What Does Delivered-at-Place Mean and Where Is This Term Used?
The responsibilities of sellers and buyers in international trade can be clarified by using DAP, or Delivered-at-place, which is a trade term. Under DAP, the seller is accountable for transporting the goods to a specified location and covering all associated costs and risks. Once the shipment reaches its destination, the buyer assumes responsibility for the goods. Incoterms, such as DAP, help establish clear guidelines for trade contracts, ensuring clarity and avoiding confusion between the parties involved.
DAP is an international trade term where the seller takes on the responsibility for costs and potential losses associated with moving goods to a specific location. In DAP agreements, the buyer becomes responsible for paying import duties, and applicable taxes, and handling local clearance taxes upon the shipment's arrival at the designated destination. The term was introduced in the International Chamber of Commerce's (ICC) eighth publication of Incoterms in 2010.
How Does DAP Work?
In trade contracts, there are rules called Incoterms that define the responsibilities of buyers and sellers. One such term is DAP. It means the seller takes on all the risks and costs of delivering goods to an agreed location, including packaging, documentation, and transportation. The buyer is responsible for unloading and handling import procedures.
DAP can be used for any transportation method and specifies the point where the buyer takes financial responsibility, like "delivered-at-place, Port of Oakland." DAP was introduced in 2010, replacing the term Delivery Duty Unpaid (DDU). DAP is now the standard term in international trade. The opposite is Delivered Duty Paid (DDP), where the seller covers duties, clearance, and taxes.
Sellers and Buyers DAP Obligations
Buyers and sellers have specific responsibilities outlined by the ICC for each Incoterm. Here are the main obligations of each party:
- Documentation: The seller is responsible for obtaining and providing necessary documentation, including tallying goods, commercial invoices, packaging, and export-related markings.
- Licensing: Securing export licenses and handling customs matters on their end is the seller's responsibility.
- Transport: The seller arranges pre-carriage, delivers goods to the port, loads them onto containers, and ensures main carriage and delivery to the destination.
- Costs: The seller covers shipment costs and any potential losses during transit.
- Proof of Delivery: Once the container arrives at the destination, the seller provides proof of delivery to the buyer.
- Payment: Buyers must establish payment for the goods and inform the seller of the destination.
- Import: Upon arrival, buyers handle import-related tasks, including necessary formalities and documentation.
- Unloading: Buyers make arrangements to unload the cargo from the shipping vessel.
- Costs: Buyers are responsible for import duties, taxes, and levies upon arrival at the destination.
- Transport: After unloading, buyers arrange transportation from the destination/port to the next location, such as a warehouse, storage facility, or retail site.
ICC and Incoterms
The ICC was founded in 1919 and introduced the Incoterms in 1936 to simplify domestic and international trade. Over time, eight updates were made to remove outdated terms, and one of those updates included the addition of DAP as a simplified term applicable to all transportation methods.
The primary purpose of the ICC and the Incoterms is to establish clear responsibilities in international contracts, particularly regarding shipping arrangements. By providing precise definitions, the Incoterms ensure that all parties involved have a shared understanding of their obligations.
Despite the clarity provided by the Incoterms, disputes can still arise in DAP arrangements. For example, issues may occur when a carrier incurs demurrage charges due to a lack of proper clearance. Determining responsibility in such cases can be challenging, as documentation requirements vary between countries and are defined by national and local authorities. It is important to note that even with defined contract terms, international trade law remains complex.
DAP vs. DDP
Under DAP, the seller and buyer share certain responsibilities for the shipment of goods. The seller is responsible for loading and shipping the goods to the buyer's designated location. They also cover the cost of transport and bear any losses during transit. Once the goods reach the destination, the buyer takes over and becomes responsible for unloading the cargo, as well as any taxes, duties, or fees.
In contrast, DDP operates differently. With DDP, the seller assumes all the risks, responsibilities, and costs associated with transport. This includes shipping costs, insurance, import and export duties, and any other agreed-upon expenses with the buyer.
International trade can be complex, but the International Chamber of Commerce has developed Incoterms to provide clarity. Incoterms are a set of rules that are periodically updated and help define the rights and responsibilities of buyers and sellers in financial contracts. One such Incoterm is Delivery-at-Place, where the seller takes on the majority of the responsibilities and costs associated with shipping the goods to the agreed-upon location. Once the goods reach the destination, the buyer assumes responsibility. These Incoterms simplify international trade by establishing clear guidelines for both parties involved.