The difference between incoterms DAT, DAP, DDP, and what the heck is VAT?
Incoterms 2010 is the eighth set of pre-defined international contract terms published by the International Chamber of Commerce, with the first set having been published in 1936. Incoterms 2010 is defined as, (“Delivered Duty Unpaid”, DDU). DDU is replaced by two new rules (“Delivered at Terminal”, DAT; “Delivered at Place”, DAP) in the 2010 rules.
DAT – Delivered At Terminal (named terminal at port or place of destination)
This Incoterm requires that the seller delivers the goods, unloaded, at the named terminal. The seller covers all the costs of transport (export fees, carriage, unloading from main carrier at destination port and destination port charges) and assumes all riskuntil arrival at the destination port or terminal.
The terminal can be a Port, Airport, or inland freight interchange, but must be a facility with the capability to receive the shipment.
All charges after unloading (for example, Import duty, taxes, customs and on-carriage) are to be borne by buyer. However, it is important to note that any delay or demurrage charges at the terminal will generally be for the seller’s account.
DAP – Delivered At Place (named place of destination)
Incoterms 2010 defines DAP as ‘Delivered at Place’ – the seller delivers when the goods are placed at the disposal of the buyer on the arriving means of transport ready for unloading at the named place of destination. Under DAP terms, the risk passes from seller to buyer from the point of destination mentioned in the contract of delivery.
Once goods are ready for shipment, the necessary packing is carried out by the seller at his own cost, so that the goods reach their final destination safely. All necessary legal formalities in the exporting country are completed by the seller at his own cost and risk to clear the goods for export.
After arrival of the goods in the country of destination, the customs clearance in the importing country needs to be completed by the buyer at his own cost and risk, including all customs duties and taxes. However, as with DAT terms any delay or demurrage charges are to be borne by the seller.
Under DAP terms, all carriage expenses with any terminal expenses are paid by seller up to the agreed destination point. The necessary unloading cost at final destination has to be borne by seller under DAP terms. If unloading can not be carried out by the seller, it might be better to ship under DAT (Delivered At Terminal) terms instead.
DDP – Delivered Duty Paid (named place of destination)
Seller is responsible for delivering the goods to the named place in the country of the buyer, and pays all costs in bringing the goods to the destination including import duties and taxes. The seller is not responsible for unloading. This term is often used in place of the non-Incoterm “Free In Store (FIS)”. This term places the maximum obligations on the seller and minimum obligations on the buyer. No risk or responsibility is transferred to the buyer until delivery of the goods at the named place of destination.
The most important consideration for DDP terms is that the seller is responsible for clearing the goods through customs in the buyer’s country, including both the duties and taxes, and obtaining the necessary authorisations and registrations from the authorities in that country. Unless the rules and regulations in the buyer’s country are very well understood DDP terms can be a very big risk, both in terms of delays and in unforeseen extra costs, and should be used with caution.
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DDP and taxes
The buyer is expectring delivery in the same manner as delivery from a local supplier. The buyer may refuse customs clearance and any liability associated with it. Registration of your company in the same country as the buyer or the use of a customs representative in that country is necessary for the seller to fulfill the DDP delivery. The seller must handle and pay the local taxes and VAT and it is recommended that before you send DDP shipments to verify the local customs/VAT requirements.
DDP excluding tax
Sellers quote DDP (Delivered Duty Paid) but sometimes forget that they also have to pay for the taxes. If the parties want to exclude value added tax(VAT)), this should be clearly stated: “Delivered duty paid, VAT unpaid (nam the place of destination)”. DDP can be very expensive for the seller. Risks and delays occur when tax registrations are not in place. When buyers accept DDP terms they are advised to check if their foreign supplier is registered as an importer or has sorted out tax issues. If the seller isn’t registred it’s impossible to make a DDP delivery.
VAT – Value Added Tax
Value Added Tax is expensive, sometimes 15-20% of the value of the goods plus duty. The buyer is often eligible for a VAT refund while the seller gets stuck with the expensive VAT.
https://en.wikipedia.org
/wiki/Incoterms#
Incoterms_2010
http://www.export.gov
/faq/eg_main_023922.asp
Radiant Global Logistics, Inc.
Highways and Skyways, Inc.
http://stations.radiantdelivers.com/rglcvg/Station
www.highwaysandskyways.com
Office 800-225-6878
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