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Incoterms® 2020 · May 2026 · 8 min read
Incoterms and Import Clearance: Who Is Responsible for Getting Goods Into the Destination Country
Import clearance is the mirror image of export clearance. Where export clearance is the formal process of declaring goods leaving the country of origin, import clearance is the formal process of declaring goods entering the destination country — paying any applicable import duties and taxes, satisfying any regulatory requirements, and obtaining release of the goods from customs control so they can be delivered to the buyer.
Under Incoterms® 2020, import clearance responsibility is allocated clearly across the eleven rules — with one significant exception that creates the most commercially complex situations in international trade. In ten of the eleven rules, import clearance is the buyer’s responsibility. In one — DDP — it is the seller’s. That single exception is not a minor technical point. It is the Incoterm that places the greatest legal and financial burden on the seller, and the one most frequently chosen without a full understanding of what it actually requires.
This article explains how import clearance responsibility is allocated under each Incoterm, what import clearance involves in practice, why DDP creates such specific challenges for sellers without a local presence in the destination country, and what both parties need to understand before goods arrive at the border.
Import clearance under the eleven Incoterms
The allocation of import clearance responsibility under Incoterms® 2020 is the complement of export clearance — and equally straightforward in most cases:
- DDP: Import clearance is the seller’s responsibility.
- EXW, FCA, FAS, FOB, CPT, CIP, CFR, CIF, DAP, DPU: Import clearance is the buyer’s responsibility.
In ten of the eleven terms, the buyer handles import clearance. This is logical for the same reason that export clearance belongs with the seller: the buyer is established in the destination country, has a relationship with domestic customs authorities, holds a VAT registration, and is best positioned to manage the import formalities in their own market. The buyer knows their own country’s import requirements, has a customs broker, and can reclaim import VAT through their normal tax returns.
DDP reverses this entirely. Under DDP, the seller takes on not only the logistics and transit risk but also the legal and financial obligations of import clearance in the destination country — a country where the seller may have no legal entity, no VAT registration, and no established relationship with customs authorities.
What import clearance actually involves
Import clearance encompasses several distinct obligations that must be completed before goods can be released from customs control and delivered to the buyer:
The import customs declaration
An import customs declaration must be submitted to the customs authority in the destination country for every commercial consignment. In the UK, declarations are submitted through HMRC’s Customs Declaration Service (CDS). In the EU, each member state operates its own national customs system connected to the EU’s central infrastructure. In the US, import entries are filed through US Customs and Border Protection’s Automated Commercial Environment (ACE).
The import declaration must include the importer’s details, the goods description, the HS code, the declared customs value, the country of origin, the Incoterm, and the transport details. The entity named as the importer of record must be legally established in the destination country — or must appoint a licensed customs broker to act as indirect representative on their behalf.
Payment of import duties
Applicable customs duty — calculated by applying the duty rate for the declared HS code to the declared customs value — must be paid or secured before goods are released from customs control. Under most terms, this is the buyer’s obligation. Under DDP, the seller pays.
Payment of import VAT, GST, or equivalent taxes
In addition to customs duty, most countries charge import VAT, GST, or an equivalent consumption tax on imported goods. In the UK and EU, import VAT is charged at the standard rate (20% in the UK, varying by member state in the EU) on the customs value plus any customs duty. Under most Incoterms, import VAT is the buyer’s cost — and a VAT-registered buyer can reclaim it through their normal VAT return. Under DDP, the seller pays import VAT — which may not be reclaimable if the seller is not VAT-registered in the destination country.
Regulatory compliance and certificates
Beyond customs clearance, certain goods require specific regulatory approval before they can be released into the destination market. Food products, pharmaceuticals, chemicals, animals and animal products, plants, electronics, and many other product categories are subject to import controls that go beyond customs duties. Product safety certificates, phytosanitary certificates, health certificates, CE marking compliance, UKCA marking, and FDA registration are examples of regulatory requirements that must be satisfied at import.
Under most Incoterms, regulatory compliance in the destination country is the buyer’s responsibility. Under DDP, it is the seller’s — adding a further layer of complexity for sellers shipping to markets where they are unfamiliar with the specific regulatory landscape.
Release of goods from customs control
Once the import declaration is accepted, duties and taxes are paid or secured, and any required certificates are presented, customs authorities issue a release decision — authorising the goods to leave customs control and be delivered to the importer. In most routine commercial transactions, this process is handled electronically and takes minutes to hours. When goods are selected for examination — physical inspection, documentary review, or scanning — the process can take days, and any storage or examination costs accrue during that period.
Import clearance under DAP: the timing problem
Under DAP, import clearance is the buyer’s responsibility. This is the correct commercial structure for most B2B transactions — the buyer is established in the destination country and is best placed to manage import formalities. The practical challenge arises from the timing relationship between physical delivery and import clearance.
In most countries, goods cannot be delivered to the buyer until import clearance is complete — the goods must be released by customs before they can leave the port, airport, or border crossing. Under DAP, the seller’s delivery obligation is to present goods at the named place ready for unloading. If the goods arrive at the border but the buyer has not yet completed import clearance, the goods are held in a bonded area at the border or port — accumulating storage charges — until the buyer’s customs broker files the entry and obtains release.
Those storage charges fall to the buyer under DAP. But they are entirely preventable. The buyer’s customs broker should file the import entry in advance of the goods’ arrival — using the pre-arrival information provided by the seller — so that release is granted at or shortly after physical arrival. Sellers shipping on DAP terms should provide complete shipping documentation to the buyer well in advance of the estimated arrival date: commercial invoice, packing list, bill of lading or airway bill, certificate of origin, and any product-specific certificates. Late or incomplete documentation delays the buyer’s customs filing and generates avoidable storage costs.
The DDP import clearance problem
DDP is the Incoterm that causes the most compliance difficulties for sellers, precisely because it places import clearance — in a foreign country — on their shoulders. The challenges are legal, financial, and operational.
The importer of record requirement
Under DDP, the seller must act as importer of record in the destination country — the entity legally responsible for the import declaration and accountable to the customs authority for the accuracy of that declaration and the payment of all duties and taxes. In most countries, the importer of record must be established in the destination country, or must appoint a licensed local customs agent to act as indirect representative.
A UK seller shipping DDP to a buyer in Japan, for example, cannot simply declare themselves as importer of record in Japan without a Japanese legal presence. They must either establish a Japanese entity, appoint a Japanese customs broker as indirect representative under a formal power of attorney arrangement, or use a professional importer of record (IOR) service provider who acts as the legal importer on the seller’s behalf.
Some countries go further and prohibit non-resident entities from acting as importer of record at all — regardless of whether they appoint a local agent. Mexico is the most frequently cited example: the importer of record in Mexico must be a Mexican-registered entity. A UK seller shipping DDP to Mexico without a Mexican subsidiary or a formal IOR service provider arrangement simply cannot legally fulfil their DDP obligation.
The import VAT problem
Under DDP, the seller pays import VAT in the destination country. Where the seller is VAT-registered in the destination country, they can reclaim that VAT through their local VAT return — net cost is zero. Where the seller is not VAT-registered, the import VAT paid cannot be reclaimed — it becomes a permanent, irrecoverable cost embedded in every DDP transaction.
For a UK seller shipping DDP into EU countries where they are not VAT-registered, the 20% to 27% import VAT on every shipment is a cash cost that erodes margin on every sale. Sellers who have agreed DDP terms without understanding this VAT exposure frequently discover it when their first import VAT invoice arrives from their customs agent — often for amounts that significantly exceed expectations.
The duty rate uncertainty problem
Under DDP, the seller pays import duties. The applicable duty rate depends on the HS code declared on the import entry and the origin of the goods. If the buyer’s customs broker — or the seller’s IOR provider — classifies the goods under a different HS code than the seller expected, or if an anti-dumping or additional tariff measure applies that the seller had not factored in, the duty cost to the seller can be significantly higher than anticipated.
In the current tariff environment — with rapidly changing duty rates on goods from certain origins, particularly the US-China trade corridor — DDP exposes the seller to duty rate volatility that they may have no practical ability to hedge or recover from the buyer once the sale price is agreed.
Import clearance responsibility at a glance
| Incoterm | Import clearance | Import duties | Import VAT / GST |
|---|---|---|---|
| EXW | Buyer | Buyer | Buyer |
| FCA | Buyer | Buyer | Buyer |
| FAS | Buyer | Buyer | Buyer |
| FOB | Buyer | Buyer | Buyer |
| CPT | Buyer | Buyer | Buyer |
| CIP | Buyer | Buyer | Buyer |
| CFR | Buyer | Buyer | Buyer |
| CIF | Buyer | Buyer | Buyer |
| DAP | Buyer | Buyer | Buyer |
| DPU | Buyer | Buyer | Buyer |
| DDP | Seller | Seller | Seller |
When DDP is the right choice despite its complexity
DDP is not an inappropriate term in all circumstances. It is the right choice when the seller has the infrastructure to handle it correctly:
- The seller has a registered entity or VAT number in the destination country. A seller with a subsidiary, branch office, or VAT registration in the destination market can act as importer of record directly, reclaim import VAT through their local return, and manage customs clearance through an established local customs broker relationship.
- The seller uses a professional IOR service provider. Specialist importers of record handle customs clearance, pay duties and taxes, and recover VAT where applicable on the seller’s behalf. For sellers regularly shipping DDP into markets where they lack a local entity, an IOR arrangement is the correct structural solution.
- B2C e-commerce where customer experience demands a fully landed price. A consumer who receives a duty demand at their door is likely to refuse the parcel. DDP — properly structured — eliminates this friction entirely. The investment in IOR infrastructure is justified by the improvement in delivery success rates, customer satisfaction, and repeat purchase behaviour.
- Low-value, low-duty shipments. For small parcels or product categories with negligible duty rates, the financial complexity of DDP is manageable and the customer experience benefit is real.
Frequently asked questions
Under which Incoterm is import clearance the seller’s responsibility?
Only under DDP (Delivered Duty Paid). Under all other ten Incoterms® 2020 rules, import clearance is the buyer’s responsibility. DDP is the only term under which the seller acts as importer of record in the destination country, pays all import duties and taxes, and handles all regulatory compliance at import. Under DAP — the term most similar to DDP — import clearance and duty payment fall to the buyer despite the seller controlling the freight and bearing transit risk to the named destination.
What happens under DAP if the buyer is not ready to clear customs when the goods arrive?
The goods are held at the port, airport, or border crossing in a bonded area under customs control, accumulating storage charges. Under DAP, those charges are the buyer’s cost. The seller has fulfilled their delivery obligation by presenting the goods at the named place — the buyer’s failure to have import clearance ready is the buyer’s problem. To avoid this, buyers should instruct their customs broker to file a pre-arrival entry using the shipping documentation provided by the seller, so that customs release is granted at or shortly after physical arrival.
Can a non-resident seller legally act as importer of record under DDP?
It depends on the destination country. Some countries permit non-resident importers of record, provided they appoint a locally-licensed indirect representative. Others — including Mexico, Brazil, and several other markets — require the importer of record to be a locally registered entity. A UK seller shipping DDP to Mexico without a Mexican subsidiary or professional IOR arrangement cannot legally fulfil their DDP obligations. Before agreeing DDP terms for a new market, the seller should verify the local importer of record requirements.
What is a professional importer of record and how does it help with DDP?
A professional importer of record (IOR) is a specialist service provider that acts as the legal importer in the destination country on the seller’s behalf. The IOR holds the necessary local registrations, files the import customs declaration, pays duties and taxes, and recovers VAT where applicable — all in the destination country, under their own legal authority. The seller pays the IOR’s service fees and reimburses the duties and taxes. For sellers regularly shipping DDP into markets where they lack a local entity, IOR arrangements are the standard structural solution.
Does the buyer need to pay import duties under DAP even though the seller arranged the freight?
Yes. Under DAP, the seller arranges and pays for freight and bears transit risk all the way to the named destination — but import clearance, import duties, and import VAT are entirely the buyer’s responsibility. The seller’s control of the freight does not affect the import duty obligation. Many buyers assume that a seller who has arranged and paid for delivery to their door has also handled the import duties. Under DAP, they have not. Only under DDP has the seller taken on that obligation.
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