Choosing the right Incoterm: DDP vs DAP after the 2026 duty changes

Incoterms 2020, published by the International Chamber of Commerce, is eleven terms that split four responsibilities between seller and buyer: freight cost, freight risk, export customs clearance, and import customs clearance. The term you choose changes who pays what, who insures what, and who handles the customs paperwork. Wrong choice and the buyer is stuck with a surprise customs bill, or the seller eats the freight cost they didn't budget for. This article covers the allocation decision; the main guide maps where it sits in the full flow, the duties article covers what the import side actually costs in 2026, and the dim weight article covers the freight bill being allocated.

The eleven terms in 2020

Any mode of transport (7 terms):

• EXW Ex Works — buyer picks up at seller's door. Seller does nothing else.
• FCA Free Carrier — seller delivers to a named carrier or place. Export clearance: seller.
• CPT Carriage Paid To — seller pays freight to named destination. Risk transfers at first carrier.
• CIP Carriage and Insurance Paid To — CPT + seller pays insurance (ICC A all-risks under 2020).
• DAP Delivered At Place — seller delivers ready for import, buyer handles import customs.
• DPU Delivered at Place Unloaded — DAP + seller unloads at destination.
• DDP Delivered Duty Paid — seller pays everything including import duty and VAT. Maximum seller obligation.

Sea and inland waterway only (4 terms):

• FAS Free Alongside Ship — buyer takes risk once cargo is alongside the vessel.
• FOB Free On Board — buyer takes risk once cargo is on the vessel.
• CFR Cost and Freight — seller pays freight, buyer takes risk at port of shipment.
• CIF Cost Insurance Freight — CFR + seller pays minimum cargo insurance (ICC C).

Which to choose for cross-border e-commerce

For B2C shipments under $1000-€1000 the practical choice is between DDP and DAP:

• DDP: seller pays freight + duty + import VAT. Buyer pays the cart price and nothing more. Buyer experience is clean — package arrives like a domestic order. Seller's risk: HS classification error becomes the seller's penalty, and every duty-regime change lands on the seller's margin.
• DAP: seller pays freight only. Buyer pays duty + VAT + (often) a customs broker handling fee at delivery. Buyer experience is hostile — surprise customs invoice on the doorstep, often 20-30% of the cart total. Refused packages leave the seller liable for return shipping plus the original outbound costs.

The majority of cross-border e-commerce sellers settle on DDP for buyer-friendliness — but the 2026 US changes repriced that promise. With the Section 321 $800 de-minimis suspended for all origins since 2025-08-29 (EO 14324) and the Section 122 10% surcharge in force since 2026-02-24, a DDP seller now pays duty on every US-bound parcel, where before August 2025 most sub-$800 B2C parcels cleared free. A seller who priced DDP into their US listings in early 2025 is now absorbing a duty bill that didn't exist when the price was set. The same dynamic reaches the EU on 2026-07-01, when the €150 duty exemption is abolished (Council agreement 2025-12-12) — smaller, since the interim flat duty is roughly €3 per item, but nonzero on every parcel. Re-run the numbers per destination with the duty + import VAT calculator before renewing a DDP commitment, and see the duties article for the full 2026 stack.

For B2B shipments the choice opens up. CIP and CPT are common — seller pays freight and insurance, buyer pays import duties (which the buyer can recover via VAT input credit). FOB is common in sea freight where the buyer arranges their own carrier from the port. EXW is rare except where the buyer specifically wants to control the entire move (own freight forwarder relationship).

The Incoterm changes the customs value too

Less obvious: the Incoterm feeds the duty calculation itself. Customs values goods under the WTO Valuation Agreement (Article VII GATT 1994), and whether the invoice price already contains freight and insurance depends on the term. The EU assesses duty on a CIF basis — freight and insurance to the EU border are part of the dutiable value, so a CIF invoice is dutiable as-is while an EXW invoice needs freight added on top. The US assesses on an FOB basis — international freight is excluded, so a DDP-priced invoice into the US must be deconstructed before duty is computed. Declaring the wrong basis means systematically over- or under-paying duty on every entry. The customs value builder maps each of the eleven Incoterms to the included cost components and assembles the dutiable value per destination (rules verified 2026-06-11 against the WTO Valuation Agreement, EU UCC Arts. 70-74, and US 19 CFR Part 152). Note also the insurance asymmetry inside the terms: CIP obliges ICC (A) all-risks cover under Incoterms 2020, while CIF only obliges minimum ICC (C) — if the cargo justifies more, price it with the shipping insurance estimator.

What goes wrong without an explicit Incoterm

When the sales contract doesn't specify an Incoterm, the default is usually buyer assumes everything from seller's door (functionally EXW). Marketplace platforms typically default to DDP or DAP depending on the marketplace. Etsy uses DDP for orders under threshold (collected via Etsy Payments) and DAP above. eBay's Global Shipping Program handles the duty / VAT collection on behalf of the seller. Shopify Markets Pro acts as merchant of record and handles DDP. Custom checkouts on Shopify / WooCommerce default to DAP unless the seller integrates a duty calculator at checkout. Whoever ends up as the declarant also needs to be eligible to act as importer — non-resident DDP sellers often discover late that they need an indirect customs representative in the destination; the importer of record checker walks that eligibility question.

The Incoterms decision tool walks the eleven terms with a "who pays what" matrix per term. The €29 PDF includes the ICC Publication 723E commentary on each term, the most common contract-language pitfalls (e.g., "FOB delivery" — which port, when title transfers, whether marine insurance is implicit), and the marketplace-specific defaults so you know what your customers actually see at checkout.