What Is Delivered-at-Place (DAP)?
Delivered-at-place (DAP) is an international trade term used to describe a deal in which aseller agrees to pay all costs andsuffer any potential lossesof moving goods soldto a specific location. In DAP agreements, the buyer is responsible for paying import duties and any applicable taxes, including clearance and local taxes, once the shipment has arrived at the specified destination. The phrase was introduced in the International Chamber of Commerce's (ICC) eighth publication of its Incoterms (international commercial terms) in 2010.
Key Takeaways
- Delivered-at-place is an international trade term that was introduced in the International Chamber of Commerce's eighth publication of its Incoterms.
- Under DAP, aseller agrees to pay all costs andsuffer any potential lossesof moving goods soldto a specific location.
- In simpler terms, the seller takes on all the risks and costs of delivering goods to an agreed-upon location under DAP rules.
- The buyer assumes all the risk and responsibility once the shipment arrives at the destination.
- Incoterms help clear up any confusion with respect to the rights and responsibilities of buyers and sellers of trade contracts.
How Delivered-at-Place (DAP) Works
Buyers and sellers often face complications when it comes to trade contracts, whether they are in the same country or not. As such, there are rules and regulations in place that clearly define the roles and responsibilities of each party in a financial contract. These are known as Incoterms—one of which is a delivered-at-place or DAP agreement.
DAP simply means that the seller takes on all the risks and costs of delivering goods to an agreed-upon location. This means they are responsible for anything associated with packaging, documentation, export approval, loading charges, and ultimate delivery. The buyer, in turn, takes over the risk and responsibility for unloading the goods and clearing them for import.
A delivered-at-place or DAP agreement is applicable for any form or combination of forms of transportation. It usually lists the point at which the buyer takes on financial responsibilities, such as “delivered-at-place, Port of Oakland.”
The term was introduced in 2010. At that time, DAP replaced the term delivery duty unpaid (DDU). While DDU may still be used colloquially, DAP is now the official term used in international trade.
The opposite of DAP is delivered duty paid (DDP), which indicates that the seller must cover duties, import clearance, and any taxes.
DAP Obligations
The ICC sets out clear obligations for both buyers and sellers for each Incoterm. Below are the key responsibilities of each party.
Sellers
The seller is the one who bears most of the responsibilities when it comes to shipping under DAP contracts. This includes:
- Documentation: Under DAP rules, the seller must secure any documentation, including tallies of goods in the shipment, commercial invoicing as well as any packaging and marking related to the export of the shipment.
- Licensing: The seller must secure any licenses needed to export the goods and take care of any customs issues on their end.
- Transport: This category includes any pre-carriage of goods, the delivery to the port, loading onto the container, and main carriage/delivery to the destination.
- Costs: The seller must bear the cost of the shipment and must pay for any losses that may result during shipment.
- Proof of Delivery: This is provided by the seller to the buyer once the container arrives at the destination.
Buyers
While the seller does bear the brunt of the responsibilities under a DAP contract, there are certain things to which the buyer must adhere. These points include:
- Payment: The buyer must establish and pay the seller for the goods. They must also advise the seller of the destination.
- Import: Once the shipment arrives at the destination, the buyer must take care of any issues related to import. This includes any formalities, such as import forms.
- Unloading: The buyer must make arrangements to unload the cargo from the shipping vessel.
- Costs: The buyer bears the cost of import duties, taxes, and levies once the shipment arrives at its destination.
- Transport: Once unloaded, the buyer is responsible for transporting the goods from the destination/port to their next location. This can be a warehouse, storage facility, or retail location.
Obligations
Sellers
Inventory, commercial invoicing, and export paperwork
Export and customs licensing
Pre-carriage, loading, main carriage, and delivery to destination
Cost of shipment and any losses
Proof of delivery to buyer
Buyers
Payment to seller
Import formalities and paperwork
Unloading cargo
Import duties, levies, taxes
Transporting to next location
Importance of Incoterms
The ICC was founded in 1919. It established the Incoterms in 1936 as a way to facilitate domestic and international trade. Since then, the chamber released eight updates of these terms in order to remove obsolete terms. Delivered-at-place was one of those simplifications, as the definition applies regardless of the method of transport.
The main driver behind the ICC and the Incoterms is the need for a clear understanding of counterparty responsibilities in international contracts, particularly when it comes to who ships what and to where. With the ICC issuing concrete definitions, contracts can refer to the Incoterms, and the signing parties have a shared understanding of responsibilities.
Even with the clear guidelines for DAP arrangements, there are still situations thatresult in disputes, such as when the carrier of the goods incurs demurrage—a charge for failing to unload in time—as a result of not receiving the proper clearance from one of the parties.
In these cases, the fault usually lies with whichever party was amiss in providing timely documentation, but determining that can be difficult, as documentation requirements are defined by the national and local authorities controlling ports and vary fromcountry to country. Indeed, international trade law can be complex even with the benefit of defined contract terms.
What Does Delivered-at-Place Mean?
Delivered-at-place is one of the rules set out by the International Chamber of Commerce relating to international trade. Under this rule, the seller is responsible for preparing and transporting goods to the buyer's location and paying for the shipment as well as any losses that may result during transport. The buyer, on the other hand, must bear the cost of taxes, duties, and levies, and must unload the shipment upon arrival.
What Are Incoterms?
Incoterms are a set of rules for international trade. They are set up by the International Chamber of Commerce and outline the responsibilities of buyers and sellers of financial contracts in domestic and international markets. As such, they provide clarity when it comes to financial contracts between parties, especially when they are in different countries. Established in 1936, Incoterms are updated periodically. Examples of Incoterms include delivered-at-place, carriage and insurance paid to, and delivered duty paid.
What's the Difference Between DAP and DDP?
DAP and DDP are two Incoterms used in international trade. Under DAP or delivered-at-place, the buyer and seller share some of the responsibilities of the shipment of goods. The seller loads and ships goods to the buyer. They also bear the cost of transport and must pay for any losses that may result en route. Once the goods arrive at the destination, the buyer assumes control. This means they are responsible for any taxes, duties, or fees, and for unloading the cargo.
DDP or delivered duty paid works a little differently. Under this rule, the seller takes on all of the risk, responsibility, and costs associated with transport. This includes the cost of shipping, insurance, duties (import and export), and any other agreed-upon expenses with the buyer.
The Bottom Line
International trade can be very complicated and tricky. That's why the International Chamber of Commerce came up with Incoterms, which are a set of rules that are updated periodically. This list provides guidance to buyers and sellers on their rights and responsibilities when it comes to financial contracts.
Delivery-at-place is one such term. Under DAP, the seller bears much of the responsibility when it comes to the preparation and cost of shipping until the goods reach their destination. Upon arrival, the buyer takes over.
