Delivered at Place (DAP) in export is an international trade term (Incoterm) where the seller assumes all risks and costs associated with delivering goods to a specified destination, ready for unloading by the buyer.
Understanding DAP
DAP signifies a specific agreement in international trade defining the responsibilities of the seller and buyer. It essentially means the seller is responsible for everything until the goods are available to the buyer at the agreed-upon location. Let's break down what this entails:
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Seller's Responsibilities: The seller is responsible for:
- Packaging and labeling the goods for export.
- Arranging and paying for transportation to the named place of destination. This includes all freight charges, insurance costs, and customs duties in the exporting country.
- Ensuring the goods are available for unloading at the designated location.
- Handling export clearance procedures.
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Buyer's Responsibilities: The buyer is responsible for:
- Unloading the goods from the arriving conveyance.
- Import clearance, including paying import duties, taxes, and any other charges related to import.
- Arranging and paying for any further transportation from the named place of destination to their final location.
Key Differences from Other Incoterms
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DAP vs. DDP (Delivered Duty Paid): The crucial difference is that under DDP, the seller is responsible for import clearance and duties in the importing country. Under DAP, the buyer handles this. DDP represents the maximum obligation for the seller.
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DAP vs. DAT (Delivered at Terminal): DAT, which is now replaced by Delivered at Place Unloaded (DPU), meant the seller delivered the goods unloaded at a terminal (e.g., a port, warehouse, or airport). DAP means the goods are available for unloading, but the buyer is responsible for the actual unloading.
Advantages and Disadvantages
For the Seller:
- Advantages: Simpler than DDP as the seller doesn't handle import duties.
- Disadvantages: The seller bears the risk and cost of transportation until the goods arrive at the named place, which can be significant.
For the Buyer:
- Advantages: Avoids responsibility for goods until they arrive at the agreed-upon destination.
- Disadvantages: Responsible for import duties, taxes, and unloading the goods, which can involve complexity and potential costs.
Example Scenario
A company in Germany (the seller) agrees to sell machinery to a company in the United States (the buyer) under DAP New York City. The German company is responsible for packaging, transporting, insuring, and exporting the machinery to New York City. Once the machinery arrives at the agreed-upon location in New York City and is available for unloading, the responsibility shifts to the US company. The US company is then responsible for unloading the machinery, clearing it through US customs, and paying any import duties and taxes.
Choosing DAP
DAP is suitable when the seller has confidence in their ability to arrange and manage transportation to the agreed-upon destination, but prefers not to handle import clearance procedures in the buyer's country. It provides a clear division of responsibilities and can be beneficial for both parties depending on their capabilities and risk tolerance.