Incoterms® 2020: DAP, DPU and DDP for delivered PPE supply
The D-terms put the seller in charge of the whole journey. The differences come down to who unloads and who pays import duty – and DDP has a VAT problem.
The D-terms put the seller in charge of the whole journey. For a hospital or an agency that wants one price, one invoice and no logistics department, they are usually the right answer. The differences between the three come down to two questions: who unloads, and who pays the import duty.
There are three, not two. DPU was renamed from DAT in the 2020 edition and is often left out of comparisons.
DAP – Delivered at Place
The seller delivers when the goods are placed at the buyer's disposal at the named destination, ready for unloading but not unloaded. The seller bears all cost and risk to that point, including main carriage and export clearance.
The buyer unloads, and the buyer imports. Import clearance, duty and VAT are the buyer's responsibility under DAP.
For deliveries within the EU customs union there is no import clearance, which is why DAP behaves like a simple delivered price on intra-EU movements and is the term we normally use for framework deliveries to Danish and other EU institutions.
DPU – Delivered at Place Unloaded
Identical to DAP with one difference: the seller unloads the goods at the named destination, and risk passes after unloading.
It is the only Incoterm that requires the seller to unload. That makes it useful where the receiving site has no loading dock or handling equipment – field warehouses, clinics, temporary storage in a humanitarian deployment – and a liability trap where the seller has no means of unloading at an unfamiliar site. Name the destination precisely.
DDP – Delivered Duty Paid
Maximum seller obligation. The seller delivers at the named destination ready for unloading, having cleared the goods for both export and import and paid all duties and taxes.
DDP produces the cleanest possible buyer experience: one price, no customs exposure, no unexpected charges. It is also the term most likely to go wrong, for a reason that has nothing to do with logistics.
The VAT problem. Import VAT is normally recoverable by the importer of record. Under DDP, the importer of record is the seller – a foreign entity that frequently cannot register for, or reclaim, VAT in the destination country. That irrecoverable VAT is then priced into the goods, and the buyer pays it as unrecoverable cost rather than reclaiming it as input tax. A DDP price can therefore be materially worse value than a DAP price plus the buyer's own recoverable import VAT, even though it looks simpler.
The ICC's guidance reflects this: DDP should be used only where the seller can, directly or indirectly, obtain import clearance in the destination country. Where the buyer can reclaim VAT and the seller cannot, DAP with the buyer as importer of record is usually the better commercial outcome.
Which to use
Practical guidance for institutional procurement:
For institutional buyers we normally quote DAP on our product range, which gives a single landed price without customs exposure. For the opposite end of the range, where the buyer controls freight and the price is lowest, see EXW and FOB. For the middle ground where the seller pays freight but the buyer carries the risk, see CIF and CIP.
The eleven Incoterms® 2020 rules
Incoterms® is a registered trademark of the International Chamber of Commerce. The rules in force are Incoterms® 2020, published September 2019 and effective from 1 January 2020. A contract that does not name the edition is ambiguous, because the 2010 rules remain valid if the parties specify them – always write the rule, the named place and the edition: `FOB Port Klang, Incoterms® 2020`.
Related: EXW and FOB · CIF and CIP · DAP and DDP
Key takeaways
Seventeen years sourcing and supplying medical gloves and PPE to governments, UN agencies, NGOs and healthcare systems. Writes on glove standards, quality management and responsible sourcing for institutional buyers, working from the source standards rather than secondary summaries.
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