Delivered At Place (DAP)
Delivered-at-place (DAP) refers to a transaction in which a seller agrees to pay for all expenses and losses associated with transportation of goods to a particular location.
Updated: May 30, 2024
Delivered-at-place (DAP) refers to a transaction in which a seller agrees to pay for all expenses and losses associated with transportation of goods to a particular location. The buyer is responsible for paying import duties and all relevant local taxes, including clearing and municipal taxes, once the shipment arrives at the place of destination in delivered at place arrangements.
The eighth edition of Incoterms or international commercial terms was published in 2010 by the International Chamber of Commerce (ICC), in which the word 'delivered-at-place' was included.
The term 'delivered-at-place' simply means that all risks and costs associated with delivering products to a predetermined location is assumed by the seller which implies that the seller is responsible for everything associated with the transaction, including documentation, export permission, packaging, loading fees, and final delivery. On the other hand, the responsibility and obligation for unloading and clearing the items for import is bear by the buyer.
Any mode of transportation or a mix of modes can be used in delivered-at-place agreement. The point at which the buyer assumes financial responsibility such as 'Delivered-at-place' is generally specified in this agreement.
The term Delivery Duty Unpaid (DDU) is replaced by DPA when it was established in 2010. DAP is now used as the official word in international trade whereas DDU is still used informally.
The driving force behind the ICC and the Incoterms is the need for a clear understanding of the duties of counterparty in international contracts. It defines who ships what to where. Contracts can refer to the Incoterms now as clear definitions are issued by ICC, and the signing parties have an agreed understanding of duties. Outdated words are eliminated and usage of Incoterms is simplified by doing some modification. Delivered-at-place, is one of these simplifications which applies regardless of the mode of transport.
Responsibilities of Sellers and Buyers in DAP:
An understanding of exactly what each party has committed to do and where liability falls in the case of loss or damage can be established between the buyer and seller by agreeing to standard sets of trading terms which is known as Incoterms. Both of them must agree to the rules and conditions designed to assist companies when goods are sold and transported, and implement it into the sales contract.
The risk of loss or damage is transferred to the buyer when the delivery obligation is fulfilled by the seller according to the appropriate term, in all Incoterms. The time at which the seller is liable for paying for the carriage to the buyer may differ from this point. The responsibilities of sellers' and buyer's under a DAP agreement include:
Responsibilities of the Seller:
- Export packaging: It is the process of preparing cargo for export.
- Loading charges: It is the cost associated with loading the cargo onto the truck at the warehouse of seller.
- Delivery to Port/Place: It is the delivery expenses associated with transporting the cargo to the port or export destination.
- Customs Clearance, Export Duty & Taxes: These are the fees and responsibilities associated with the export of cargo.
- Origin Terminal Handling Charges (OTHC): The seller is responsible for OTHC charges.
- Loading: The seller is also responsible for any expenses associated with loading the cargo onto the carriage.
- Freight Charges: It is the price of shipping the goods to the location of buyer.
- Destination Terminal Handling Charges (DTHC): The seller is responsible for DTHC charges.
- Delivery to Destination: The seller is responsible for transporting the load to its final destination when the cargo arrives at the destination port of buyer.
Responsibilities of the Buyer:
- Unloading at Destination: Any expense associated with unloading the cargo once it arrives by truck at its final destination are the responsibility of the buyer.
- Import Duty, Taxes, and Customs Clearance: All of these fees associated with the cargo are the responsibility of the buyer. The buyer is also liable for the costs of the inspection if a customs inspection is necessary.
Advantages & disadvantages of DAP:
The responsibilities of parties in the event of unexpected costs incurred during the shipping procedure is clearly defined in DPA which is one of the main advantages of it. The buyer is responsible for any risks and losses after the goods are delivered to him according to this Incoterm. On the other hand, any additional costs incurred during the shipping procedure are the responsibility of the seller. There are sometimes instances that result in conflicts even with the clear guidelines for DAP agreements. For example, a fee for failing to unload on time has to be paid as a result of not having sufficient clearance from one of the parties when the goods carrier is charged demurrage. Normally, the fault rests with whoever failed to provide timely documentation in these circumstances. But establishing who was responsible for fault can be difficult since documentation standards are set by the national and municipal authorities in charge of ports and vary from country to country. International trade law can be complicated even with the benefit of well established contract.
Advantages of DAP:
- The buyer has an additional benefit in knowing who is accountable for any additional costs incurred throughout the shipping process when using DAP Incoterms for exporting. The buyer is responsible for all risks and losses associated with the cargo after the products are made accessible to them according to the International Commerce Center (ICC). Usually, the cargo would be made accessible to them at their warehouse. Any additional charges incurred during the shipment procedure is taken care by the seller.
- A low liability option and a broad agreement is provided for buyers who wants to transfer all shipping risk on the seller. So, there is a reduced buyer risk.
- Buyers can get assistance for cash flow and inventory management with DAP, particularly for costly commodities that require regular restocking from sellers.
- DAP Incoterms can be negotiated with sellers to handle the shipment and the buyer only have to pay after the goods arrives at their destination. A seller can transport the goods to a bonded warehouse near the location of buyer when particular quantities are required or items are reordered often and the shipment would be sent from the bonded warehouse whenever the buyer reorder. This is very beneficial for the buyer as smaller orders can be placed by the user and also it can be fulfilled more quickly, instead of waiting for freight to come from the origin of seller.
Disadvantages of DAP:
- Delays in practice might be caused in DAP despite the obligations of buyers to settle all import duties, local taxes, and customs clearance are clearly mentioned in this Incoterm. The shipment must be allowed by customs to pass before it is delivered to the buyer as customs clearance is generally done before the cargo arrives at the selected destination of in most of the situations. These charges will be incurred by the buyer in case of delays, dunnage, or detention.
- The risk and responsibility to ship the cargo is generally bear by the seller. So, the overall cost will be relatively higher if a buyer has to rely on their third party logistics or freight forwarder.
- DAP can be a risk for certain sellers also, particularly when sending to new buyers because the seller will have the risk of losing their shipment if the buyer may refuse to pay import charges. However, sellers are fully aware of these situations. These issues can be mitigated by increasing deposits or charging greater costs, in order to make the shipping procedure viable.
Examples of DAP:
A variety of alternatives can be provided by DAP that might benefit both the buyer and the seller. So, DAP is worth considering whenever a seller agrees to the terms. DAP can be a realistic option for more experienced importers looking for a way to enhance cash flow in case your sellers are prepared to investigate the choices.
Some examples where a buyer and seller may use a DAP agreement include:
- It might be indicated that the buyer only has to pay for the cargo after the products reach their location if the stated site is the warehouse of buyer. The buyer has to pay for their goods after they are delivered in this case, instead of paying in advance while being shipped.
- Transporting extra goods to a nearby warehouse may be offered by the seller. Generally it will be a bonded warehouse, where the consumer can purchase the products at any time. The only costs the buyer would have to pay is the import taxes and unloading expenses in this case.
- DAP can offer a unique approach if the client is acquiring items from different countries to save freight costs. The cargo can be combined into a single container and sent to a port near each country. The buyer need to mention the named place to be a bonded warehouse. The items will be deconsolidated when the cargo arrives.