Incoterms: What Does DAP Mean?

Shipping is full of terminology that can make the process more difficult to understand. Incoterms are a set of rules that govern the international trade of goods, and a crucial part of this terminology. Executing successful business deals, including the payment and delivery, often means following one of the Incoterms 2020.

Exporting, transporting and importing goods involves strict compliance rules that differ depending on the journey. This is where the Incoterms can help you in understanding your responsibilities. There are currently 11 rules, and depending on the agreed-upon rule, the obligations between the buyers and sellers can differ.

In this article, we will specifically focus on DAP Incoterm, one of the 11 rules, and what it involves.

What is DAP (Delivered At Place) Incoterm?

DAP stands for Delivered At Place, which means that the seller must make the item available at the buyer's chosen location. DAP can be viewed as a favourable service for buyers as sellers bear a lot of the risk in the delivery process. DAP can be used for any transport mode and multiple modes on the same delivery.

Transportation risks can include the loss of goods, travel delays and incorrect documentation, which can be expensive. When couriers travel through a compact region, like Europe, these risks can be heightened. This is why DAP is a buyer-benefitted system of delivery. Sellers can use DAP to show they're customer service focused and make their business stand out to customers. But, it comes with higher costs of course.

DAP obligations for sellers and buyers

DAP has obligations for both sellers and buyers that can differ from the other 10 Incoterms. Below, we take a look at the specific obligations that DAP requires and what it means for both buyers and sellers:

General obligations

Sellers

In all of the Incoterm rules, sellers have to provide the goods with a commercial invoice. Depending on the sale, there could also be other evidence of compliance required, such as weighbridge documents or analysis certificates. Sellers can provide the documents either as a hard copy or in an electronic form; the contract may state which option is required.

Buyers

Again, all Incoterms rules state that the buyer must pay the contracted price for the goods. The rules don't specify what stage this payment needs to be made or the payment method. The contract between the seller and buyer should refer to these payment duties so that both parties are clear on their obligations.

Neither the seller or buyer are required to insure the goods, although the seller may benefit more from insurance with the DAP incoterm as they bear most of the risk.

Delivery obligations

Sellers

The DAP and DDP (Delivered Duty Paid) rules place the responsibility on the seller to deliver the goods to the buyer at an agreed destination place. Once delivered, the seller is not responsible for unloading the goods off of the delivery fleet. In most cases within Europe and the UK, this would be by truck or rail freight.

Sellers may need to be aware that the delivery destination is not always the buyer's premises. This can be important as the requirements to enter the drop-off spot can differ. Finally, DAP states that the delivery is to be made within the agreed period.

Buyers

Once the seller delivers the goods, buyers are responsible for collecting the goods.

This includes the safe unloading from the transportation means, so arranging and paying for any equipment necessary. If any accidents happen to the cargo during this process, it is not the responsibility of the seller compensate.

Transfer of risk

Sellers

DAP rules state that sellers bear all the risk of loss and damage to goods until they have been delivered. The exception to the rule is given below in the buyer's transfer of risk. Sellers must also provide proof of delivery once it's completed.

Buyers

While the seller bears the loss and damages during delivery, the buyer takes over the risk if they give incorrect delivery information or they fail to provide the correct information to clear the goods through import customs. If loss or damage occurs to the goods because of these reasons, then the buyer becomes responsible.

For example, suppose the seller dispatches the goods to the buyer and they are held indefinitely by the importing country's customs because the buyer failed to provide the necessary import permit. In that case, the buyer bears the risk.

Once the goods are at the delivery location, the buyer takes over the risk of loss or damages.

Custom obligations

Sellers

Under DAP rules, the seller is also responsible for the export customs formalities for the goods leaving the place of origin. This can include licenses, permits and security clearances. They could also be pre-shipment inspections and other approvals required.

Buyers

The buyer is responsible for the import formalities for the goods entering the country of the destination. This can include permits, import clearance and security clearances, both for transit and import. If a shipment inspection is required at the import clearance point, the buyer must cover this cost.

DAP states that, where appropriate, the buyer should also aid the seller in their export formalities if the seller asks.

Wrapping it up

International business trade can be a complicated procedure. Understanding your own obligations in that process can be complex enough in itself. In this article, we've focused on one of the Incoterm rules. DAP places a lot of the obligations on to the seller. With many boxes to check for successful delivery, there can be a high level of risk involved for sellers using DAP rules. But the flipside is that buyers may feel like they have received a higher quality of service. Increasing the chances of repeat custom.

You can help yourself minimise your risk by consulting an international shipping expert. WTA can help you find a solution to your delivery needs. Contact us to find out more.

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