Delivered-at-Place (DAP) Definition, How It Works, and Obligations

What Is Delivered-at-Place (DAP)?

Delivered-at-place (DAP) is an international trade term used to describe a deal in which a seller agrees to pay all costs and suffer any potential losses of moving goods sold to a specific location. In DAP agreements, the buyer is responsible for paying import duties and any applicable taxes, including clearance and local taxes, once the shipment has arrived at the specified destination. The phrase was introduced in the International Chamber of Commerce's (ICC) eighth publication of its Incoterms (international commercial terms) in 2010.

How Delivered-at-Place (DAP) Works

Buyers and sellers often face complications when it comes to trade contracts, whether they are in the same country or not. As such, there are rules and regulations in place that clearly define the roles and responsibilities of each party in a financial contract. These are known as Incoterms—one of which is a delivered-at-place or DAP agreement.

DAP simply means that the seller takes on all the risks and costs of delivering goods to an agreed-upon location. This means they are responsible for anything associated with packaging, documentation, export approval, loading charges, and ultimate delivery. The buyer, in turn, takes over the risk and responsibility for unloading the goods and clearing them for import.

A delivered-at-place or DAP agreement is applicable for any form or combination of forms of transportation. It usually lists the point at which the buyer takes on financial responsibilities, such as “delivered-at-place, Port of Oakland.”

The term was introduced in 2010. At that time, DAP replaced the term delivery duty unpaid (DDU). While DDU may still be used colloquially, DAP is now the official term used in international trade.

DAP Obligations

The ICC sets out clear obligations for both buyers and sellers for each Incoterm. Below are the key responsibilities of each party.

Sellers

The seller is the one who bears most of the responsibilities when it comes to shipping under DAP contracts. This includes:

• Documentation: Under DAP rules, the seller must secure any documentation, including tallies of goods in the shipment, commercial invoicing as well as any packaging and marking related to the export of the shipment.
• Licensing: The seller must secure any licenses needed to export the goods and take care of any customs issues on their end.
• Transport: This category includes any pre-carriage of goods, the delivery to the port, loading onto the container, and main carriage/delivery to the destination.
• Costs: The seller must bear the cost of the shipment and must pay for any losses that may result during shipment.
• Proof of Delivery: This is provided by the seller to the buyer once the container arrives at the destination.

Buyers

While the seller does bear the brunt of the responsibilities under a DAP contract, there are certain things to which the buyer must adhere. These points include:

• Payment: The buyer must establish and pay the seller for the goods. They must also advise the seller of the destination.
• Import: Once the shipment arrives at the destination, the buyer must take care of any issues related to import. This includes any formalities, such as import forms.
• Unloading: The buyer must make arrangements to unload the cargo from the shipping vessel.
• Costs: The buyer bears the cost of import duties, taxes, and levies once the shipment arrives at its destination.
• Transport: Once unloaded, the buyer is responsible for transporting the goods from the destination/port to their next location. This can be a warehouse, storage facility, or retail location.

Importance of Incoterms

The ICC was founded in 1919. It established the Incoterms in 1936 as a way to facilitate domestic and international trade. Since then, the chamber released eight updates of these terms in order to remove obsolete terms. Delivered-at-place was one of those simplifications, as the definition applies regardless of the method of transport.

The main driver behind the ICC and the Incoterms is the need for a clear understanding of counterparty responsibilities in international contracts, particularly when it comes to who ships what and to where. With the ICC issuing concrete definitions, contracts can refer to the Incoterms, and the signing parties have a shared understanding of responsibilities.

Even with the clear guidelines for DAP arrangements, there are still situations that result in disputes, such as when the carrier of the goods incurs demurrage—a charge for failing to unload in time—as a result of not receiving the proper clearance from one of the parties.

In these cases, the fault usually lies with whichever party was amiss in providing timely documentation, but determining that can be difficult, as documentation requirements are defined by the national and local authorities controlling ports and vary from country to country. Indeed, international trade law can be complex even with the benefit of defined contract terms.

The Bottom Line

International trade can be very complicated and tricky. That's why the International Chamber of Commerce came up with Incoterms, which are a set of rules that are updated periodically. This list provides guidance to buyers and sellers on their rights and responsibilities when it comes to financial contracts.

Delivery-at-place is one such term. Under DAP, the seller bears much of the responsibility when it comes to the preparation and cost of shipping until the goods reach their destination. Upon arrival, the buyer takes over.