Delivered-At-Place (DAP) is one of the seven incoterms out of eleven in Incoterms 2020 that can be used for any mode of transport. According to this incoterm, the seller (or consigner) is responsible for the carriage of goods up to a nominated place that is mutually agreed upon between them and an importer. While the seller is accountable for the carriage, the cost of unloading, along with the importing charges and other local expenses, rests with the buyer.
DAP closely resembles the incoterm Delivered Duty Unpaid (DDU), which was deactivated in incoterms 2020.
Shipping Terms
In the DAP Incoterms, the place of destination — in the importer’s country — is agreed upon by both the buyer and seller. The carriage responsibility stays with the seller. Though the seller carries out the carriage process, they are not responsible for unloading goods at the port. Unloading goods at the importing country’s port is the buyer's responsibility. The risk is transferred from the buyer to the seller at this designated port.
Seller’s Responsibilities
DAP is one of the more buyer-friendly incoterms. Accordingly, some of the seller’s responsibilities are:
For Delivery terms
Under DAP terms, the seller’s liability lies till the designated port, so his responsibility starts right from the place of origin, i.e., inland transport from the warehouse to the first port (exporter’s country) and then carriage proceedings & logistics from the first port to the nominated port (importer’s country).
For transportation
Under DAP, the seller is responsible for the transportation of goods and the ready-for-unloading procedure at the named destination place. Beyond this place, the buyer is responsible for the transportation of goods upto their warehouse or other final destination.
For loading and unloading
After the seller brings the goods to the agreed-upon destination point, the buyer needs to carry out the unloading and loading of goods before transporting them to their final destination. So, the seller only needs to carry out the loading of goods for the first time before the shipment begins.
On the basis of costs
The DAP payment terms are as follows :-
- Maintenance of goods in the warehouse
- Charges for inland transportation from the warehouse to the first port
- Freight forwarder's fees for handling their logistics division/terms
- Terminal charges at the port
- Customs clearing charges
- Documentation charges
- Insurance
- Carriage charges
- Freight terms
The seller pays for DAP freight as they are liable for carriage up to the destination port and the inland transit from the warehouse to the port. This can be either road transport or rail transport, and also, the shipping terms from the first port to the designated port are to be carried out by the seller.
For Insurance
DAP incoterms do include insurance obligations for the seller. The seller can pay for coverage for damage to goods till the designated port, and also take marine insurance if the goods are to be moved by ocean/sea. As the risk and damage to goods stay with the seller till the goods are delivered at the designated port, they are liable for the insurance of goods under DAP.
For Documentation
As per DAP regulation, the seller is tasked with securing any documentation, including commercial invoicing, bill of lading, insurance certificate, packing list, tallies of goods in the shipment, and packaging and marking related to the export of the given shipment.
For Duty and customs clearance
Export customs and related duties are carried out by the seller. They are answerable for all necessary documents, such as the bill of lading, commercial invoice, insurance certificate, packing list, and other customs proceedings. The seller will bear all charges for export proceedings and customs clearance.
Also read: What’s the difference between Freight Collect and Freight Prepaid?
For Transfer of risks
The transfer of risks from the seller to the buyer occurs at the designated destination port, which is generally in the importer’s country.
For Freight charges
The seller pays all the freight charges for a shipment.
Freight terms
The seller pays for DAP freight as he is liable for carriage till the destination port as well as the inland transit from the warehouse to the port. This can be either road transport or rail transport, and also the shipping terms from the first port to the designated port are to be carried out by the seller.
Insurance
DAP incoterms does include insurance. The seller can pay for coverage for damage to goods till the designated port, and also take marine insurance if the goods are to be moved by ocean/sea. As the risk and damage to goods stays with the seller till the goods are delivered at the designated port, he is liable for the insurance of goods under DAP.
Buyer’s Responsibilities
Buyers may prefer this incoterm due to its terms being beneficial for them. Some of the buyer’s responsibilities are as follows:
For Delivery Terms
The buyer has responsibility for unloading goods at the destination country’s port. Later, inland transit of goods from the designated port to his owned warehouse is also a part of his responsibility.
In terms of Costs
The DAP payment terms are as follows :-
- Import customs charges
- Unloading charges (that is, if the seller agrees to unload the goods at the port)
- Inland transportation charges
- Warehouse charges for maintaining goods after the delivery process
- Freight terms
- The price for carriage is already paid by the seller. Hence, the only liability for the buyer is to take care of import customs proceedings and inland transit to their own warehouse.
For Insurance
The buyer has no obligation for insurance as the risk of damage to goods is the seller's responsibility till the goods arrive at his country’s port.
Documentation
As specified earlier, the exporter is answerable for all the documentation involved in shipping goods. So, the buyer’s responsibilities in this regard are minimal.
Duty and customs clearance
In DAP terms, the import customs proceedings are the responsibility of the buyer. So the evidence of documents provided by the seller are to be acknowledged by the buyer. As mentioned earlier, the unloading of goods at the destination port is the buyer’s responsibility. He will be held chargeable for all the customs formalities.
Freight charges
Costs, levies & charges like freight demurrage charges, port charges, and other expenses. levied after the risk transfer under DAP incoterms are borne by the consignee, who can either be an exporter or the importer, depending on the agreed final destination.
What Are the Advantages Of DAP?
The terms of DAP clearly bifurcate the responsibilities of a buyer and seller regarding additional expenses during the shipping process. The buyer nears the risks and losses after the delivery of goods. During a shipment, the seller holds accountability for the same.DAP offers minimal liability to a buyer in terms of costs and losses. Hence, it is a hugely sought after incoterm for importers.DAP enables buyers to manage their inventory and cash flows. This is especially a benefit for goods that require frequent re-ordering. This is possible as DAP only makes it necessary for buyers to pay for the goods once they're delivered at their destination. This prevents the creation of cash flow gaps between paying for goods and receiving them.
What Are the Disadvantages of DAP?
Despite the clarity with which DAP bifurcates responsibilities, certain situations may result in disputes. One such situation is when the shipping carrier needs to pay demurrage at the importer's port. There may be disputes regarding which party is supposed to pay the demurrage.
Sellers are exposed to liabilities and responsibilities in DAP, such as responsibility of losses and costs incurred during carriage.DAP can lead to delays. In several cases, customs clearance occurs before the goods arrive at the buyer’s designated destination, which means that customs must allow a shipment to pass before it is delivered to the importer. In the event of delays, dunnage, or detention, these costs will be incurred by the importer.
Why is DAP Considered a Buyer-Friendly Incoterm?
This incoterm enables buyers to import goods cheaply and with few responsibilities and risks on the whole. By handing over the control of a shipment to the seller, buyers save costs and headaches of shipments that sellers have to bear with these terms.
How Does DAP Work?
Here is an example of DAP’s working mechanism in a shipment. A New York-based buyer enters into a DAP deal with a seller from Toronto, Canada, to buy a batch of leather bags. It means that the seller from Toronto has to pay money to transport the goods from their storage facility to a port in New York.
If the goods are damaged during shipment, the Toronto-based seller will bear the costs. Upon the arrival of the goods at the port in New York, the buyer must pay customs duty, import tariffs, and other local taxes.
If the contract mentions the terminal destination as the port in London, the seller does not have to pay further freight. However, if the terminal destination is the buyer’s warehouse, the seller must also pay for it.
When Should Traders Use DAP?
DAP is an optimal incoterm for trade stakeholders in case certain factors align perfectly in shipping. Some such scenarios include:
If the consignee needs to reduce their freight costs
- DAP offers a creative solution for importers to drastically reduce freight charges. For example, if products were to be bought from Japan and shipped to Mexico, the seller and buyer could agree upon the cargo to be sent from and delivered to a port close to the buyer’s facility. Additionally, a bulk of transportation costs are borne by the seller. All this reduces the time and money spent on importing goods.
- If a buyer purchases multiple consignments from a specific exporter
- DAP implies that the buyer only needs to pay for the cargo once the goods arrive at their location. In such a case, the buyer would pay only when they receive their goods and, therefore, not always tie up money in inventory while the shipping process is going on.
Difference between DDP, DAP & CIF
As implied multiple times, DAP is a buyer-friendly incoterm. So, how does it compare to some of the other incoterms?
__Also read: DDP and CIF
FAQs on DAP Incoterms
Is DDU same as DAP?
Delivery duty Unpaid (DDU) is not included in the revised 2020 publication, the closest term that describes the functions of DDU incoterms is DAP Incoterms.
Does DAP include unloading?
Yes, DAP includes unloading of goods on the delivery destination port, and it is to be carried out by the buyer.
Who pays DAP freight?
The seller pays for the DAP freight as he is responsible for the carriage proceeding till the importer’s country port.
Does DAP include customs clearance?
DAP does include customs clearance, wherein the export customs are carried out by the seller and the import customs clearance is to be done by the buyer.
What is the difference between DAP and DAT?
The major difference between DAP and DAT is that the unloading of goods on the dock port in DAP is settled by the buyer, and in DAT the responsibility rests with the seller.
Is DAP and CIF the same?
Basic difference between the terms is the mode of transportation, where in DAP the parties have access to all modes of transport, in CIF they are restricted to water and inland transit.
As an expert in international trade and logistics, I can provide a comprehensive analysis of the concepts discussed in the article about Delivered-At-Place (DAP) and its implications in the context of international shipping and trade.
DAP Incoterms Overview: Delivered-At-Place (DAP) is an incoterm that falls under the Incoterms 2020, specifically designed for any mode of transport. It involves the seller being responsible for the carriage of goods up to a mutually agreed destination in the importer's country. The article delves into the responsibilities of both the seller and the buyer under DAP.
Seller's Responsibilities under DAP:
- Delivery Terms: Seller's liability extends from the place of origin to the designated port, covering inland transport and carriage proceedings.
- Transportation: Seller is responsible for transporting goods and ensuring they are ready for unloading at the named destination.
- Loading and Unloading: Seller loads goods for the first time, and the buyer is responsible for subsequent loading and unloading.
- Costs: Seller bears various costs, including maintenance, inland transportation, freight, insurance, and customs-related charges.
- Insurance: Seller is obligated to provide insurance coverage for goods until the designated port.
Buyer's Responsibilities under DAP:
- Delivery Terms: Buyer unloads goods at the destination port and handles inland transit to their warehouse.
- Costs: Buyer incurs import customs charges, unloading charges, inland transportation charges, warehouse charges, and other expenses.
- Insurance: Buyer is not obligated for insurance as the risk is with the seller until goods reach the destination port.
- Documentation: Minimal responsibilities for the buyer as the seller handles documentation and customs proceedings.
Advantages of DAP:
- Clear Responsibilities: DAP clearly defines responsibilities, minimizing buyer liability.
- Inventory Management: Buyers can manage inventory and cash flows effectively.
- Cost Savings: Importers benefit from reduced costs and responsibilities, making DAP a sought-after incoterm.
Disadvantages of DAP:
- Disputes: Situations like demurrage payments can lead to disputes.
- Seller's Liabilities: Sellers bear responsibilities and liabilities during carriage.
- Possible Delays: Customs clearance before reaching the buyer's destination can lead to delays and additional costs.
DAP Working Mechanism: The article provides a practical example of a DAP deal between a buyer in New York and a seller in Toronto, emphasizing the seller's responsibility for transportation costs and the buyer's obligation for customs duties upon arrival.
When to Use DAP: DAP is optimal in scenarios where consignees seek to reduce freight costs, and buyers purchase multiple consignments from a specific exporter.
FAQs on DAP Incoterms: The article answers key questions, such as the difference between DDU and DAP, the inclusion of unloading in DAP, who pays DAP freight, and whether DAP includes customs clearance.
Comparison with Other Incoterms: The article briefly touches upon the differences between DAP and other incoterms like DDP and CIF, highlighting DAP as a buyer-friendly option.
In conclusion, DAP offers a clear delineation of responsibilities between buyers and sellers, making it a favorable choice in international trade, especially for importers looking to minimize costs and streamline processes.
