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Who Pays for Landed Cost?

Overview

You want to know if you or your customer pay for landed cost.

Environment

AvaTax

Resolution

  • Specific to business to customer (B2C) sales, calculating the landed cost depends on the seller's business decision

  • When sending the invoice to AvaTax - the incoterm (transaction type) determines if you calculate OR calculate, collect and remit:

    • DAP - This acronym stands for "Delivered at Place" and indicates the Seller will be responsible for coordinating the shipping from their facility to the Buyer's door. However, the Buyer will be the "Importer of Record" responsible for paying/remitting the customs duty & import tax (including VAT) directly to the customs authorities when the shipment arrives in the destination country. Sellers may choose this situation if they are unable or don't want to pay the duties & taxes to the authorities themselves. In a DAP situation, the Seller will calculate and communicate the estimated duties & taxes at the point of sale as a courtesy, so there are no surprises when the shipment arrives. When the Buyer acts as the importer of record, the Seller has no requirements or liabilities for the importation process.
    • DDP - This acronym stands for "Delivered Duty Paid" and applies when the Seller (or their 3rd party) will be responsible for coordinating the shipping from their facility to the Buyer's door. However, the Seller will be the "Importer of Record" or their agent may be named as the "Merchant of Record" responsible for paying/remitting the customs duty & import tax (including VAT) directly to the customs authorities in the destination country. In a DDP situation, the Seller will calculate and incorporate the customs duties and taxes into the invoice at the point of sale and facilitate the import customs clearance so the end consumer doesn't have to do anything. Sellers may choose this situation to provide the best customer experience.
  • Developers can view how to code this in our API by visiting our developer blog.