What is DAP?
DAP, or Delivered At Place, is one of the most commonly used international trade terms in international trade. Under DAP, the seller is responsible for transporting the goods to the destination specified by the buyer, but does not include unloading, nor is it responsible for import customs clearance and payment of tariffs.
This term applies to all modes of transport, including land, sea, air or multimodal transport. Whether it is LCL or FCL, express or air, DAP provides flexibility for international buyers and sellers, especially for buyers who want the seller to handle the transportation process but do not want to bear the responsibilities related to import.
The core of DAP terms is the sharing of responsibilities and risks. The seller bears most of the risks and costs during the transportation process, while the buyer is responsible for customs clearance, tax payment and unloading at the destination.
Unlike other terms, DAP emphasizes that the seller must deliver the goods intact to the agreed location, not just to the port or border, which greatly meets the buyer’s demand for certainty in the delivery of goods. For example, a Chinese auto parts manufacturer supplies goods to a US customer. The two parties use the DAP term and agree that the destination is the US customer’s assembly plant. The seller is then responsible for transporting the goods across the ocean directly to the factory to fulfill its delivery obligation.
Composition of DAP Shipping Pricing
In DAP shipping, the seller is responsible for most of the costs from the departure point to the destination. Pricing generally includes the following parts:
- Pick-up and inland transportation costs: from the Chinese factory or warehouse to the departure port, such as Shenzhen, Ningbo, Shanghai, etc.
- Export customs clearance costs: The seller is responsible for completing the export customs clearance procedures.
- International transportation costs: including air freight, sea freight or rail freight. Take shipping electronic products from China to the Netherlands as an example. If sea transportation is used, the freight for a 40-foot container may be around US$2,000-4,000; if air transportation is used, the freight per kilogram may be as high as US$30-80. In addition, loading and unloading fees and warehousing fees are also costs that cannot be ignored. At ports and transit points, loading and unloading and temporary storage of goods will incur costs. Insurance costs are usually calculated based on the value of the goods and transportation risks, and are generally around 0.3%-1% of the value of the goods.
- Delivery costs before local customs clearance in the destination country: for example, inland transportation from the Port of Le Havre in France to Paris, or from the Port of Hamburg in Germany to customers in Berlin.
- Insurance (optional): Some customers will require transportation insurance, which is also one of the costs considered by the seller.
It should be noted that the customs clearance costs, tariffs, and value-added tax in the destination country are borne by the buyer. This part is usually not reflected in the price, but must be indicated in the contract or invoice to avoid misunderstandings.
Scope of application of DAP
DAP is applicable to all modes of transport, whether it is road transport, rail transport, ocean transport, air transport, or multimodal transport. This flexibility makes it popular in global trade. For example, a Chinese electronic product manufacturer exports products to UAE customers. The goods are first shipped to Dubai Port by sea, and then delivered to the customer’s designated warehouse by inland transportation. The use of DAP terms can clearly define the responsibilities of both parties.
In addition, DAP is particularly suitable for trade scenarios where the destination delivery requirements are clear and the buyer wants the seller to assume more transportation and delivery responsibilities. For some precision instruments, large equipment and other goods that require special transportation and installation guidance, the DAP term can ensure that the goods arrive safely and accurately at the final use location.
The difference between DAP and DDP, CIF, FCA
Among many international trade terms, DAP is often confused with DDP (Delivered Duty Paid), CIF (Cost, Insurance and Freight), FCA and other terms. Understanding the difference between them will help companies better choose the appropriate terms.
Difference from DDP: DDP requires the seller to bear all costs together with import duties, value-added tax, etc., which is suitable for sellers with sufficient resources and strong customs clearance capabilities; while DAP leaves the customs clearance responsibility to the buyer.
Difference from CIF: CIF is mostly used for sea transportation. The seller only delivers the goods to the port of shipment for loading and is responsible for insurance, while DAP delivers the goods to the buyer, which is a term closer to the final delivery location.
Compared with EXW: EXW (ex-factory) is the term with the lightest responsibility, and almost all operations are handled by the buyer; DAP is almost the opposite, reflecting the seller’s high service capabilities.
Compared with FCA, under FCA, the seller completes the delivery obligation when handing over the goods to the designated carrier, and the subsequent transportation risks and costs are transferred to the buyer; while DAP requires the seller to bear all risks and costs until the goods are delivered at the destination. Take shipping furniture from China to the UK as an example. If FCA is adopted, the risk is transferred to the buyer after the seller hands over the goods to the freight forwarder in China; if DAP is adopted, the seller is responsible for transporting the goods to the designated location in the UK, and the transportation risks and costs during the period are borne by the seller.
By comparison, it can be seen that DAP is a term with relatively balanced rights and responsibilities, which can meet the buyer’s demand for complete transportation services without requiring the seller to bear complex import affairs.
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Application cases of DAP in actual trade
In international furniture trade, the DAP term is widely used. A furniture manufacturer in Foshan, China supplies goods to retailers in Saudi Arabia. The two parties agree to use the DAP term, with the destination being a retail warehouse in Riyadh. The Chinese manufacturer is responsible for arranging the packaging and transportation of the goods, including land transportation from the Chinese factory to the port, transoceanic sea transportation, and inland transportation after arriving at the Saudi Arabian port, until the goods are safely delivered to the retail warehouse.
In this process, the manufacturer bears the risks of damage and delays to the goods during transportation. This method allows Saudi retailers to focus on sales without worrying about the complex links of goods transportation, while also ensuring that the goods can arrive at the sales location on time and in good condition, reflecting the convenience and practicality of DAP in actual trade.
Division of risks and responsibilities under DAP terms
(I) Risks and responsibilities of the seller
Under DAP terms, the seller bears the main risks before the goods are delivered to the buyer. This includes the risk of damage and loss of the goods during transportation, as well as the risk of breach of contract due to transportation delays. The seller is responsible for arranging the transportation of the goods, selecting reliable carriers, and purchasing appropriate insurance to deal with possible risks.
(II) Risks and responsibilities of the buyer
When the goods are handed over to the buyer for disposal at the designated destination, the risk is transferred to the buyer. At this time, the buyer is responsible for receiving, inspecting, and subsequently transporting, storing and using the goods. If quality problems are found in the goods after delivery, the buyer must negotiate with the seller to resolve them in accordance with the contract agreement and relevant legal provisions.
(III) Key points of risk transfer
The key to risk transfer under DAP terms lies in the delivery of the goods at the designated destination. When the goods have been clearly identified as goods under the contract and are in a state that the buyer can dispose of them, the risk is transferred to the buyer. “Disposal” here means that the buyer can freely dispose of the goods, such as picking up the goods and arranging the subsequent transportation of the goods.
For example, in a trade of electronic products shipped from China to the United States, the two parties agreed to DAP a warehouse in New York, USA. When the goods arrive at the New York warehouse and the buyer is notified that the goods can be picked up, the risk of the goods has been transferred to the buyer even if the buyer fails to pick up the goods in time due to his own reasons. If a fire occurs in the warehouse at this time and the goods are damaged, the loss will be borne by the buyer.
(IV) Measures and suggestions for dealing with risks
To reduce the trade risks under the DAP term, both the buyer and the seller should take corresponding measures. The seller should choose a reputable carrier, sign a detailed transportation contract, and clarify the rights and obligations of both parties;
Purchase sufficient and appropriate cargo transportation insurance to cover various risks that may arise during transportation. At the same time, strengthen the packaging and quality inspection of the goods to ensure that the goods are not damaged during transportation. Before the goods are delivered, the buyer should promptly understand the transportation status of the goods and be prepared to receive the goods;
After the goods are delivered, the goods should be inspected as soon as possible and communicate with the seller in time if any problems are found. The two parties should also clearly stipulate in the contract the division of risk responsibilities, dispute resolution methods and other terms so that they can have a basis to rely on when problems arise and resolve disputes smoothly.
For exporters, DAP is a way to enhance service capabilities and help expand overseas markets; for importers, DAP can strike a balance between avoiding the high price of DDP and the cumbersomeness of EXW.
With the flexibility and diversification of cross-border trade, DAP is becoming one of the preferred transportation terms for more and more companies.