EXW, DAP or DDP: Shipping Terms Explained for UK Ecommerce Businesses

The supplier sends a price of £10 per unit. Another offers £12.40, delivered. The first looks cheaper, so you start negotiating the minimum order.

Then somebody asks whether the £10 is EXW. You say you will check, while quietly wondering how three letters have become another job on your list.

Those letters matter. They help determine who arranges transport, who deals with customs, who pays the import charges and where responsibility for loss or damage changes hands. They can turn two apparently similar quotes into very different purchasing commitments.

For an ecommerce founder, the useful question is what it will take to get saleable stock into the warehouse, with the right paperwork and no unexplained bills. EXW, DAP and DDP each offer a different division of the work and risk.

This guide focuses on commercial stock imported into Great Britain: England, Scotland and Wales. Northern Ireland and direct-to-consumer low-value shipments can involve different customs and VAT arrangements. Our companion article on the cost of importing stock explains the wider landed-cost calculation; here, we will work out who is responsible for each part.

What the shipping terms actually decide

EXW, DAP and DDP are three of the International Chamber of Commerce's Incoterms rules. They allocate delivery obligations, costs, risk and customs responsibilities between seller and buyer. All three can be used across different transport modes.

They do not settle the whole purchase contract. Agree payment dates, product quality, ownership, remedies and dispute arrangements separately. Risk passing to you and legal ownership passing to you are different questions.

Always include the rule, a precise named place and the version. For example: DAP, your 3PL's full warehouse address, Incoterms 2020. “Delivered UK” leaves considerably more room for discussion than you want after the goods have left the factory.

The difference at a glance

The table shows the standard position under Incoterms 2020. Expressly agreed variations need checking against the rest of the contract.

The practical spectrum is straightforward. EXW leaves you organising most of the journey. DAP gives you supplier-arranged delivery but keeps the import process on your side. DDP puts more of the job with the seller, including import clearance and charges.

That last option can be convenient. It still needs a proper explanation of how the seller will do it.

EXW means the factory price is only the start

Under EXW, the seller makes the goods available at the agreed collection point, usually its factory or warehouse. The buyer takes the delivery risk there, before loading onto the collecting vehicle, and is responsible for arranging the onward journey.

Your freight arrangements therefore need to cover collection, loading, export procedures, international carriage, UK import clearance and final delivery. The seller has assistance obligations, but EXW does not normally make it responsible for loading or export clearance.

For a business with an experienced forwarder, this can provide control over routing, service and pricing. It can also make consolidating orders from several suppliers easier.

For a founder buying abroad for the first time, it can create a list of responsibilities nobody has priced. Ask the forwarder to quote from the exact collection point through to your warehouse, including origin charges and export arrangements. An ocean-freight quote alone does not cover the whole job.

If the factory routinely loads the vehicle and handles export clearance, ask whether FCA at the supplier's premises would reflect the intended arrangement better. Under that form of FCA, those responsibilities sit with the seller, while the buyer can arrange the main carriage.

You do not earn extra margin merely by taking on extra responsibility. You earn it if you can manage that responsibility effectively for a worthwhile saving.

DAP delivers the stock but leaves you importing it

With DAP, the seller arranges carriage to the named destination and normally carries the delivery risk until the goods arrive ready for unloading. The buyer handles import clearance and pays the associated import duties and taxes.

This can suit a UK brand that wants the supplier to organise transport while its own customs agent handles the import declaration and VAT arrangements.

For example, a DAP quote to your Manchester warehouse may include the international freight and final transport. It does not mean UK duty, import VAT and your customs agent's fee have disappeared. Budget for them and appoint the agent before arrival.

The hand-off needs coordinating. Ask who contacts your agent, when the documents will be available and what happens if clearance is delayed. Agree potential storage, demurrage, waiting-time and redelivery charges. Your own failure to complete import formalities can create costs and affect the normal allocation of risk under the rules.

DAP also needs an exact destination. Delivery to a port is a different commitment from delivery to your warehouse. Confirm booking requirements, vehicle access and any unloading equipment needed. If the warehouse cannot accept the vehicle, “delivery included” may still result in a second bill.

DDP puts import clearance and charges with the seller

Under standard DDP, the seller arranges transport, handles export and import clearance and bears the applicable duties and import taxes. Delivery risk normally passes at the named destination when the goods are ready for unloading. Unloading remains the buyer's responsibility, although its cost may already be included in the carriage contract.

DDP can be a sensible commercial arrangement where the seller has the capability and legal arrangements to fulfil those obligations. A higher delivered price may be worthwhile if it saves management time and offers a dependable service.

The question I would ask is how the import will actually work. Which business is importing, who is making the declaration and what paperwork will you receive? Can the seller legally fulfil its obligations in the destination country?

A supplier saying “our agent handles everything” has described an intention. You still need enough detail to understand the arrangement.

If the paperwork says DDP but the courier asks you for duty and import VAT before releasing the stock, stop and reconcile the contradiction. You may decide to pay to prevent further delay, but record the payment and resolve responsibility with the supplier. Do not quietly add it to the original price and assume the quote was correct.

DDP does not automatically give you VAT to reclaim

This is where the accounting can become expensive.

There is a difference between import VAT on your business's import and UK VAT charged to you on a supply of goods. The documentation and entitlement to recovery differ. Neither follows simply from the letters DDP.

If your business is the entitled importer and owns the goods at import, the relevant import records may support recovery, subject to the normal rules. If the supplier imports its own goods and then makes a UK taxable supply to you, the relevant evidence may instead be a valid UK VAT invoice from the supplier.

You cannot reclaim somebody else's import VAT because it was economically included in your purchase price. Nor can you divide an overseas supplier's all-in charge by six and assume the result is UK VAT.

Suppose a supplier charges £13,200 DDP and says the price includes £2,200 “tax”. That description alone supports no £2,200 VAT claim. Establish what tax it represents, whose import it relates to and which evidence supports your business's entitlement. If no VAT is recoverable, you need to understand that before pricing the products.

Ask your accountant to check the proposed documentation before the first substantial order, rather than after a year of invoices has accumulated.

Compare complete costs rather than headline quotes

Take an illustrative order for 1,000 identical units. Assume the same specification, delivery destination and broadly comparable service. These figures are purchasing assumptions, not a tariff calculation or current freight quotation.

The apparent £1,700 difference between the supplier quotes becomes £200 after filling in the missing services. The DAP option costs 20p more per unit under these assumptions. That may be a reasonable price for a reliable supplier-managed journey, or your forwarder may provide better service for less.

Now suppose the supplier offers £12,400 DDP. If that is a genuine comparable final cost, with no additional buyer charges or recoverable VAT to separate, it is £400 above the EXW route. You can assess whether the additional convenience and risk allocation justify it.

But if the DDP price has an unclear VAT element, it is not ready for comparison. Resolve the tax treatment first. A cheaper-looking quote with uncertain documents does not become a good purchase because it fits neatly into the spreadsheet.

For an actual shipment, have the agent calculate duty using the correct classification, origin and customs value. Adding every seller delivery charge to the duty base would be wrong where costs need separating under the valuation rules. Likewise, import VAT is not necessarily 20% of the factory invoice. Our importing-costs guide covers those calculations in more detail.

Put VAT timing into the cash forecast

Recoverable VAT still matters when somebody has to fund it upfront.

Suppose the correctly calculated import VAT for your shipment is £2,400 and your business is entitled to full recovery. Paying it at import uses £2,400 until that recovery is reflected in your VAT position. The stock's underlying cost and the cash needed to receive it are different figures.

Eligible UK VAT-registered importers can use postponed VAT accounting, or PVA, to account for import VAT through the VAT return. Full recovery can offset it on that return, avoiding the upfront import VAT payment. PVA does not remove customs duty or other delivery charges.

The import must meet the conditions, including business use, the right to dispose of the goods and your VAT number on the declaration. If an agent imports on your behalf, instruct it in writing to use PVA before the declaration is made. Retain and reconcile the postponed import VAT statements.

DAP can work well with buyer-controlled customs and PVA. EXW can also do so. DDP does not itself prohibit PVA, but whose import it is and how the seller's contractual obligations are being met must be clear. Adding your VAT number to a shipment does not resolve those questions by itself.

Check risk and insurance separately from the price

EXW transfers delivery risk near the start of the journey. DAP and DDP normally leave it with the seller until the named destination. That matters if the stock is damaged between the factory and warehouse.

None of these three terms requires a party to obtain cargo insurance for the other. Agree suitable cover, claims procedures and evidence separately.

Carrier liability can differ considerably from the value you need to recover. If a shipment contains £30,000 of stock, ask what the policy actually covers, including loading, exclusions and the claims excess. Check cover from the point where your risk begins, not just from the port.

Also separate transit damage from defective manufacture. A pallet arriving safely says nothing about whether the products meet the agreed specification. Product inspections and acceptance terms remain important whichever delivery rule you choose.

Agree the details before paying the deposit

For a first order or a changed shipping arrangement, I would want written answers to these questions:

• What exact rule, named place and Incoterms version apply?
• Which transport, handling, clearance and delivery services are included or excluded?
• Who handles export and import declarations, and whose details will be used?
• How will duty and VAT be dealt with, and what evidence will the buyer receive?
• Where does risk pass, what insurance covers it and who handles a claim?
• Who books the delivery, provides unloading and pays exceptional charges?

Ask for a sample of the documents you should expect, suitably redacted. The supplier's invoice, packing list, transport documents and customs information should describe a consistent transaction. Your forwarder and accountant can check different parts before you commit.

If the supplier proposes declaring a lower value, calling commercial stock a gift or using another business's details without a clear explanation, do not build the purchase around that arrangement. A low quote is no saving if the declaration is wrong.

Choose the arrangement you can operate properly

For a growing ecommerce brand, I would compare DAP with a competent UK customs agent against a complete forwarder-managed collection quote, including FCA where appropriate. That gives you a useful view of the price of supplier-arranged transport and the control available through your own provider.

EXW can work where collection and export responsibilities are properly covered. DDP can work where the seller can fulfil the import obligations and explain the tax and records clearly. Convenience has a value, but it needs to be real.

At COPA, the outcome I want is straightforward: a dependable landed cost, a realistic cash commitment and documents that support the VAT treatment. Agree those before paying the deposit and the three letters become a useful purchasing decision, rather than a surprise when the stock reaches the border.