DAP vs DDP: Which International Shipping Strategy is Right for You?

There are several shipping strategies available to e-commerce businesses, and choosing the right one for your needs is an important part of making shipping as simple, compliant and cost-effective as it possibly can be. This guide explores two of the most common options – DAP and DDP – and compares them to help you decide which is best for your business and your customers.

What does DDP mean in shipping?

DDP stands for Delivered Duty Paid. Under this shipping method, the seller assumes responsibility for all the fees and risks involved in the shipping process, all the way to its final delivery destination:

Pros of DDP

Placing all the responsibility for processing with one party – the seller – does simplify things, for the buyer in particular. The benefits of choosing DDP include:

• Buyer confidence: with a DDP service, buyers only need to receive their goods at the agreed delivery location, without worrying about risks or customs administration. This creates a smoother, stress-free experience and encourages long-term loyalty to brands offering DDP shipping.
• Better oversight of the process: seller handles everything, including transport, freight charges and customs clearance. This makes it easier to manage and control the entire process, enabling quick responses to any issues that arise.
• Reduced risk of disruption: the benefits of buyer confidence and seller oversight combine to increase the likelihood that goods will arrive at their destination without delays or complications.

Cons of DDP

Although it might seem the more straightforward approach, DDP isn’t suitable for every business, and there are a few risks to be aware of:

• Greater risk of additional costs: no shipping process is completely failsafe, and unexpected issues or disruptions can arise. Since the seller is responsible for the entire process, they must absorb any additional costs that occur, as well as the customs admin fees that are often added to the duties and taxes levied
• Potential lack of customs expertise: the seller may export to a country where they are unfamiliar with customs and duty requirements. This can result in delays, added complexity, and additional costs, which may negatively impact both service levels and the buyer’s experience.

What does DAP mean in shipping?

DAP stands for Delivered at Place and moves many of the risks and responsibilities from the seller (as they would be under a DDP service) to the buyer. Under DAP, the seller is responsible for packaging and labelling, while the buyer typically handles customs clearance, unloading, and the payment of any import duties or taxes.

Pros of DAP

In the right situations, DAP can be the preferable option over DDP for a variety of reasons:

• Reduced risk for the seller: by reducing their responsibilities, the seller faces less risk of unexpected costs or reputation-damaging disruptions.
• More autonomy for the buyer: with greater control over how, where, and when goods are shipped, the buyer can tailor the shipping and delivery process to suit their specific needs and preferences.
• Local knowledge for the customs process: buyers in destination countries are more likely to have a better understanding of their local customs and duties regulations, compared to international e-commerce staff. This reduces the chance of delays or unnecessary costs caused by unfamiliarity with local rules.

Cons of DAP

However, those advantages don’t mean to say that the DAP process is completely without risk or pitfall. Businesses using DAP should always watch out for:

• More admin burden on buyers: while some buyers might appreciate the increased flexibility and autonomy that DAP offers, others may find the additional administration inconvenient. This also exposes them to a higher risk of extra costs if something goes wrong, which can negatively impact customer satisfaction and loyalty.
• Risk of goods being lost: if a buyer refuses to pay import duties, the goods may be impounded at customs. Without completing the delivery and needing to issue a refund, the seller risks losing both the goods and any potential sales revenue.
• Slower shipping process end-to-end: buyers may not be able to start the customs and duty process until they are notified that the shipment has arrived in their country. This adds additional lead time, meaning buyers may have to wait longer to receive their goods.

What are the key differences in terms of legal responsibility and risk?

The legal framework around different types of international trade and shipping is known as Incoterms, created and regularly updated by the International Chamber of Commerce. The latest set of regulations came into effect in 2020 and provides clarity on who bears responsibility for goods at different stages of the shipping process.

Under DDP Incoterms (Delivered Duty Paid), sellers are responsible for arranging the carriage and delivery of goods to the nominated location, clearing them for import, and ensuring all relevant taxes and duties are paid. The buyer assumes legal responsibility only once the goods are made available to the buyer, either through delivery or unloading at the agreed destination.

On the other hand, under DAP Incoterms (Delivered At Place), the risk transfers to the buyer when the goods are made available for unloading, but before customs clearance and import duty payment has been processed. That means that if there are any issues with unloading, or with the payment of the relevant taxes, it is the legal responsibility of the buyer to resolve them.

Which option is right for my business?

Every business is unique, from the types of goods that they sell and their typical To work out which is the most likely to work for your organisation, you should consider the following:

• Range of shipping destinations: for businesses that primarily ship to one or a few countries, understanding and managing customs and tax responsibilities is easier, making DDP a better option. However, if goods are shipped to many countries worldwide, DAP may be more suitable for the same reasons mentioned above.
• In-house expertise and resource: handling all shipping, insurance, customs, and tax paperwork for each consignment can require significant staff time. This burden increases under DDP since the seller takes on full responsibility. A logistics partner can help alleviate some of this workload.
• Cost and profitability: any unnecessary shipping costs can erode profit margins. While DDP is often more expensive and higher-risk due to potential extra costs, it can also lead to greater customer satisfaction and, ultimately, increased revenue in the long term.
• Customer experience needs: in a global and digitised retail landscape, customer expectations are higher than ever, and it’s easy for them to look elsewhere if dissatisfied. It’s crucial to choose the shipping option that best suits your customers’ needs: DAP if they value flexibility and autonomy, and DDP if they prioritise fast delivery.

Generally, DDP is a better option if your order volumes and shipment sizes are large and frequent – for example, a US-based beauty firm importing or exporting regular shipments of cosmetics into the UK and EU – as it helps minimise the administrative burden. DAP, on the other hand, is often more suitable for smaller order volumes. However, these are just general guidelines, and we recommend seeking expert advice to ensure you choose the best option for your business’s unique needs.

Should I look for external support with a DAP or DDP service?

If you don’t have the expertise to manage DAP or DDP shipping in-house, or if you’re concerned that handling the administration will take up too much time, partnering with an expert is a smart investment. A trusted third-party logistics provider (3PL) can manage all aspects of your shipping and offer guidance on whether DAP or DDP is the best option for your business. ILG provides worldwide, multi-carrier delivery services, and has the expertise businesses need to make informed decisions and focus on growth, so reach out to us for all your logistics needs.

FAQs

What is DDU?

DDU stands for Delivered Duty Unpaid, which is the situation where a customer accepts a package and is responsible for the payment of import and customs taxes. DDU is very similar to DAP in that regard, and the benefits and pitfalls of adopting that approach are much the same as those listed for DAP above.

Is DDP shipping suitable for trade in every country?

No. At the time of writing, there are more than 90 countries that don’t allow packages to be shipped under a DDP service, including Brazil, Portugal, and a number of countries in Eastern Europe. You should check the rules for any goods destination closely before selling goods and shipping to that country – or ask your logistics partner for their expertise and advice.

Can I use DDP shipping to import into the United States?

Yes, although you should be aware that freight forwarders are unable to complete American customs clearance on the seller’s behalf. If you are selling goods into the United States, you will therefore have to be registered as an importer.

We’ve produced a guide on shipping between the US and the UK which you may find helpful.

What should I do if shipping to a country with particularly complex customs and duties?

When dealing with complex customs and duties, you have two options. First, you can opt for DAP, which shifts the responsibility for customs and duties to the buyer. Alternatively, you can partner with a logistics expert who can handle the complexities for you, ensuring compliance and a smoother shipping process.