By Benny Lim      Photo：Kevin Bidwell

DDP and DDU are commonly used trade terms in the import and export of goods. However, exporters may lack a deep understanding of these terms and the costs associated with them, leading to unnecessary complications during the export process.

So, what exactly are DAP and DDP, and what are the differences between these two terms?

DDU, a term defined in the 2000 rules, has actually been discontinued since 2010. It has been replaced with DAP (Delivered at Place), which is a new term introduced in the 2010 rules and is used with a specified place of destination.

What is DAP?

The terms of DAP are defined as follows: (Delivery at Place), applicable to one or more modes of transportation. It means that the seller/exporter delivers the goods when they are ready for unloading at the destination, and the buyer takes over the responsibility once the goods are on the arriving means of transport. The seller/exporter bears all risks involved in transporting the goods to the specified destination. It is important to clearly specify the location within the agreed-upon destination, as the seller/exporter assumes risks up to that point. This term does not include duties, taxes, and other official charges payable upon importation. The importer is responsible for any additional costs and risks incurred due to delays in the import clearance process. Generally, the cost details involved in DAP can be quite varied. If using this trade term, it is advisable for importers to obtain written confirmation from the freight forwarder, ensuring there is a record of the agreement to prevent later disputes.

What is DDP?

DDP stands for Delivered Duty Paid. It means that the seller/exporter delivers the goods to the buyer after completing the import customs clearance procedures at the specified destination. Under this trade term,the seller assumes all risks involved in transporting the goods to the specified destination, as well as handling destination customs clearance, paying duties, fees, and other charges. It can be said that this trade term imposes the highest level of responsibility on the seller. If the seller cannot obtain import licenses directly or indirectly, it is advisable to use this delivery term cautiously.

What are the differences between DAP and DDP?

The main difference between DAP and DDP lies in the party responsible for the risks and costs during the destination port's import clearance process. If the exporter is capable of completing the import declaration, DDP can be chosen. If the exporter is unable or unwilling to handle import procedures, bear associated risks and costs, then DAP should be used.

The costs generated by DAP and DDP differ in the following ways:

Generally, in DDP and DAP, apart from the local charges at the export port, the costs also include freight charges. In DAP, trucking costs are included, although they are relatively simple compared to DDP. The customer is responsible for paying the customs duties, whether through monthly automatic deductions or per shipment settlements. The exporter only needs to pay the costs incurred for the delivery, such as trucking and additional charges resulting from trucking, for example, detention, demurrage, chassis fees, and so on.

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DDP costs are not complicated either; they include the costs of customs clearance, ISF filing bond, advance duties fees, taxes, and other expenses. It is important to note that due to the significant amount of taxes, custom brokerage generally avoid advancing duties, and additional punitive tariffs in US-China trade relations have increased the tax rates. This means that in addition to the basic rates based on the Harmonized System code (HS CODE), an additional 20-30% may apply. This is a daunting prospect for importers. If duty advances are necessary, the cost is approximately (duty amount * 2.5-5%), depending on the standard charges set by local customs brokerage.

In resulting, DAP requires the seller to handle the transportation and customs procedures but does not cover import duties and other expenses in the destination country. On the other hand, DDP includes transportation,

customs procedures, and import duties and other expenses in the destination country, making it the seller's responsibility.

When choosing between DAP and DDP, both the buyer and seller need to consider specific circumstances and trade conditions, including logistics costs, risk allocation, and legal requirements. In international trade, it

is common to use the International Chamber of Commerce's (ICC) internationally recognized commercial terms (Incoterms) to clarify the responsibilities and obligations of both parties, avoiding ambiguity and

disputes.

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