Incoterms: the starting point for duty responsibility
Incoterms (International Commercial Terms) are published by the International Chamber of Commerce (ICC) and define who is responsible for transportation costs, insurance, and customs duties in an international sale. The Incoterms agreed at the time of sale determines who pays import duty. The two most relevant Incoterms for ecommerce are DDP and DAP.
- DDP (Delivered Duty Paid): seller pays all costs including import duties.
- DAP (Delivered at Place): seller pays transport costs; buyer pays import duties.
- EXW (Ex Works): buyer collects goods at origin; buyer pays all costs.
- FCA (Free Carrier): seller delivers to carrier; buyer pays from there.
DDP vs DAP: which party pays
Under DDP (Delivered Duty Paid), the seller pays all costs to deliver the goods to the destination country, including import duties, taxes, and customs clearance. The buyer receives the goods with no additional duty payment required at delivery. Under DAP (Delivered at Place), the seller delivers to the named place but does not pay import duties. The buyer is responsible for paying import duties at the destination.
- DDP: buyer pays nothing at delivery — seller covers all costs including duties.
- DAP: buyer pays import duties at delivery — seller covers transport to destination.
- EXW: buyer arranges and pays all transport and duties from the origin.
- Clarify the Incoterm in writing before accepting a quote.
How Etsy handles import duties
Etsy allows sellers to set their international shipping preferences, including whether to use Etsy's built-in duty collection or to set their own terms. When Etsy's duty collection is enabled, Etsy calculates and collects estimated import fees at checkout and pays them to the carrier on the buyer's behalf. Sellers can also set DDP or DAP terms through their own carrier arrangements.
- Etsy's collected duties: Etsy charges the buyer at checkout and handles payment to the carrier.
- Seller-set terms: seller chooses the Incoterm and includes duty in the shipping price.
- DDP on Etsy: seller pays all costs including duties — buyer pays a single price at checkout.
- Verify the Etsy policy for your destination market before setting international shipping.
How eBay handles import duties
eBay requires sellers to declare whether import charges are included in the item price for international shipments. eBay's Global Shipping Program collects estimated duties and taxes at checkout and remits them to the carrier. Sellers can also use their own carrier accounts and set the Incoterms. The key distinction on eBay is whether the seller has opted into the Global Shipping Program or set their own DDP/DAP terms.
- eBay Global Shipping Program: eBay collects estimated duties from the buyer at checkout.
- Seller-arranged international shipping: seller sets the Incoterms and includes or excludes duties.
- DDP on eBay: seller includes duty in the item price; buyer pays nothing extra at delivery.
- DAP on eBay: buyer pays duty on delivery — seller does not include it in the price.
How Shopify handles import duties
Shopify does not automatically calculate or collect import duties at checkout unless the seller enables a third-party duty collection app or integrates with a carrier that handles duties. Sellers on Shopify who offer international shipping need to decide whether to build duty costs into the shipping price (DDP) or leave them as a separate charge for the buyer (DAP/DDU). Shopify Markets can help configure destination-specific settings.
- Shopify Markets: configure duty collection settings by destination country.
- DDP on Shopify: include estimated duty in the product price or shipping cost.
- DDU/DAP on Shopify: buyer pays duty on delivery — not included in the checkout price.
- Third-party apps: duty collection apps can automate DDP-style estimates at checkout.
Common mistakes with duty responsibility
The most common mistake is assuming either the buyer or seller always pays — when in fact it depends entirely on the agreement. Another common error is quoting a DDP price without accounting for the actual duty cost, leading to under-collection. A third mistake is failing to disclose the Incoterms or duty policy clearly to international buyers.
- Mistake 1: assuming seller always pays — incorrect when DAP or EXW is agreed.
- Mistake 2: quoting DDP without calculating the actual duty — leads to under-collection.
- Mistake 3: not disclosing the duty policy to international buyers — causes disputes.
- Mistake 4: confusing shipping cost with duty cost — they are separate charges.