Definition
Delivered At Place (DAP) is a term used in international trade agreements. It means that the seller is responsible for all costs and risks associated with delivering goods to an agreed-upon location. Once the goods are delivered at that location, the buyer assumes responsibility for the goods, including customs and duties.
Key Takeaways
- Delivered At Place (DAP) is an international trade term used to describe a deal in which the seller agrees to pay all costs and suffer any potential losses of moving goods sold to a specific location.
- In a DAP agreement, the seller fulfills his obligation as soon as the goods are ready and available at the determined location, ready for unloading by the buyer. The risk of damage or loss to the goods becomes the buyer’s responsibility at this point.
- The DAP term greatly benefits the buyer as all the transportation costs and risks are assumed by the seller until the goods are delivered at the contractually agreed place, reducing the costs and risks for the buyer.
Importance
Delivered At Place (DAP) is a crucial term in finance and international trade, particularly in terms of freight logistics.
Its significance lies in its delineation of responsibility and cost allocation between the seller and buyer.
Under DAP terms, the seller assumes all risks and costs associated with transporting the goods right up until they reach the intended location in the buyer’s country.
However, the responsibility of discharging the cargo, customs clearing, and subsequent shipping beyond the initial drop-off point falls to the buyer.
Therefore, understanding DAP is vital for both parties to calculate their potential costs, manage risks, and establish a mutual agreement that safeguards their respective interests.
Explanation
The finance term, “Delivered At Place” (DAP) is used widely in international trade agreements and has a specific purpose in facilitating better clarity and smooth transactions. The purpose of DAP is essentially to set clear obligations and responsibilities for the buyer and seller involved in an agreement with regards to transportation, insurance, customs duty, and other logistics.
Under a DAP agreement, the seller is responsible for shipping the goods and bearing all the risks and costs associated with delivering the good to an agreed-upon location. In practice, DAP exists to protect both parties in a trade transaction.
For instance, companies or individuals involved in importing goods often use DAP terms to ensure that the goods are delivered at a specified location, removing the hassles associated with transport, insurance fees or export/import formalities. Once the seller has confirmed the goods have been delivered to the agreed-upon place, the risk of loss or damage is transferred to the buyer.
Hence, DAP is essentially a term used to manage the risk associated with international shipping and to ensure orderly and systematic transactions.
Examples of Delivered At Place
Delivered At Place (DAP) is a type of international trade term. It’s used to denote that the seller is responsible for all costs and risks involved in bringing a product to a location that the buyer specifies, excluding import duties or taxes. Here are three real-world examples:
Cross-Country Furniture Shipment: A furniture retailer in China sells a set of tables to a customer in the United States. The contract specifies ‘Delivered At Place’ to the customer’s warehouse, meaning the Chinese retailer is responsible for all freight charges, packing costs, and handling fees until the furniture arrives at the US warehouse. The buyer, however, is responsible for import duties and taxes and offloading the goods once they reach the destination.
European Car Import: A car manufacturer in Germany is selling a batch of cars to a company in Spain. They agree on a DAP agreement, meaning the German manufacturer must cover all costs and risks associated with transporting the cars to a precise location in Spain. The Spanish buyer then takes on the responsibility for unloading and paying the import duties or taxes.
Technology Distribution: An electronics manufacturer in Japan has a deal with a tech retailer in Canada to ship a new line of laptops. The terms are DAP to the retailer’s location in Toronto. The Japanese manufacturer must manage the transportation of these laptops to the specified location in Toronto, covering transportation costs, potential damages, and risks. The Canadian retailer then bears the costs of unloading as well as any import duties or taxes.
FAQs about Delivered At Place
What does Delivered At Place (DAP) mean?
Delivered At Place is a shipping term used in international trade where the seller is responsible for making goods ready for delivery to the buyer at the agreed place.
What responsibilities does the seller have in a DAP agreement?
In a DAP agreement, the seller bears all costs and risks associated with transporting goods to a specified location. Responsibilities include arranging transportation, taking care of customs paperwork, and ensuring goods arrive in good condition.
What are the buyer’s responsibilities in a DAP agreement?
The buyer’s responsibilities include taking care of import clearance, paying any import duties and taxes, and unloading the goods from arriving transport at the specified place.
Are any other terms similar to DAP?
Yes, there are similar terms to DAP like Delivered Duty Paid (DDP). However, in DDP, the seller is also responsible for paying import duties and taxes, not just delivering the goods to the specified location.
When is the risk transferred from the seller to the buyer in a DAP agreement?
The risk is transferred from the seller to the buyer when the goods have been made available to the buyer at the named place of destination, and are ready for unloading from the arriving means of transport.
Related Entrepreneurship Terms
- Incoterms
- Freight forwarding
- International trade
- Customs clearance
- Transport insurance
