Logistics and customs clearance are connected: DDP versus DAP
To create a better basic understanding, I would first like to explain what “Incoterms” are. They are known from traditional trade: Incoterms define the rules of the game and the payment and delivery modalities in international business. There are currently eleven different Incoterms (Incoterms 2010). Two of the Incoterms are important for e-commerce: DDP and DAP.
DAP stands for “delivery at place”: What does this mean?
If a delivery is sent on a DAP basis, the seller is responsible for the delivery of the goods including transport costs to the named destination at the buyer. The costs of carrying out all the necessary import formalities are expressly excluded. These are borne by the buyer, meaning that all taxes incurred when importing to the country of destination must be paid by the buyer or the recipient.
What does this mean for foreign customers? If VAT and/or customs are higher than the exemption limits, all duties must be paid on the doorstep upon receipt of the consignment. If the recipient is not present at the delivery or the outstanding amount cannot be paid, a collection invitation will be left for the shipment.
Please note: If you do not clearly communicate the Incoterm DAP to your customers when ordering in the online shop, the customs duties are likely to annoy them.
DDP - delivered duty paid
For a delivery based on DDP (delivered duty paid), the seller must deliver the goods at their own expense and risk to a destination in the import country, taking care of all formalities and paying all import duties in addition to all costs. DDP is essentially same as DAP with additional customs and tax processing. What does this mean for foreign customers? They no longer have to pay anything on receipt, the goods are delivered as if they were a national delivery. In this variant, the shipping agent has the goods cleared in the EU by a partner such as Asendia. Thereafter, no further customs duties or value added tax must be paid.
In the field of e-commerce, we draw on the expertise of experts in selected areas. The author of this article, Fabian Baumberger, is responsible for E-Commerce Solutions at Asendia. Asendia is a joint venture between the French La Poste and the Swiss Post; it offers standard and custom shipping solutions for advertising mail, business correspondence, small goods and newspapers.