U.S.:Changing US Contract Terms - DDP to DAP!

Exporters face rising risks delivering DDP to the US—shifting to DAP can manage costs and compliance better.

Export compliance and customs professionals know how challenging DDP (Delivered Duty Paid) deliveries to the US have become. For exporters from the UK or EU, DDP means handling import customs formalities, tariffs, and now, importantly, the US General Sales Tax (GST) system—known locally as State Sales Tax. This adds layers of complexity and unpredictable costs that directly impact your bottom line and compliance risk.

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Key Questions Covered in This Blog

• Why is delivering DDP to the US risky for UK/EU exporters?

• How does the US GST (State Sales Tax) system affect DDP deliveries?

• What contractual and compliance risks arise from changing DDP to DAP?

• How to check and negotiate force majeure clauses related to US trade changes?

• What practical steps can exporters take to protect themselves?

  
  
  
  

Abbreviations Used In This Blog

• DDP – Delivered Duty Paid

• DAP – Delivered At Place

• GST – General Sales Tax (US State Sales Tax)

• Incoterms® – International Commercial Terms

“Changing delivery terms is more than a paperwork exercise. It’s about managing compliance risk, costs, and trust in your US customer relationships.” — Arne Mielken, Managing Director, Customs Manager

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Why is delivering DDP to the US risky for UK/EU exporters?

DDP places full responsibility for customs clearance, tariffs, and import taxes on the exporter. In the US, this means not only managing volatile import tariffs but also the complex and decentralized State Sales Tax system. Many UK and EU exporters underestimate these costs or their compliance obligations, leading to unexpected financial burdens.

How does the US GST (State Sales Tax) system affect DDP deliveries?

Unlike the EU’s VAT system, the US sales tax system is decentralized. Each state sets its own tax rates and rules. There is no federal sales tax.

For example, California imposes a base sales tax of 7.25%, while Texas charges 6.25%. Local counties and cities can add more, pushing rates above 10%. The exporter must register and remit sales tax if they have a “nexus” — a business presence or significant sales in that state.

Example: If you deliver DDP to a customer in New York, you need to handle import customs and also collect and remit New York’s sales tax. This requires state-level tax registrations, filings, and compliance.

For many exporters, this is an unfamiliar and costly burden, making DDP deliveries to the US risky and inefficient.

What contractual and compliance risks arise from changing DDP to DAP?

Switching from DDP to DAP shifts the import formalities and tax obligations onto the US buyer. This reduces the exporter’s variable costs and compliance risks but requires clear contractual changes. If the contract is not updated accordingly, disputes and cost surprises may arise.

Careful attention to purchase order terms and overall contract conditions is essential to avoid confusion and unintended liability.

How to check and negotiate force majeure clauses related to US trade changes?

Force majeure clauses may allow renegotiation of Incoterms® if unforeseen changes in trade policy occur. These clauses typically cover acts of God, wars, or government actions but now often include changes in trade regulations.

Since US Executive Orders frequently rely on national security grounds, force majeure clauses triggered by changes in US tariffs or import controls may provide grounds to renegotiate delivery terms away from DDP.

Always review your contracts carefully and seek legal advice before invoking force majeure.

What practical steps can exporters take to protect themselves?

First, review and update all contracts to clearly define delivery terms and responsibilities, especially when exporting to the US.

Second, factor in US State Sales Tax compliance for DDP deliveries or shift to DAP to pass these obligations to the importer.

Third, incorporate accurate and validated country of origin information in your export paperwork to avoid customs penalties and delays.

Finally, stay informed on evolving US tariffs and trade controls and seek expert advice to navigate complex compliance requirements.

Arne’s Takeaway

Delivering under DDP to the US exposes UK/EU exporters to unpredictable costs and compliance burdens—especially due to US State Sales Tax. Moving to DAP is often a practical solution but requires careful contract management and customer communication. Don’t let customs compliance surprises damage your trade relationships or profitability. Act now, update contracts, and stay compliant.

Expert Recommendations

• Always audit your current export contracts for delivery terms clarity.

• Consult a customs compliance expert before changing Incoterms®.

• Consider training on US import regulations and tax systems for your export team.

• Use validated origin data to protect against customs penalties.

• Monitor US trade policy changes regularly.

  
  

Sources & Further Information

• US State Sales Tax Overview – https://www.taxadmin.org/state-and-local-sales-tax

• Incoterms® 2020 official guidelines – ICC

• US Customs and Border Protection – https://www.cbp.gov

• Customs Manager training courses and expert calls – www.customsmanager.org

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Disclaimer

This blog is for educational purposes only and does not constitute legal advice. Consult qualified legal professionals for specific contract or trade compliance issues.

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