DDP and DAP are a shipping process and as a buyer or a seller, knowing the difference between these two terms is important to knowing your true shipping costs, especially when selling goods to foreign countries. One can have more benefits over the other depending on the circumstances of the delivery process or the final destination.
DDP and DAP were both created to develop a more robust and better understanding of shipping practices and international commerce standards when shipping across countries.
This article will explain what DDP and DAP shipping is, what is the difference between the two, the advantages and disadvantages of both and also when one might be more beneficial to use over the other when coming to a shipping agreement between the seller and the buyer.
DDP stands for Delivery Duty Paid. This basically means that the seller is responsible for all costs and risks which are related to all of the goods movement from the origin to the destination until the customer receives them. All of the fees and risks of shipping goods are covered by the seller.
For the buyer, this means more security and reduced risks which can be important during international shipment.
Many problems for sellers using DDP occur when trying to sell internationally, in particular when passing through customs which can be problematic when selling into countries where passing or processing goods gets more complicated.
This is where it becomes beneficial for the seller to use DAP since the buyer takes full responsibility once the goods have arrived to the specified destination. This is purely because the buyer would be more familiar with how goods are processed in their country.
As reliable as DDP can be, it also carries its own cons, such as lower profits due to the increasing costs of shipping and any potential tariffs.
This means that the order values would need to be high or above average in order to remain profitable for the seller. Also, since the seller is exposed to more risks, if there would be any additional payments or fees to cover which have not been communicated, they would all have to be covered by the seller.
DAP stands for Delivery at Place. This service offers many of the same benefits as DDP while excluding some of the risks to the seller. This is because under DDP, the seller carries all responsibility of the process, further exposing them to unknown costs, especially when selling goods internationally which could potentially lead to problems at customs. With DAP, the buyer is responsible for the unloading, packaging, labeling, duties, freight and taxes.
So, what are the benefits of DAP? Both parties are protected during different stages of the delivery process.
For the buyer, they can be confident and reassured that the goods will be delivered to the agreed place, ready for the unloading process while for the seller, they have reassurance that they will not be held responsible for any potential pitfalls especially any additional required duties or taxes.
DAP also comes with its own cons. The main one of course being that the buyer might prefer the seller to take on as much responsibility of the delivery process as possible, while the seller might not feel too comfortable taking on such high risks of having to be prepared for additional costs or fees.