Shipping Term DAP: It's That Simple!

The shipping term DAP provides a flexible delivery method for international trade. It clarifies buyers' and sellers' responsibilities and obligations, helping reduce transaction costs and risks. Understanding DAP terms' specific operation and division of duties is crucial for both parties in international trade to ensure the smooth progress of transactions.

Definition and application of shipping term DAP

The shipping term DAP is a commercial term that is widely used in international trade. It means " Delivered At Place." It means that after the seller has transported the goods to the destination specified by the buyer, the goods loaded on the transport (without unloading) are handed over to the buyer for disposal, and the delivery is completed. In a DAP agreement, the seller bears all risks and costs until the goods are ready for unloading by the buyer at the named destination.

DAP is a new term added in INCOTERMS 2010, which is intended to replace DAF (Delivered at Frontier), DES (Delivered Ex Ship), and DDU (Delivered Duty Unpaid) in INCOTERMS 2000. DAP means that the seller is responsible for the delivery of the goods to any location specified by the buyer. It may be a designated place at the border between the two countries, on the vessel at the port of destination, or inland in the importing country, but does not include unloading.

DAP applies to any mode of transport, multimodal transport and sea transport, providing more choices and convenience for international trade.

Case Analysis

A U.S. company imports a electronic products shipment from China, with both parties agreeing on DAP (Delivered At Place) terms. The destination is Los Angeles, USA.

Under DAP terms, the Chinese seller is responsible for shipping the electronic products to Los Angeles. It means the Chinese seller is responsible for all transportation costs and risks from the starting point to Los Angeles, but this does not include import taxes or customs clearance fees. These costs will be paid by the buyer, the U.S. company. The point of risk transfer is also at the destination in Los Angeles—when the goods arrive at the specified location in Los Angeles and are ready for the buyer to take control, the risk shifts to the buyer. If there is any damage or delay during transportation, the Chinese seller will be responsible.

Allocation of responsibilities under the DAP clause

Seller's responsibilities

• Sign a transportation contract and pay the freight incurred to transport the goods to the designated destination or an agreed place within the selected destination.
• Delivery is completed when the goods that conform to the contract are placed on the arrived means of transport and handed over to the buyer at the designated destination.
• Give the buyer the notice so that he can take the necessary steps for the delivery of the goods.
• All risks and costs shall be borne by the Customer prior to delivery by the specified means of transport at the place of destination.
• Obtain at your own risk and expense the necessary export licenses or other official authorizations, and complete all customs formalities required for the export of goods and their transit through different countries before delivery.
• Provide a commercial invoice or equivalent electronic information.

Buyer's responsibilities

• Sign a transportation contract and pay the freight incurred to transport the goods to the designated destination or an agreed place within the selected destination.
• Delivery is completed when the goods that conform to the contract are placed on the arrived means of transport and handed over to the buyer at the designated destination.
• Give the buyer the notice so that he can take the necessary steps to deliver the goods.
• Bear all risk and cost before delivering using designated means of transport to destination.
• Obtain at your own risk and expense the necessary export licenses or other official authorizations, and complete all customs formalities required for the export of goods and their transit through different countries before delivery.
• Provide a commercial invoice or equivalent electronic information.

Customs clearance issues under DAP terms

Under DAP terms, the seller is responsible for delivering the goods to the destination specified by the buyer and handling export customs clearance and transit transportation procedures. The buyer is responsible for arranging import customs clearance and paying any related fees, duties, taxes and other charges. This means that except for customs clearance fees and duties, the seller bears all costs before reaching the destination.

To ensure smooth customs clearance, the seller usually provides the required commercial invoice, bill of lading and other necessary documents. Under DAP terms, the buyer's customs clearance usually requires the following steps:

1. Prepare customs clearance documents, including a commercial invoice, bill of lading, packing list, certificate of origin, and any special licenses required by the importing country.
2. Choosing a customs clearance agent: Buyers can choose a professional agent to reduce delays caused by unfamiliar procedures.
3. Payment of duties and other charges: Before the goods arrive, the buyer is required to pay duties, VAT, and possible demurrage charges.
4. Customs declaration: After submitting all documents and fees, the customs clearance agent or buyer must declare the goods with the customs of the importing country.
5. Goods collection: The buyer can collect the goods from the port or logistics center after customs clearance.

Shipping term DAP and other trade terms

The main difference between the shipping term DAP and other trade terms lies in the transfer point of responsibility and risk, the assumption of costs, and the allocation of insurance and customs clearance responsibilities. The selection of appropriate trade terms needs to be determined based on the specific transaction conditions, the characteristics of the goods, the mode of transportation, and the negotiation results of both parties. The following are the main differences between DAP and some other commonly used trade terms:

EXW: The seller's sole obligation is to prepare the goods for collection at their premises, with the buyer assuming all expenses and risks associated with the goods once they are collected from the seller's site.

DAP: The seller undertakes the obligation to transport the goods to the buyer's designated location, incurring all associated shipping expenses and assuming all risks until the goods have been delivered.

2. DAP and FCA (Free Carrier)

FCA: The seller delivers the goods to the carrier designated by the buyer and bears all costs and risks before the goods are delivered to the carrier.

DAP: The seller undertakes the obligation to transport the goods to the buyer-designated location, incurring all costs and risks of transportation until the goods have been delivered to their intended destination.

3. DAP and CPT (Carriage Paid To)

CPT : The seller covers the costs of shipping the goods to the agreed-upon destination, yet assumes no liability for the risks that may occur once the goods have reached their destination.

DAP : The seller pays for the shipping costs and takes responsibility for all risks while transporting the goods until they arrive at the destination.

4. DAP and CIP (Carriage and Insurance Paid To)

CIP: Like CPT, the seller is also required to secure basic insurance coverage for the goods.

DAP: The seller's obligation is limited to the delivery of the goods to the buyer's specified destination; they are not required to provide insurance for the goods. Nevertheless, the seller must bear the responsibility for any risks that arise while the goods are in transit.

5. DAP and DDP (Delivery Duty Paid)

DDP: The seller is tasked with the duty of transporting the goods to the location designated by the buyer, covering all expenses, such as import taxes, duties, and the fees associated with customs clearance.

DAP: The obligation to cover import taxes, duties, and the expenses related to customs clearance lies with the buyer, excluding the seller from these costs.

6. DAP vs CIF (Cost, Insurance and Freight)

CIF: The seller bears the responsibility of shipping the goods to the port designated by the buyer, including the expenses for freight and insurance coverage. However, once the goods have reached the destination port, the seller is no longer accountable for any risks that may occur.

DAP: The vendor is accountable for shipping the merchandise to the location designated by the purchaser and assumes all associated transportation expenses and hazards until the merchandise reaches its destination.

Risks to be aware of when using the shipping term DAP

When using the DAP trade term, the buyer and seller need to fully understand and negotiate details such as the mode of transportation, to guarantee the safe and punctual arrival of goods at their destination, it is crucial to confirm the delivery time and location. The seller needs to choose the appropriate means of transportation and carrier to ensure that the goods can be safely delivered to the destination specified by the buyer.

If the goods are damaged or lost during transportation, the seller must be responsible for them and negotiate compensation with the buyer according to the contract.

In addition, the seller needs to provide valid customs clearance documents to ensure that the goods can pass through customs smoothly and be delivered to the buyer on time. If the documents provided by the seller have problems or are unqualified, resulting in the goods being unable to pass customs smoothly, the seller needs to bear the relevant responsibilities.

Sum Up

Applicable scenarios and advantages of DAP clauses:

DAP is suitable for a variety of trade scenarios, especially when the buyer wants to handle the import formalities and bear the related costs himself. It allows the buyer to be responsible for customs clearance, and the seller only needs to deliver the goods to the designated location. This flexibility allows the buyer to more easily handle logistics without having to worry about customs clearance issues in the importing country.

In addition, DAP also provides flexibility in the place of delivery, which can be a designated place at the border between the two countries, on board the ship at the port of destination, or at a certain place in the importing country's inland. This makes DAP one of the basic terms in many international trade agreements.

Cooperate with the most reliable freight forwarder - Jikeship

Jikeship is an international freight forwarding company headquartered in China. It provides global logistics services, including ocean, air, land, and multimodal transport. The company is committed to providing customers with stable and efficient cargo transportation solutions.

As an expert in freight forwarding, Jikeship can assist you in cargo transportation, customs declaration, and customs clearance processes. They have established solid partnerships with many airlines, shipping companies and land transport companies to ensure your goods can reach their destination safely and quickly.

Choosing to work with Jikeship is a wise decision. They have an experienced and knowledgeable team of professionals who can provide customized logistics solutions and consulting services. Whether you want to ship goods from China worldwide or import goods from other countries to China, Jikeship can provide comprehensive service support.

When establishing a partnership with Jikeship or other freight forwarders, it is recommended that you communicate your cargo transportation needs in detail, including details such as the type, quantity, weight and destination of the cargo. They will provide the most optimized logistics solution based on your specific needs and provide precise information on transportation time, cost and customs clearance requirements.

FAQ

1. What are the advantages of the DAP trade term?

The advantage of the shipping term DAP is that it provides a transparent and flexible delivery method. The seller is responsible for delivering the goods to the destination specified by the buyer and bears all risks and costs during transportation, which reduces the buyer's risks and costs. At the same time, the buyer does not need to go through export customs declaration procedures, which simplifies the trade process. In addition, the DAP term also allows buyers and sellers to choose a suitable delivery location according to actual needs, improving the transaction's flexibility.

2. Does DAP apply to perishable goods?

DAP terms can be applied to perishable goods. Still, the seller must ensure that the goods are adequately protected and handled during transportation to prevent them from deteriorating before reaching their destination.

3. How do you choose a suitable DAP logistics service provider?

When choosing a DAP logistics service provider, you should consider its global network coverage, transportation capabilities, customs clearance services, customer reviews, and cost-effectiveness.

4. How does the buyer prepare to receive the goods under DAP terms?

The buyer should prepare customs clearance documents in advance, arrange unloading and inland transportation, and communicate with the seller to ensure that necessary transportation and cargo information is obtained in time so that the goods can be received smoothly.

5. Who is responsible under DAP terms if the goods are damaged during transportation?

Under DAP terms, the seller is responsible for delivering the goods safely to the designated location. If the goods are damaged during transportation, the liability depends on the specific stage where the damage occurred. If the damage occurs during transportation, which is the seller's responsibility, the seller is responsible; if the damage happens during unloading or subsequent stages, which is the buyer's responsibility, the buyer is responsible.