The DAP Incoterm, or “Delivered at Place”, replaces the now outdated DDU Incoterm, or Delivery Duty Unpaid, which appeared in the previous Incoterms edition, Incoterms 2000.
DAP is an Incoterm that states that the seller must make the goods available to the buyer at the buyer’s chosen location at origin.
Under DAP delivery terms, the seller is not responsible for unloading the goods at destination or for any customs-related costs, tariffs, taxes, fees, or duties that may apply.
The buyer is therefore responsible for all risks involved with processing the import customs clearance and all applicable duties and taxes upon cargo arrival at destination.
Under DAP, the seller is responsible for the majority of the transportation process and leaves minimal liabilities for the buyer. This makes it one of the two most popular Incoterms, the other being Delivery Duty Paid (DDP), for sellers looking to differentiate themselves by offering high levels of customer service to buyers.
The DAP Incoterm is versatile and can be used irrespective of the mode of transportation.
Cargo insurance is not an obligation for either party under the DAP Incoterm.
However, given the significant responsibilities and liabilities of the seller, most sellers exporting under DAP often prefer to purchase insurance.
This may just be to cover the portions they’re liable for. But the more likely scenario would be for them to insure the entire transportation from start to end.
When arranging insurance under DAP, make sure the insurance terms and conditions are specified in the sales contract.
As an exporter, shipping under the DAP Incoterm means taking responsibility for practically everything not only at the origin but also at the destination.
While this means higher risks for the exporter, by being responsible for the majority of the processes and fees, the exporter can obtain more competitive prices for the purchase of the goods and the ocean freight transportation by negotiating directly with the shipping line or freight forwarder.
It is for this very same reason that there is an elevated risk for shippers. DAP can prove particularly problematic when it comes to demurrage charges that may accrue when the cargo gets held up at destination. In the event this occurs, the shipper is the party liable for the payment of delay fees.
Before agreeing on the DAP Incoterm, as an exporter, make sure the destination country is safe, is one that you’re familiar with, or that your freight forwarder has a destination agent in place there.
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