Delivered-at-Place (DAP)

Definition

In international trade, Delivered-at-Place (DAP) is an agreement where the seller assumes all responsibility and costs to transport goods to a specified location. The seller covers all risks and expenses until the goods are ready for unloading by the buyer at the agreed destination. However, the seller is not responsible for handling the goods after the goods have arrived at the named place.

Phonetic

The phonetics of the keyword “Delivered-at-Place (DAP)” is: Dih-liv-uhd-at-pleyss (D-A-P)

Key Takeaways

Here are the three main takeaways about Delivered-at-Place (DAP):

1. Responsibility of the Seller: Under DAP, the seller is responsible for arranging the carriage and delivering the goods at an agreed place or designated location at the destination. The seller is burdened with all costs and risks involved with bringing the goods to that location.
2. Transfer of Risk: The risk of loss or damage to the goods transfers from the seller to the buyer only when the goods have been delivered at the specified location. Until that point, any loss or damage to the goods is upon the seller.
3. Import Duty and Tax: DAP is distinct from other Incoterms as the import clearance, duties, and taxes are responsibility of the buyer. The buyer is accountable for unloading the goods from the delivery vehicle and carrying out all the necessary import formalities.

Importance

The business/finance term Delivered-at-Place (DAP) is important as it dictates the responsibilities concerning the delivery and transportation cost between sellers and buyers in international trade transactions. Under DAP, the seller is responsible for all costs, risks, and tasks necessary to deliver the goods to an agreed-upon place, typically the buyer’s premises or a named place. The shift of responsibilities occurs when the goods are available for unloading. At this point, the buyer assumes all risk and costs related to import clearance, duties, and onward transportation. This clarity on obligations and expenses aids in mitigating business risks, supporting efficient trade, and managing associated costs, which is crucial in international commerce scenarios.

Explanation

Delivered-at-Place (DAP), being one of the international commercial terms (Incoterms), serves an essential role in global trade by establishing a common set of rules for businesses of different countries. It particularly provides a precise understanding of the risk and cost allocation between the buyer and the seller. In essence, it aids in removing uncertainties in shipping processes and prevents potential disputes in international business transactions.Under a DAP agreement, the seller is responsible for covering the costs and risks associated with delivering the goods to a specified location, excluding the payment of import duty or tax. The buyer, however, is obligated to unload the goods, handle customs procedures and cover all associated costs. This extensive understanding of roles ensures transparency and smoothness in the delivery process, and both parties can clearly see their responsibilities, reducing the chances of misunderstanding. Hence, DAP is an efficient tool that benefits businesses by providing a standardized framework for international trade, which can, in turn, increase operational efficiency.

Examples

1. International Wholesale: Let’s say a Chinese electronics manufacturing company creates high-end smartphones. They receive an order from an Australian retail chain. They agree on DAP terms, so it’s the Chinese company’s responsibility to handle all the shipping costs, customs and import duties until the smartphones reach the Australian store. However, once the goods are ready for unloading by the buyer at the named place of destination, the risk transfers from the seller to the buyer.2. Automobile Delivery: A European car manufacturer is selling vehicles to a dealership in the United States. Under the DAP terms, the manufacturer must bear all the costs to transport the cars, including insurance during transport, and customs duties. It’s their responsibility to deliver the cars directly to the US dealership. After the cars have arrived at the dealership and ready for unpacking, the responsibility and risks transfer to the US dealership. 3. Agricultural/ Farm Produce: An Indian farmer grows a rare type of exotic spices that’s popular in upscale restaurants in Canada. The Canadian restaurants place orders directly with the farmer. Here, under DAP agreement, the farmer handles all shipping costs, duties, and other expenses until the shipment reaches the restaurant’s address in Canada. After the spices have arrived and ready for unloading, the responsibility is then transferred to the restaurants.

Frequently Asked Questions(FAQ)

Related Finance Terms

• Incoterms
• International Trade
• Freight Responsibility
• Import Duty
• Shipping Documentation

Sources for More Information

– Investopedia– Shippo– Trade Finance Global– Export.gov