 2020 published by the International Chamber of Commerce and in force since 1 January 2020. In both cases, the seller arranges and pays for main carriage to the agreed place: a warehouse, a delivery address, an inland port. The difference comes down to a single item, import customs clearance.

Under DAP, the seller delivers the goods made available to the buyer at destination, on the arriving means of transport, not unloaded. The buyer then takes on the import customs formalities, payment of duties and taxes owed, and unloading. Under DDP, the seller's level of obligation is at its highest: it bears all risks and costs up to the agreed place, including import customs clearance, and delivers goods already cleared, ready to unload.

Under DAP, the buyer remains the importer: it files the import declaration, pays the customs duties calculated on the goods' customs value, and settles the import VAT. It is also the buyer who, as a taxable person, can then deduct that VAT under the usual conditions.

Under DDP, the seller advances the customs duties and import VAT, at the destination country's rate, since it acts as the importer. To recover that VAT, it must in principle be VAT-registered in the destination country: without local registration, it often remains a final cost borne by the seller, or passed on in the price. A Chinese seller that stitches together a DDP with no tax structure in Europe takes on this risk, or passes it, one way or another, on to the buyer.

The comparison comes down to a handful of turning points, to check systematically before signing an order under either term.

A Chinese company selling DDP to the European Union must, in theory, hold an EORI number and a VAT registration in a member state to act as importer. Without these identifiers, it cannot be treated as an importer established in the Union, and the rules on indirect customs representation apply: a third party, often a customs agent or a consolidator, then files the declaration in its name.

In practice, many suppliers who quote DDP delegate this whole area to a logistics consolidator or a freight forwarder, without the buyer knowing who is actually registered as the importer or what value was declared to customs. Under-declaring value, to reduce the duties and VAT paid, is a known risk of this arrangement on some DDP shipments from China: it exposes the goods to a hold in case of inspection, and the buyer, as the consignee, can find itself drawn into the checks even without having signed any declaration.

Another direct consequence for the buyer: not being the registered importer under DDP, it generally cannot recover import VAT by self-assessment, unlike what it would do under DAP or an ex-works-type incoterm. A poorly managed DDP service can therefore end up costing more than the invoice suggests.

A DDP is not to be dismissed on principle: it can work well when the seller genuinely has an import structure in Europe. It still needs to be checked before signing, with a few precise questions.

Comparing two factory quotes only makes sense at the same incoterm: a DAP price and a DDP price do not cover the same charges, and an ex-works price even less so. The benchmark that matters for deciding whether an import stays profitable is the landed cost, that is, the product price plus freight, insurance, customs duties, any non-recoverable VAT, and ancillary charges up to your warehouse.

A poorly checked DDP can show an attractive figure at the quoting stage, then reveal hidden costs, in the form of a customs inspection, a delay or unrecovered VAT. Working out the landed cost ahead of time, rather than after receipt, avoids this unpleasant surprise, whatever incoterm is used.

Sorva is a trading house: we buy the goods in China, then resell them to you, delivered, at a price fixed in advance. You do not have to interpret a DAP or DDP quote sent by a factory, nor check an EORI number or a declared customs value yourself: our Chinese-speaking team in Guangzhou negotiates the departure terms with the supplier, and our organisation arranges transport and delivery to you.

The Produce and Deliver plan, at 1,590 euros excluding tax, covers production oversight and freight to your door, with a delivered price set from the start. The Turnkey Business plan, at 2,490 euros excluding tax, goes further still, from product and factory search through to going live on your shop. In both cases, you open a file, we negotiate the goods for you and we take a commission on their ex-works value.