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.
The phonetics of the keyword “Delivered-at-Place (DAP)” is: Dih-liv-uhd-at-pleyss (D-A-P)
Here are the three main takeaways about Delivered-at-Place (DAP):
- 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.
- 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.
- 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.
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.
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.
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)
What does Delivered-at-Place (DAP) mean in finance and business?
Delivered-at-Place (DAP) is a shipping term used in international trade that refers to a situation where the seller is responsible for delivering the goods to a location specified by the buyer. The seller bears all the costs and risks involved in transporting the goods to that location.
Who bears the transportation costs in a DAP agreement?
In a DAP agreement, the seller bears all the transportation costs and the risks associated with delivering the goods to the specified location.
What happens once the goods are delivered to the specified location in a DAP agreement?
Once the goods are delivered at the specified location, the buyer is responsible for unloading the goods and handling any import customs duties or taxes.
How is DAP different from other shipping terms like CIF or FOB?
In comparison to other shipping terms such as Cost, Insurance, and Freight (CIF) or Free on Board (FOB), DAP means the seller assumes all the risks and costs up to the point where goods are ready for unloading by the buyer. The risk transfers to buyer once the goods are ready for unloading.
Do the buyers have any responsibilities in a DAP agreement?
Yes, in a DAP agreement, the buyer is responsible for duties, taxes, and other customs procedures required in their country for importing goods. They are also responsible for unloading the goods once delivered.
Is insurance covered under DAP?
No, DAP does not cover insurance. The buyer needs to arrange for insurance if desired as it is not the responsibility of the seller.
When is DAP most commonly used?
DAP is most commonly used in international shipping transactions where the seller agrees to deliver the goods to a place specified by the buyer. It is applicable for any mode of transport, including multimodal transport.