Incoterms 2020: what DDP requires of the seller

Incoterms are three-letter rules published by the International Chamber of Commerce that define, for a sale of goods, who arranges what, who pays for what, and at which precise point risk passes from seller to buyer. They are referenced in a majority of international contracts and understood in detail by a minority of the people who sign them.

The eleven terms, briefly

One column in that table matters more than the others. DDP is the only term that places import clearance on the seller. Import clearance is the obligation that requires standing in a country the seller may have no presence in at all.

Why DDP gets agreed

It is commercially attractive, and the attraction is genuine. The buyer receives a single delivered price with no customs process to manage and no surprise duty invoice. Sales teams like quoting it because it removes the buyer's objections about complexity. For consumer-facing sales it is close to an expectation.

Why it then goes wrong

Import VAT is usually unrecoverable

In most VAT jurisdictions, import VAT is recoverable by the party that imports the goods, provided that party is registered there. A foreign seller acting as importer under DDP typically has no registration, so the VAT becomes an unrecoverable cost. The buyer, who could have recovered it, never had the opportunity.

On a shipment with meaningful VAT exposure, this single point routinely costs more than the entire freight.

Some countries do not permit it

A number of jurisdictions require the importer of record to be a locally established entity, or require a fiscal representative. A seller with no local presence cannot lawfully act as importer at all, and the shipment stops at the border until the arrangement is restructured, usually under time pressure and at cost.

The obligation continues after delivery

Acting as importer of record carries responsibility for the accuracy of the entry (classification, valuation, origin) and exposure to post-entry audit for years afterwards, in a jurisdiction whose customs authority the seller may never have dealt with.

DAP as the practical alternative

Delivered At Place gives the buyer nearly everything DDP offers. The seller arranges and pays for carriage to the named destination and carries the risk for the whole journey. The buyer handles import clearance and pays duty and import VAT, which they can then recover.

The commercial difference is a single line in the quotation clarifying that duties and taxes are payable by the buyer. The legal and fiscal difference is substantial.

And the other trap: EXW

Ex Works sits at the opposite extreme and carries an equivalent problem. It makes the buyer responsible for export clearance from the seller's own country, where the buyer typically has no presence and, in many jurisdictions, cannot lawfully file an export declaration.

In practice the seller ends up performing the export formalities anyway, without contractual clarity about who is responsible when something is wrong. FCA achieves the same commercial intent with the export obligation correctly placed on the party who can actually perform it. The ICC has recommended FCA over EXW for international sales for years.

Getting it right

1. 01Always state the Incoterm with a named place and the rule set: "DAP Rotterdam, Incoterms 2020". A term without a place is incomplete.
2. 02Before agreeing DDP, confirm you can act as importer of record in that country and establish what happens to the import VAT.
3. 03Use FCA rather than EXW for international sales.
4. 04Check whether the term you have agreed matches how the shipment is actually being handled: the two diverge more often than anyone expects.

Published 26 May 2026.