DDP vs DAP: who clears customs & pays the import duty + VAT?

DDP vs DAP at a glance

The two terms place the goods at the same destination, but split one decisive responsibility differently. Under DDP (Delivered Duty Paid) the seller clears import customs and pays the import duty + VAT — the buyer sees one all-in price with no surprise fee. Under DAP (Delivered at Place) the buyer clears and pays the duty + VAT on arrival, and can be hit with a fee they did not expect. The total landed cost is the same either way — what changes is who fronts the cash and carries the clearance risk.

• DDPBest for B2C and trust-sensitive sales — a fully landed, no-surprises price is a competitive advantage. The seller must be able to register for import + VAT in the destination country.
• DAPOften the safer default for cross-border B2B: the buyer is (or is legally required to be) the importer of record and keeps control of valuation and clearance.
• =Same total cost. Goods, freight, duty and VAT do not change — Incoterms® only re-assigns who pays them. DPU shares DAP’s duty/VAT split (buyer pays) and adds seller-unloads.

DDP vs DAP under Incoterms® 2020

DDP (Delivered Duty Paid) and DAP (Delivered at Place) are two of the eleven Incoterms® 2020 rules published by the International Chamber of Commerce (ICC). Both place the goods at the buyer’s named destination, but they split one decisive responsibility differently: who clears the goods through import customs and pays the import duty and VAT/GST.

The arithmetic landed cost of a shipment is the same under either rule — goods value, freight, duty and import VAT do not change. What changes is which party fronts and bears the duty and VAT, and who carries the clearance paperwork and risk. That is precisely what the comparator above shows.

Who clears customs and pays duty + VAT?

• DDP — the SELLER pays. The seller carries out and pays all customs formalities, including import clearance, import duty and import VAT/GST, and delivers the goods ready for unloading. It is the maximum-obligation rule for the seller. Per the ICC, “the seller is responsible for carrying out and paying all customs formalities, including export, import … and, if applicable, transit procedures.”
• DAP — the BUYER pays. The seller delivers the goods at the named place ready for unloading (the seller does not unload). The buyer must manage and pay for all import clearance formalities, import duty and import VAT/GST upon arrival.

Note: DDP can require the seller to be registered for import and for VAT/GST in the destination country — often impractical for a foreign seller, and in some jurisdictions the local importer (the buyer) is legally required to clear. That is why DAP is frequently the safer default for cross-border B2B.

And DPU? (the third “D” rule)

DPU (Delivered at Place Unloaded) is the only Incoterms® rule that requires the seller to unload the goods at the destination. On import duty and VAT, DPU works like DAP: the buyer handles import customs clearance and pays the duty and VAT. The U.S. Department of Commerce summarises the unloading split plainly: “Under DAP the seller does not unload the goods, under DPU, the seller does unload the goods.” The duty/VAT picture in the comparator above therefore applies to DPU as well as DAP.

Cashflow & risk: why “who pays” matters

Even though the total cost is identical, the choice of term moves real cash and risk between the parties:

• DDP simplifies the buyer’s side — one all-in price, no surprise customs invoices — but the seller fronts the duty + VAT, ties up working capital, and absorbs the risk of misclassification, valuation disputes and clearance delays. Sellers typically price that risk into the quote.
• DAP / DPU keeps duty + VAT off the seller’s books and gives the buyer control of valuation and clearance — but the buyer must be ready to front the duty + VAT and clear on arrival, or the goods sit at the border.

VAT reclaim for B2B importers

For a VAT-registered business importing goods, the import VAT is usually reclaimable input VAT: it is recovered on the VAT return, so for that party it is a cashflow timing cost, not a permanent one. Import duty is generally not reclaimable and stays a real cost. This is why the “who fronts the VAT” question is often about working-capital timing for B2B, while duty is a hard cost either way. Toggle “VAT reclaimable” above to reflect this in the verdict. (Reclaim eligibility depends on the importer’s registration and the destination country’s rules.)

CIF vs FOB customs value

Duty is charged on the customs value, and the basis for that value varies by country. On a CIF basis the customs value includes freight and insurance to the border (e.g. the EU); on an FOB / transaction-value basis freight is excluded (e.g. the United States). The comparator lets you switch basis — on CIF the duty (and the VAT base) is higher because freight is dutiable. Always confirm the basis your destination customs authority applies; it changes the duty amount, not who is obliged to pay it.

When to choose each

• Choose DDP when you are the seller, you can register for import + VAT in the destination country, and offering a fully landed, no-surprises price is a competitive advantage — and you are willing to carry the duty/VAT cash and clearance risk.
• Choose DAP when the buyer is the importer of record (or is legally required to be), wants control of valuation and clearance, or when the seller cannot or does not want to register and clear in the destination country.
• Choose DPU in the same buyer-clears situations as DAP, when the seller is also able and willing to unload at the destination point.

Frequently asked questions

Sources

• ICC — Incoterms® 2020 rules
• ICC Academy — "Incoterms® 2020: DAP or DDP?"
• U.S. Dept. of Commerce (trade.gov) — "Know Your Incoterms"