A shipment arrives at the border, customs asks for duties and documents, and both parties assume the other one will handle it. The goods sit in a warehouse, storage costs grow, and the customer waits. In many of these cases the answer was in the contract all along, in three letters.
What DAP and DDP mean
Both are Incoterms rules published by the International Chamber of Commerce. In the current version, Incoterms 2020, the difference is clear:
- DAP (Delivered at Place): the seller delivers the goods to the named destination and bears the risk until then. The buyer handles import clearance and pays import duties and taxes.
- DDP (Delivered Duty Paid): the seller does everything, including import clearance and payment of import duties and taxes in the destination country.
So under DAP, a shipment held at import customs is mainly the buyer’s problem. Under DDP, it is the seller’s.
Why DDP is often harder than it looks
DDP sounds convenient for the buyer, but the seller must be able to act as importer in the destination country. A foreign company often cannot do this without a local entity, a tax registration or an importer of record service. If that is not arranged before the first shipment, the goods can get stuck even though the contract is clear.
Where disputes usually come from
The contract and the invoice say different things.The agreement says DAP, the invoice or order confirmation says DDP. Check which document prevails and make sure the commercial team uses the same term everywhere.
The rule is named without a place or a version.“DAP” alone is not enough. Write “DAP [exact address], Incoterms 2020”.
Incoterms are expected to solve everything.They allocate delivery, risk, costs and customs formalities. They do not deal with transfer of ownership, payment terms or what happens if tariffs suddenly change. Those need their own clauses.
New tariffs.If duties rise between signing and delivery, the party that pays duties under the Incoterms rule bears the increase, unless the contract says otherwise. For long-term supply contracts, a tariff adjustment clause is worth considering.
When a shipment is already stopped
Read the contract and the shipping documents first, in that order, and establish which rule applies. Notify the other party in writing, keep records of all costs, and take reasonable steps to limit storage and demurrage charges, regardless of who will ultimately pay them. The cost discussion is easier when nobody can say the damage could have been smaller.
In short
Choose the Incoterms rule deliberately, name the place and the version, keep the contract and invoices consistent, and add clauses for what Incoterms do not cover. It takes a few minutes during drafting and can save weeks at the border.
Practice area: International Business
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