Incoterms (International Commercial Terms) are a set of standardized rules and regulations developed by the International Chamber of Commerce (ICC) that govern the international trade of goods. The Incoterms establish clear rules for the responsibilities and obligations of buyers and sellers in terms of transport, delivery, insurance, and other aspects of trade.
The current version that is used is the Incoterms 2020. It has 7 rules that cover all the modes of transport and 4 that are specific to the transport of cargo over water. These Incoterms rules are as follows:
- EXW – Ex Works (showing the place of delivery)
- FCA – Free Carrier (showing the place of delivery)
- CPT – Carriage Paid to (showing destination)
- CIP – Carriage and Insurance Paid To (showing destination)
- DAP – Delivered at Place (showing destination); replaces Delivered Duty Unpaid or DDU.
- DPU – Delivered at Place Unloaded (showing destination); replaces Delivery at Terminal or DAT.
- DDP – Delivered Duty Paid (showing destination)
The Incoterms that are specific to water transport are the following:
- FAS – Free Alongside Ship (port of loading has to be mentioned)
- FOB – Free on Board (port of loading to be mentioned)
- CFR – Cost and Freight (show port of discharge)
- CIF – Cost Insurance and Freight (port of discharge to be shown)
One of the most commonly used Incoterms is DAP, which stands for Delivered at Place. In this article, we will provide an in-depth analysis of the Incoterm DAP, its definition, obligations, and key features.
Definition of DAP
DAP stands for Delivered at Place. According to the ICC, DAP means that the seller delivers the goods at a named place of destination, but the buyer is responsible for unloading the goods and clearing them through customs. The seller bears all the risks and costs associated with delivering the goods to the named place of destination, including transport costs, export and import clearance, and delivery to the final destination.
The named place of destination can be any agreed-upon location, such as a port, an airport, a warehouse, or a buyer’s premises. It is important to note that the seller’s obligations end once the goods have been delivered to the named place of destination, and the buyer assumes all the risks and costs from that point onwards.
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Obligations of the Buyer and Seller under DAP
The DAP Incoterm defines the obligations of both the buyer and seller in international trade. Let’s take a closer look at the obligations of each party under DAP:
Seller's Obligations
- Delivery of goods: The seller is responsible for delivering the goods to the named place of destination as agreed upon in the contract of sale.
- Export clearance: The seller is responsible for obtaining all necessary export licenses, permits, and customs clearance for the goods to leave the country of origin.
- Transport costs: The seller bears all the costs associated with transporting the goods to the named place of destination.
- Import clearance: The seller is responsible for obtaining all necessary import licenses, permits, and customs clearance for the goods to enter the country of destination.
- Delivery to the final destination: The seller is responsible for delivering the goods to the final destination as agreed upon in the contract of sale.
Buyer's Obligations
- Unloading of goods: The buyer is responsible for unloading the goods from the means of transport at the named place of destination.
- Customs clearance: The buyer is responsible for clearing the goods through customs in the country of destination.
- Import duties and taxes: The buyer is responsible for paying all applicable import duties and taxes associated with the importation of the goods.
- Transport from the named place of destination: The buyer is responsible for all costs associated with transporting the goods from the named place of destination to the final destination.
Key Features of DAP
The DAP Incoterm has several key features that make it an attractive option for international trade:
- Delivery to the named place of destination: The seller is responsible for delivering the goods to the named place of destination, which can be any agreed-upon location, such as a port, an airport, or a warehouse.
- Risk transfer: The risk of loss or damage to the goods is transferred from the seller to the buyer once the goods have been delivered to the named place of destination.
- Cost allocation: The seller bears all the costs associated with delivering the goods to the named place of destination, including transport costs, export and import clearance, and delivery to the final destination.
- Flexibility: DAP allows for flexibility in terms of the location of delivery, and it can be used for any mode of transport, including land, sea, and air.
Bottom Line
The DAP Incoterm provides a clear allocation of responsibilities and risks between the buyer and seller, allowing for flexibility in terms of the location of delivery and any mode of transport. However, DAP does have some disadvantages, such as uncertainty regarding delivery time, the risk of damage during unloading, and potential disputes. It is important for both the buyer and seller to understand the obligations and risks associated with DAP before entering into a contract of sale to ensure a successful and smooth transaction.
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Tags: Incoterms
