Introduction to DAP in Transport Conditions
DAP or Delivered-at-Place is an international trade term that defines the responsibilities and costs between buyer and seller in a shipping agreement. Under DAP, the seller is responsible for arranging and bearing the costs of transporting the goods to the agreed place, usually the buyer's location. On the other hand, the buyer is responsible for importing and unloading the goods.
DAP can be applied to a variety of modes of transport, including ocean, air, road and rail freight. It is important to note that DAP does not mean that there are no additional costs beyond the cost of the product. The buyer must bear any costs involved in cargo insurance, import duties, customs clearance and unloading at final destination.
With the introduction of DAP, previous Incoterms such as DAF, DES and DDU were abolished.
SELLER'S OBLIGATIONS UNDER DAP
Sellers play an important role in a DAP agreement as they bear most of the responsibilities and costs associated with the shipping process. The main obligations of the seller under the DAP include:
Export Packaging: The seller must prepare the goods for export and ensure that they are properly packed and secured.
Loading costs: The seller bears all costs associated with loading the goods on the transport vehicle at its warehouse.
Delivery to port/location: The seller is responsible for arranging and paying for the delivery of the goods to the port or point of export.
Export Duties, Taxes and Customs Clearance: The seller must bear all costs and responsibilities related to the export of the goods, including obtaining the necessary licenses and handling customs matters.
Origin Terminal (OTHC) Handling Charges: The seller is responsible for paying these charges at the origin terminal.
Loading into carriages: All costs of loading the goods into carriages shall be borne by the seller.
Freight: The seller pays the freight required to transport the goods to the buyer's destination.
Destination Terminal Handling Charges (DTHC): Sellers are also responsible for these destination terminal handling charges.
Delivery to the destination: After the goods arrive at the buyer's port of destination, the seller is responsible for arranging and handling the final transportation to the agreed destination.
Obligations of the Buyer under the DAP
While the seller bears most of the responsibilities in a DAP contract, the buyer has certain compliance obligations. These include:
Payment: The buyer must purchase the goods and pay the seller, and notify the seller of the destination.
Import: After the goods arrive, the buyer is responsible for handling any import issues, including filling out the necessary import forms.
Unloading: The buyer must arrange for the goods to be unloaded from the ship.
Import Duties, Taxes and Duties: Once the goods reach their destination, the buyer is responsible for the cost of import duties, taxes and duties.
Transport: After unloading, the buyer is responsible for transporting the goods to the next location, such as a warehouse, storage facility, or retail location.
Pros and cons of DAP for both buyers and sellers
Benefits for Buyers
The DAP clearly shows which party is responsible for any additional costs during shipping, minimizing the buyer's risk.
The reduced liability makes DAP a popular choice for buyers looking to transfer all shipping risk to the seller.
DAP can help buyers manage cash flow and inventory, especially for expensive items that sellers need to reorder on a regular basis.
Buyer's Disadvantage
Delays in customs clearance may result in additional costs to the buyer as they are responsible for import duties, taxes and customs clearance.
Since the seller bears all risk and responsibility associated with shipping, the buyer's total shipping cost may be higher.
bad for sellers
DAP may be considered a risk for some sellers, especially when shipping to a new buyer, as the buyer may refuse to pay the import duties, thus putting the seller at risk of losing the goods.
To mitigate these risks, sellers may require higher deposits or higher fees to make the shipping process worthwhile.
When should the DAP protocol be used?
DAP is a common Incoterm that offers numerous advantages to buyers and sellers. Anytime a seller is open to a DAP protocol, it's worth considering. It minimizes the risks and obligations of the new importer, but may come with higher costs. Experienced importers who are looking for creative solutions to manage logistics with their sellers may also find DAP beneficial.
However, be sure to communicate with your seller and provide the exact drop-off location for the specified destination. Both parties should also discuss who will be responsible for any additional costs incurred due to unforeseen risks during the import and export process.
diploma
It is important for buyers and sellers involved in international trade to understand what DAP means for shipping. By understanding the responsibilities and costs associated with DAP agreements, you can make informed decisions and navigate the complexities of shipping with more confidence. Remember to communicate with your seller, provide a delivery location, and consider the pros and cons of using DAP in your shipping contract
