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December 23, 2022

Delivered At Place (DAP) Incoterm Explained

Are you ready to finally understand the ins and outs of the DAP Incoterm?

It's a complex concept, but with our help, you'll get an overview that can shed some light on this often-misunderstood Incoterm.

From its definition to when it should be used, we’ll cover everything you need to know about Delivered At Place (DAP), so you can make informed transport decisions in the future.

What is Delivered At Place (DAP)?

Delivered At Place (DAP) is an Incoterm used to define the terms of delivery for goods between a seller and buyer. It has replaced Delivered Duty Unpaid (DDU) in the 2010 Incoterms modifications and has since been used in 2020 Incoterms rules as well.

DAP dictates that the seller must deliver the goods to a named place of destination, such as their own or another location agreed upon by both parties. The buyer is then responsible for unloading, and any additional costs or risks associated with getting the goods to their final destination.

If the DAP terms of delivery have been accepted, the parties must specify who will obtain insurance and add it to the contract.

DAP Price Calculation: Product cost + packaging + loading charges + delivery to port/place + export customs charges + terminal charges + loading on carriage + carriage charges +insurance (if its seller side) + destination terminal charges + delivery to destination + profit share

Obligations Under the DAP Incoterm

Exporter Obligations

  • Export customs clearance, taxes, and duties
  • Loading costs
  • Paying for transport, insurance if so agreed, and other associated costs until the goods reach their destination
  • Delivery of the goods to the agreed-upon place
  • Both origin terminal handling charges (OTHC) and destination terminal handling charges (DTHC)

Importer Obligations

  • Paying the price of goods as stated in the contract of sale
  • Import customs clearance, taxes, and duties
  • Unloading and paying for all other costs associated with getting the goods to their final destination

DAP Point of Risk Transfer

Despite its advantages, some drawbacks are also associated with using DAP shipping. For starters, this type of shipping can be more complicated than other terms of delivery, as the seller is required to arrange and pay for transport and other associated costs until the goods arrive at their destination.

DAP Example

A buyer from Korea is purchasing wood pallets from a seller in the United States. The terms of delivery are DAP, meaning that the seller is responsible for delivering the goods to the buyer’s premises in Korea.

The contract also specified that insurance is covered by the seller. Once the wood pallets have been delivered, the terms of delivery are satisfied. The buyer is then responsible for clearing customs, taking possession of the goods, unloading them, and ensuring they are delivered to the final destination.

Benefits and Drawbacks of DAP

For Exporters

The primary benefit of DAP shipping is that it offers more control over costs. This type of shipping requires only one party—the seller—to be involved in the process. As a result, buyers don’t need to worry about organizing transport from the port of delivery to the agreed-upon destination, making it more cost-efficient. Additionally, since the seller is only responsible for export customs clearance, they can avoid the hassle of dealing with import customs clearance.

Despite its advantages, some drawbacks are also associated with using DAP shipping. For starters, this type of shipping can be more complicated than other terms of delivery, as the seller is required to arrange and pay for transport and other associated costs until the goods arrive at their destination.

Moreover, sellers should carefully consider whether they want to assume the risk of transport with a new buyer. If a problem arises, such as the buyer refusing to take care of import customs clearance, the seller may be left with a shipment that they can’t unload.

For Importers

The main benefit of using DAP shipping as an importer is that it simplifies the process of getting goods to their final destination. By shifting responsibility for transport onto the seller, buyers don’t need to worry about organizing and managing the shipment.

However, DAP terms of delivery also have their drawbacks for buyers. Namely, the overall cost is typically higher than other terms of delivery, as they're taken care of by the seller which can lead to higher prices. Additionally, buyers take on the responsibility of any costs associated with storage and insurance once the goods are delivered, which may add to their final expenses.

Is DAP the Right Choice for Your Business?

Determining the right Incoterm for your business can be a difficult task, so it is essential to consider all options carefully.

The Delivered at Place (DAP) Incoterm is a popular choice for importers that want to simplify the logistics process. On the other hand, it can be equally appealing to exporters that want to remain in control of the terms and conditions for their delivery terms.

This Incoterm can be an attractive option for businesses of all sizes because it eliminates the need for customs clearance and freight forwarding. If you're still uncertain, our experienced team can help you evaluate your options and pick the most suitable shipping agreement for your business, allowing you to make an educated decision on whether DAP is right for you.

Reach out to us now to get started.

DAP FAQ

Who pays for DAP in shipping?

The seller is responsible for both export customs clearance and arranging and paying for transport costs until the goods arrive at the agreed-upon destination.

Who bears insurance responsibility under the DAP Incoterms?

Insurance is negotiable, and the seller has no responsibility to cover insurance unless otherwise agreed upon in the terms of delivery.

Who is responsible for customs clearance under the DAP Incoterms?

The seller is responsible for export customs clearance, while the buyer is responsible for import customs clearance.

What is the difference between DAP and FOB?

The main difference between Delivered at Place (DAP) and Free on Board (FOB) terms of delivery is that with DAP, the seller is responsible for arranging and paying for transport while with FOB terms, it's up to the buyer to arrange and pay for transport. Additionally, the transfer of risk differs between terms, with FOB terms transferring risk when the goods are loaded onto a vessel while DAP terms transfer risk upon delivery at the buyer’s destination.

What is the difference between DAP and DDP?

Delivered at Place (DAP) and Delivered Duty Paid (DDP) are two types of delivery agreements for international trade. With DAP, the seller is responsible for getting the goods to a specific place in order for them to be accepted by the buyer. This includes all transportation costs and customs fees. On the other hand, with DDP, the seller is responsible for all associated costs including duties, taxes, and any additional fees required to get the goods to their destination. The seller assumes full responsibility until they are delivered to the agreed destination.

What is the difference between DAP and CIF?

The Cost, Insurance, and Freight (CIF) Incoterm is similar to DAP in that the seller is responsible for all transport costs. However, with CIF terms, the seller also assumes responsibility for insurance while in transit. On the other hand, with DAP terms, insurance is not included and must be negotiated separately.

What is the difference between DAP and DDU?

DAP was introduced in the Incoterms 2010 terms to replace the terms Delivered Duty Unpaid (DDU). Even though they are essentially the same, DDP also specifies who is responsible for terminal charges. With DAP terms, the seller is responsible for any terminal charges, whereas, with DDU terms, it was not specified who was responsible for these fees and responsibility had to be agreed upon separately.

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