Most dropshipping problems that reach a lawyer rather than an accountant start here. The VAT treatment is written about endlessly; the customs position, which sits underneath it, is barely discussed and causes more damage.
The role that has to belong to someone
When goods enter the EU, a declaration is made and someone is the importer of record. That party is liable for the customs declaration being correct, for import duty, and for import VAT where it applies. It is a legal role, not a shipping preference, and it does not disappear because nobody discussed it.
In a dropshipping chain there are realistically three candidates: your supplier, your company, or your customer. Which one it is depends on the shipping terms your supplier actually uses, which most sellers have never checked.
DDP and DAP, and why the difference reaches your customer
DDP - delivered duty paid. The sender handles clearance and pays duty and import VAT. The parcel arrives with nothing owing. This is what your customer assumes has happened.
DAP - delivered at place. The sender delivers, but clearance and charges are the recipient's problem. The carrier fronts the duty and import VAT, adds a handling fee, and presents the customer with a bill before releasing the parcel.
A customer who paid €38 for a product and is then asked for €14 before the courier will hand it over does not read that as a customs rule. They read it as a scam, and they raise a chargeback. This is one of the most common causes of chargeback clusters in dropshipping, and it is entirely preventable.
Where IOSS fits, and where it stops
For consignments up to €150, IOSS lets you charge EU VAT at checkout and have the parcel released without import VAT being collected at the border. Used correctly, it removes the doorstep-charge problem for the great majority of dropshipping orders.
It stops at €150. Above that, IOSS does not apply, standard import procedures do, and duty may be payable as well as VAT. Splitting a single order into several parcels to stay under the threshold is not a workaround; it is a well-known pattern and it is treated as one.
There is also the reverse failure: sellers who registered for IOSS but never passed the IOSS number correctly to the supplier or carrier. The parcel is then taxed at the border anyway, the customer is charged twice in effect, and you have the compliance cost of IOSS with none of the benefit.
Customs value is not what you paid
The customs value is based on the price paid for the goods, plus transport and insurance to the EU border, not your supplier's invoice figure in isolation. Suppliers who declare a low value to speed clearance are creating an exposure that belongs to whoever is the importer of record — potentially you.
Undervaluation is the single thing customs authorities are best at detecting, because they see the same route, the same supplier and the same product category thousands of times.
Returns, which nobody plans for
A returned item is an export followed by a re-import, and the duty and import VAT paid on the way in are not automatically recovered. For low-value goods the recovery process often costs more than the duty. Most dropshipping operations end up absorbing this, which is fine as long as it is priced in rather than discovered.
What to establish
- Ask your supplier, in writing, which incoterm they ship under and who they name as importer
- If they ship DAP to your customers, either change that or make the customer's liability unmissably clear before checkout
- Confirm your IOSS number is actually reaching the carrier on every consignment, not just registered
- Keep the supplier invoice and the shipping documentation for every order — this is what an enquiry asks for
- Price returns and duty into your margin rather than treating them as exceptions
Frequently asked questions
Who is the importer of record in dropshipping?
It depends on the shipping terms your supplier uses. Under DDP the sender handles clearance and charges; under DAP the customer becomes liable and is billed by the carrier before delivery. Someone always holds the role.
What is the difference between DDP and DAP for dropshipping?
DDP means duty and import VAT are paid by the sender and the parcel arrives clear. DAP means the recipient pays them, plus a carrier handling fee, before the parcel is released.
Does IOSS remove customs charges for my customers?
For consignments up to €150, yes, provided the IOSS number actually reaches the carrier. Above €150 IOSS does not apply and normal import procedures, including possible duty, take over.
Can I recover import VAT and duty on a returned item?
Not automatically. A return is an export followed by a re-import, and recovery is a separate process that often costs more than the duty on low-value goods.
Tagsimporter of recordDDP DAPcustoms valuedropshipping EU
General information, not tax advice
This article reflects Estonian law as it stands on the date shown. Rules change and individual circumstances differ - confirm your own position with us before acting.