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Delivered At Place (DAP) Meaning
DAP (Delivered at Place) is a delivery agreement used in international trade. At the same time, the seller is willing to bear all expenses and potential losses incurred while transporting the goods. This agreement aims to provide a standardized framework for international trade transactions that helps reduce risk.
However, once the goods have been safely transported to the agreed-upon location. Then the buyer is responsible for unloading and collecting the consignment and incurring import duty, customs duty, local taxes, and other related charges. As a result, the buyer bears the risk of loss and potential expenses. DAP is frequently used when the buyer is in a foreign country and may need more resources to handle the logistics of importing.
Table of contents
- Delivery at Place (DAP) is an incoterm that states the seller's obligation to pay all the expenses and bear any loss that arises while transporting and delivering the goods to the destination specified by the buyer.
- However, the seller is not liable for unloading the consignment. It is the buyer's obligation after that to unload the goods and pay off the import customs clearance duty and taxes.
- It is different from Delivered At Terminal. That states that the seller is liable to bear expenses and potential losses until the goods reach the terminal, the buyer decides.
Delivered At Place Explained
Delivered at Place (DAP) is a common import or export agreement term that clearly states the seller and buyer's obligations regarding a consignment's delivery, clearance, and unloading.
Thus, the seller's obligations as per the Delivered at place incoterm are as follows:
1. Documentation: The seller should prepare all the documents related to the tally of the goods for export, commercial invoice, etc.
2. Licensing: The seller must check the export license and other legal formalities for moving the goods from the source location.
3. Transport: The seller loads the consignment, conducts the inspection, tallies the goods with the order list, and performs other pre-carriage tasks.
4. Shipment Cost: The seller also pays the expense of shipping the goods and bears the risk of loss in transit.
5. Proof of Delivery: The seller must be able to present all the documents. Along with the proof of delivery to the buyer as the consignment reaches the delivery location.
However, the buyer's obligations in a DAP agreement include the following:
1. Payment: As soon as the buyer receives the proof of delivery, they must pay off the due amount to the seller.
2. Import Custom Clearance: The buyer should take charge of all the import formalities and pay the import duty and other taxes for taking possession of the goods.
3. Unloading: The buyer must arrange and pay for unloading the cargo or container outside the terminal once the clearance is completed. As a result, under the delivered at place unloaded clause, the buyer is liable for any costs associated with the unloading of the goods from the transport vehicle.
4. Transportation: The buyer is responsible for paying the freight and transportation charges for moving the goods from the delivery location to their premises or warehouse.
The International Chamber of Commerce (ICC) introduced the term' delivered at place' as a part of the various other Incoterms it developed in 1936. Hence, the idea was to build a robust international trade system where the parties' responsibilities to the trade were well-defined and precise.
Examples
Let us now discuss some possible cases where the DAP term is applicable:
Example #1
Let's say a buyer in Germany wants to purchase some goods from a supplier in the United States. Hence, the two companies agree to use the delivered at place incoterm. Therefore, this means that the US supplier is responsible for providing the goods to a specified location in Germany. But the buyer is responsible for any costs or risks associated with importing the goods into Germany.
Once the vessel arrives at the destination, the buyer is responsible for arranging for the container to be cleared through customs and transported to its desired location. Furthermore, the buyer must also pay import duties, taxes, or fees for bringing the goods into Germany.
Hence, in this example, the DAP incoterm ensures that the supplier in the US is responsible for delivering the goods to the agreed-upon location in Germany. And the buyer is responsible for the costs and risks associated with importing the goods.
Example #2
Suppose the seller in New Mexico receives an order from a buyer in Alaska. The trade agreement again includes the delivered at place contract, but the seller has to ship the consignment worth $40000. However, the cargo drowned with the ship in transit due to a cyclone. Since the goods failed to reach the destination, i.e., the Texas port, the seller must resend the consignment and bear the loss of $40000.
They assumed the ship had not drowned and safely reached the Texas port. But during the commencement of the import formalities, the port authority refused to release the consignment because the buyer's import license had expired. Then, the buyer cannot refuse to pay the due amount, i.e., $40000, to the seller.
Delivered At Place vs Delivered At Terminal vs Ex Works
The International Chamber of Commerce (ICC) has penned various international trade terms to ensure clarity of seller and buyer's responsibilities in the export and import of goods. Hence, DAP, DAT, and EXW are the three different incoterms stated here.
Following are the broad distinctions between the three:
| Basis | Delivered At Place | Delivered At Terminal | Ex Works |
|---|---|---|---|
Meaning | DAP states the seller's responsibility for incurring all the expenses and taking the risk of possible losses during the transportation and delivery of goods to the mentioned destination. | DAT states that the seller is responsible for all the expenses and possible losses until the goods are dropped at the mentioned terminal. | EXW states that the seller is only responsible for manufacturing, packaging, and keeping the consignment of goods ready at their location for the buyer to collect. |
| Seller’s Obligation | Documentation, packaging of goods, licensing, transportation, shipment, and providing proof of delivery | Documentation, packaging of goods, licensing, transportation, delivery at the terminal, and providing proof of delivery | Manufacturing, packaging, and placing the goods at their location |
| Buyer’s Obligation | Obligations include payment, import customs clearance, unloading, and transporting goods to their premises. | Carriage of goods to their premises, import formalities, duties, and tariffs | Loading charges, collection of goods from the seller's premises, paying custom export fees, carriage, insurance, custom import fees, terminal charges, delivery to destination, and unloading |
Frequently Asked Questions (FAQs)
In DAP, the seller pays the export duty and is responsible for the export customs clearance. At the same time, the buyer is responsible for paying the import duty and executing the import customs clearance for collecting the goods from the delivery location.
Following are the various benefits of DAP to the seller:
- High-profit margin due to high risk
- Not liable to unload the consignment at the destination
- Right to select the freight forwarder for export
- A greater degree of control over goods movement.
In the DAP, the seller is responsible only for packaging, labeling, freight, and export customs clearance. The buyer then takes over the charge of unloading the goods, import customs clearance, duties, and taxes.
On the contrary, in delivered duty paid (DDP), the seller is also responsible for the import customs clearance and thus liable to pay the import duty at the destination.
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