International trade involves a complex web of logistics, costs, and risks. To create a universal understanding of responsibilities between buyers and sellers, the International Chamber of Commerce (ICC) established Incoterms. These globally recognized trade rules define who is responsible for specific tasks during the shipping process, including the rule known as Delivered at Place (DAP).
What is Delivered at Place (DAP)?
Delivered at Place (DAP) is an Incoterm where the seller is responsible for delivering the goods to a specified destination. Under this rule, the seller handles all transportation and assumes the associated risks until the goods arrive at the agreed-upon location. The goods are considered “delivered” when they are at the buyer’s disposal on the arriving mode of transport, ready for unloading.
This “place” can be any location mutually agreed upon, such as the buyer’s warehouse, a port, or an airport. The contract of sale must name the specific point of delivery, as this precision marks the formal handoff of the shipment from the seller to the buyer. DAP can be used for any mode of transportation.
Seller’s Obligations Under DAP
Under the DAP Incoterm, the seller’s primary duty is to arrange and pay for all costs to transport the goods to the named destination. This includes packaging, pre-carriage from their facility, and the main freight charges. The seller must also handle all export formalities in their own country.
This involves obtaining export licenses, paying export duties and taxes, and preparing all required documentation for customs clearance. They are responsible for providing the buyer with proof of delivery and any documents the buyer needs to take possession of the goods.
The seller’s obligations stop just short of unloading the goods from the transport vehicle and do not include handling import customs procedures in the buyer’s country. If the seller’s transportation contract includes unloading, they cannot charge the buyer for this service unless previously agreed upon.
Buyer’s Obligations Under DAP
Once the goods arrive at the named destination and are ready for unloading, responsibilities shift to the buyer. The buyer is responsible for arranging and paying for the unloading of the goods from the arriving transport.
A primary responsibility for the buyer under DAP is managing all import-related procedures. This includes handling import customs clearance, paying all applicable import duties and taxes, and securing any necessary permits for importation.
Any costs from customs delays, such as storage or detention fees, are the buyer’s responsibility, provided they were not caused by the seller’s incorrect documentation. After the goods are unloaded, the buyer also handles any further transportation if the named place is not their own premises.
The Critical Point of Risk Transfer
A defining feature of any Incoterm is the moment that risk of loss or damage to the goods passes from the seller to the buyer. For DAP, this transfer occurs when the goods are placed at the buyer’s disposal at the named destination, still loaded on the arriving transport. This means the seller bears all risks associated with the goods throughout transit until they reach the agreed-upon point.
If the shipment is damaged while being transported, it is the seller’s responsibility. Conversely, if the goods are damaged during unloading or import customs inspection, the buyer bears the loss. This delineation helps both parties arrange insurance and manage potential claims.
How DAP Compares to Other Incoterms
Comparing DAP to other Incoterms helps clarify its applications, as distinctions often involve who handles unloading and import duties. A common comparison is with Delivered Duty Paid (DDP). The primary difference is that under DDP, the seller is responsible for import clearance and costs, including duties and taxes, making it the term with maximum seller obligation. With DAP, this responsibility falls to the buyer.
Another related term is Delivered at Place Unloaded (DPU). The distinction here is unloading. DPU requires the seller to transport the goods to the destination and unload them. Under DAP, the buyer is responsible for the unloading process.
When to Use DAP
DAP is often chosen when a seller wants to manage the entire transportation chain but wishes to avoid the complexities of a foreign country’s import regulations. This allows them to offer a near door-to-door service without taking on customs-related risks in the buyer’s country.
For a buyer, DAP offers the advantage of having the seller handle the logistics of a complex shipping journey. Buyers may prefer DAP because it gives them control over the import customs process in their own country, where they likely have more expertise to manage duties and taxes. This can prevent unexpected costs that might arise if a seller, unfamiliar with the import country’s rules, were to handle these formalities.
Buyers must be prepared for potential delays if customs clearance does not proceed smoothly, as any resulting charges will be their responsibility. DAP is well-suited for land transport within regions where customs formalities between countries are minimal.