Incoterms: DAP or DDP for UK Exports after Brexit?
It’s something to consider - once the UK leaves the Customs Union you may want to revise the Incoterms of your exports. Lets look at DAP and DDP in detail below:
DAP (delivered at place or point)
DAP is one of the most popular of the Incoterms within Europe. It is effectively a door-to-door service. So the shipment is collected from your warehouse and delivered to the customers. With the UK currently being part of the European single market and customs union DAP is extremely straightforward - no customs formalities, no local import duty or tax.
DDP (delivered duty paid)
DDP is used currently when shipping goods outside of the EU. It is a door-to-door service but also includes the customs formalities to get the goods clear through customs and includes the local import duty. From the UK it is currently only used when shipping to non-EU countries. Companies who only ship within Europe will be less familiar with this term.
Does DDP include VAT?
Not necessaryly. The definition from the International Chamber of Commerce (ICC) does not refer to local tax (such at value added tax, VAT) being included. This is because companies who are VAT registered will claim the import VAT paid back in their quarterly return. If you do need it to include local VAT this can be specified at the time of export.
So what happens after Brexit?
I’m not here to speculate so lets just try and look at the facts we do know and the effects they may have.
At the moment the UK trying to negotiate and trade deal with Europe and fingers crossed something solid is agreed very soon. This will determine what tariffs (if any) will be applied to UK Exports to Europe.
How will this affect the incoterms?
The incoterms themselves will not change with Brexit regardless of the outcome but your customers may face extra costs such as import duty, tax and customs clearance. If this is the case and you normally ship DAP you, and your customers, will need to be conscious of these possible extra costs.
You do have other incoterms options if this is not suitable for you or your customers.
Changing from DAP to DDP
You may consider changing the Incoterms from DAP to DDP, if only temporarily until your customers become used to the new process. With DDP you would pay the additional cost of the customs clearance and the local import duty, your customer would just need to pay the local import tax. This would mean minimal change for your customer but more risk and costs for your company to pay overall.
There are many other options of incoterms available. UK companies should start revising Incoterms and preparing for all the possible options now so they are prepared. For more details see my other article and guide here: https://www.tinyurl.com/incotermsguide
I hope this has been of interest to you and given you some ideas to consider.
Disclaimer: The views and opinions expressed in my LinkedIn profile, posts and articles represent my own views and opinions and not those of any of my current or previous employers. I write my articles in my own free time to try and benefit others - if this if remotely useful or interesting to you please feel free to click like and share.
Source: ICC website. The full text of the 2010 edition of the Incoterms rules is available at https://store.iccwbo.org/. “Incoterms” is a trademark of the International Chamber of Commerce (ICC).
Group Shipping Manager at HR Smith Group of Companies
4 年I have i shipment to deal with originally goods sold and delivered on DDP incoterms from UK to Belgium before Brexit. Now I need to import the same goods from Belgium to UK with the same terms which will be EXworks as I’m I charged of all costs. How can I do that now where my customer in Belgium will not get involved in any power of attorney for the customs declarations.
Head of Trade Compliance
7 年If any EU exporter will try to charge me a VAT I will refuse such transaction as export is VAT exempt (if I am importer outside EU of course) this will mean 20-25% clear profit to exporter in case importer accept such VAT fee as this is simply exporter write off. This is rookie mistake to pay VAT charge while importing from EU. In case of no legal presence in importing country I will rather avoid DDP at any cost. If I am exporter shipping DDP I should be aware in case of any questions during audit from importing country Customs as I might become sponsor for trip of Custom's officer to my local HQ just so they can gather info or take a look at my docs. Hefty bill will follow such trip in case there is no one to answer their question in importing country or no proper documents are easily available. Other option will be to hire representation to handle your case but this wont be cheap as well. Rarely DDP is good idea. It is still possible if proper security and control mechanisms are in place but be aware of risk, responsibility and importing country regulations as this might be costly mistake (unless someone like trips to importing country to answer officer questions there)
Global Export Control Manager bei Ferring
7 年Still I would recommend DAP named place, or FCA Origin.
Werk slimmer, niet harder
7 年Value Added Tax (VAT). It should be understood prior to quoting DDP the VAT is refundable to the registered party with the tax ID registration in place. In some areas, there could be local taxes due that would also be for your account and again, these need to be noted as you are the responsible party for the entire transport of the goods.
Customs Adviser
7 年"Does DDP include VAT? Officially – no it doesn’t". Interesting question..... I.m.o. it does include VAT if an amount of VAT is included in the invoice, f.e. iin a domestic sale or when selling to a private individual or companies/institutions without a VAT number.