Delivered at Frontier (DAF)

Definition

Delivered at Frontier (DAF) is a term used in international trade contracts, indicating that the seller’s obligation is to deliver the goods to a named place at the frontier but before the customs border of the destination country. The seller is responsible for all the costs and risks associated with transporting the goods to that point. After delivery, the buyer assumes all responsibilities for import clearance, duties, and onward transport.

Phonetic

The phonetics of the keyword “Delivered at Frontier (DAF)” is:Delivered – /dɪˈlɪvərd/ at – /æt/Frontier – /frʌnˈtɪr/(DAF) – /dæf/

Key Takeaways

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1. DAF is a trade term used in international shipping, indicating that the seller is responsible for making a product available at a specific location, usually a named place, city, or frontier. But, they’re not responsible for unloading the goods or, from there on, any costs associated.
2. The term DAF is generally followed by a place, for instance, ‘DAF New York.’ Hence, the seller’s obligations are met when the goods arrive at the said location but before crossing the frontier or border.
3. DAF can be utilized for any mode of transport. But, it is predominantly used for sea and inland waterways. However, since it doesn’t involve handling the goods, it is declined in containers transported by sea. Here, terms like Cost, Insurance, and Freight (CIF), Cost, and Freight (CFR), Carriage Paid To (CPT), or Carriage and Insurance Paid to (CIP) end up taking its place.

“`Remember that the specific details about responsibilities for transport and other matters will be laid out in sales contracts when using DAF (or any Incoterm).

Importance

The business/finance term “Delivered at Frontier” (DAF) is important as it is a type of international trade agreement known as an Incoterm. Incoterms dictate the responsibilities, risks, and costs of transporting goods between sellers and buyers. Under a DAF agreement, a seller is responsible for arranging transportation and covering all costs, except for import duties and taxes, to deliver goods to a named place at the frontier, which is typically a border of a country. However, the risk of damage or loss transfers from the seller to the buyer once the goods have arrived at the frontier. Clarification of these responsibilities and costs helps reduce confusion and disputes between parties in international trade transactions, which makes DAF terms crucial in global commerce.

Explanation

Delivered at Frontier (DAF) is an international trade term used in the context of goods transported to the borders of a designated country. Essentially, it demarcates the point where responsibilities and costs associated with delivering goods shift from the seller to the buyer. Its main purpose is to create a clear-cut understanding between both parties involved in an international trade transaction concerning who bears the costs and responsibilities at various stages of shipment, thereby reducing ambiguities and preventing potential disputes over the sharing of associated costs and risks.In a DAF agreement, the seller has fulfilled his obligation when the goods have been made available at the designated frontier, but before the customs border of the importing country. The seller is responsible for all the risks and costs related to the transportation of goods up to this point, including exporting formalities. Once the goods have arrived at the designated frontier, the responsibilities, risks, and costs transfer to the buyer, which includes the task of clearing the goods for import at its own risk and cost. By providing clarity over this transition point, DAF arrangements ensure smooth trade transactions and allow better planning and execution for both sellers and buyers.

Examples

1. Automobile Manufacturing: An American car manufacturing company plans to sell parts to a French auto manufacturer. The American company agrees to a DAF arrangement where they take responsibility for all costs, losses, and risks involved in delivering the car parts to the France-Germany border. Once the car parts are at the France-Germany border, responsibility shifts to the French manufacturer.2. Agricultural Industry: A Brazilian coffee bean exporter has a contract with an Italian coffee roasting company. The agreement states that the Brazilian exporter bears all the risks and costs associated with transporting the coffee beans to the Swiss-Italian border. Following the DAF terms, once the coffee beans arrive at the border, the Italian company becomes responsible for all costs and risk.3. Electronics Business: A South Korean electronics corporation has a contract to supply televisions to a Russian company. Under the DAF terms, the South Korean company covers all transportation costs and assumes all risks until the goods reach the Chinese-Russian border. From that point onwards, the Russian buyer assumes all risks and responsibilities.

Frequently Asked Questions(FAQ)

Related Finance Terms

• Incoterms
• Export Clearance
• Freight Forwarding
• Border Crossing
• Import Duty

Sources for More Information

• Investopedia
• The Balance
• Business Dictionary
• Tutor2U