Estimated reading time: 5 minutes
DAP (Delivered at Place) is one of the most popular Incoterms used in Europe, it is also one of the most popular used for e-commerce.
Learn how to use it for international commerce and cross-border e-commerce.
Everything you need to know about DAP Incoterm including practical examples
TFG spoke to Johnatas Montezuma, a shipping expert with years of experience on Incoterms, who shares his experience and practical work with many Fortune 100 companies
History of Delivered at Place (DAP)
DAP should be one of the most used terms because it is easy for the buyer who only needs to arrange its home country’s import customs clearance.
The International Chamber of Commerce (ICC) eliminated DDU (Delivery Duty Unpaid) from Incoterms 2000 and created DAP and DAT (Delivery at Terminal) with the intention of simplifying the D terms group.
DAP is one of the lesser used terms as shippers prefer the most traditional CFR (Cost and Freight) and CIP (Carrier Insurance paid to).
DAP Incoterm – Explained
In DAP, short for Delivered at Place, the seller is responsible for moving the goods from the origin to their delivery at the place agreed with the buyer ready for unloading at the destination.
Under DAP terms, the risk passes from the seller to the buyer from the point of destination mentioned in the contract of delivery.
The seller must deliver the goods not unloaded at the place agreed and notify the buyer that the goods have arrived.
The seller covers all legal export formalities at the time of exporting the goods but the buyer is the one responsible for customs clearance, duties, and taxes at the destination.
DAP in practice
While the ICC’s (International Chamber of Commerce) description may sound straightforward, there are some practical considerations to be aware of.
On the ground, there will be many cases where the buyer needs to complete the customs clearance at the destination before the actual physical delivery.
This means that local customs authorities must provide a green light for moving goods from the destination terminal to the buyer’s premises.
In some scenarios, customs processes can be delayed causing extra storage, demurrage, and detention costs.
What to watch out for when using DAP Incoterm
As with any of the Incoterms, there are several things that importers and exporters looking to use the DAP Incoterms should be aware of.
For example, the goods could arrive at the destination country without proper import documentation, leading to headaches, delays, and additional fees.
Another possibility is that a customs broker or a buyer that did not pay the proper duties and taxes could delay the customs clearance process.
All of these are things that could go wrong and that traders need to be aware of.
Paying extra expenses under DAP
The short, unhelpful, but most accurate answer is that it depends.
The ICC rules state that buyer bears all risk and loss of damage from the time the seller makes the goods available at the named place of destination within the agreed time.
Usually, the delivery point is the buyer’s door after customs clearance.
Therefore, the seller is responsible for anything that needs to be paid before the goods arrive at the agreed named place of destination.
Likewise, the buyer will need to pay any extra expenses incurred after the goods arrive.
As with any international business transaction, the exact terms of any individual contract may vary.
This makes it important to check your individual scenario to determine who should be paying for any unexpected expenses.
Avoid misunderstandings in international transactions
While the world of international commerce is always going to be filled with uncertainties, importers and exporters can take several steps to help mitigate the risk of costly miscommunications.
Some of these best practices are to:
- Agree on the point of destination as clearly as possible and state it in the contract
- Agree on delivery timelines
- Have the seller notify the buyer when the goods arrive with sufficient time in advance
- Have the seller must provide all necessary documentation a few days before arrival
- Agree on who will pay for unloading charges (this is sometimes difficult for the seller to arrange)
- Nominate a destination customs broker in advance and agree on a reasonable clearance period
- Agree beforehand who will pay for demurrage, detention, and storage in case of any dispute
Some shippers prefer to use CPT (Carrier Paid to) instead of DAP.
It is easier to choose CPT that covers the carriage of goods until they arrive at the place of destination and delivery happens when goods have been received by the first carrier.
This choice will depend on other factors like payment terms, mode of transportation, and the nature of the goods.
Scenario: eCommerce
When sellers want to ship overseas and have preferred international courier rates, they can use DAP instead of DDP (Delivery Duty Paid).
Having preferred courier rates allow shippers to deliver goods to the buyer’s destination so they can clear customs and pay duties and taxes if necessary.
eCommerce sellers typically have the advantage of placing goods at the stated destination with competitive rates and letting buyers arrange local customs processes.
Conclusion
When correctly applied, DAP is one of the most useful terms in international commerce offering great benefits for buyers and sellers.
It is important for both parties to agree on who will pay for extra expenses when applicable.
With the anticipated increase in cross-border commerce, many experts expect DAP to become more popular in the years to come.
Written by Johnatas Montezuma from International Commercial Terms
