DAP | Delivered at Place – Incoterms 2020

DAP requires the seller to deliver to a place named by a buyer, typically the buyer’s premises. The buyer is responsible for unloading the means of transport. The seller has to carry out any export formalities and the buyer has to carry out any import formalities. Like with CPT and CIP the seller contracts for carriage and risk transfers only upon delivery which now is at the buyer’s premises. The seller has no obligation to the buyer to insure for its risk. This rule works well for transport of goods by land within the Europe/Central Asia landmass but strikes potential problems once there is a change in mode of transport along the way.

DAP | Delivered at Place

DAP (insert named place of destination) Incoterms® 2020

EXPLANATORY NOTES FOR USERS

1. Delivery and risk – “Carriage and Insurance Paid To” means that the seller delivers the goods—and transfers the risk—to the buyer

• • by handing them over to the carrier
• contracted by the seller
• or by procuring the goods so delivered.

The seller may do so by giving the carrier physical possession of the goods in the manner and at the place appropriate to the means of transport used.

Once the goods have been delivered to the buyer in this way, the seller does not guarantee that the goods will reach the place of destination in sound condition, in the stated quantity or indeed at all. This is because risk transfers from seller to buyer when the goods are delivered to the buyer by handing them over to the carrier; the seller must nonetheless contract for the carriage of the goods from delivery to the agreed destination. Thus, for example, goods are handed over to a carrier in Las Vegas (which is not a port) for carriage to Southampton (a port) or to Winchester (which is not a port). In either case, delivery transferring risk to the buyer happens in Las Vegas, and the seller must make a contract of carriage to either Southampton or Winchester.

2. Mode of transport – This rule may be used irrespective of the mode of transport selected and may also be used where more than one mode of transport is employed.

3. Places (or points) of delivery and destination – In CIP two locations are important: the place or point at which the goods are delivered (for the transfer of risk) and the place or point agreed as the destination of the goods (as the point to which the seller promises to contract for carriage).

4. Insurance – The seller must also contract for insurance cover against the buyer’s risk of loss of or damage to the goods from the point of delivery to at least the point of destination. This may cause difficulty where the destination country requires insurance cover to be purchased locally: in this case the parties should consider selling and buying under CPT. The buyer should also note that under the CIP Incoterms® 2020 rule the seller is required to obtain extensive insurance cover complying with Institute Cargo Clauses (A) or similar clause, rather than with the more limited cover under Institute Cargo Clauses (C). It is, however, still open to the parties to agree on a lower level of cover.

5. Identifying the place or point of delivery with precision – The parties are well advised to identify both places, or indeed points within those places, as precisely as possible in the contract of sale. Identifying the place or point (if any) of delivery as precisely as possible is important to cater for the common situation where several carriers are engaged, each for different legs of the transit from delivery to destination. Where this happens and the parties do not agree on a specific place or point of delivery, the default position is that risk transfers when the goods have been delivered to the first carrier at a point entirely of the seller’s choosing and over which the buyer has no control. Should the parties wish the risk to transfer at a later stage (e.g. at a sea or river port or at an airport), or indeed an earlier one (e.g. an inland point some way away from a sea or river port), they need to specify this in their contract of sale and to carefully think through the consequences of so doing in case the goods are lost or damaged.

6. Identifying the destination as precisely as possible – The parties are also well advised to identify as precisely as possible in the contract of sale the point within the agreed place of destination, as this is the point to which the seller must contract for carriage and insurance and this is the point to which the costs of carriage and insurance fall on the seller.

7. ‘or procuring the goods so delivered’ – The reference to “procure” here caters for multiple sales down a chain (string sales), particularly common in the commodity trades.

8. Costs of unloading at destination – If the seller incurs costs under its contract of carriage related to unloading at the named place of destination, the seller is not entitled to recover such costs separately from the buyer unless otherwise agreed between the parties.

9. Export/import clearance – CIP requires the seller to clear the goods for export, where applicable. However, the seller has no obligation to clear the goods for import or for transit through third countries, or to pay any import duty or to carry out any import customs formalities.

Delivered at Place Seller and Buyer Obligations

DAP A1 / B1 General Obligations

A1 (General Obligations)

In each of the eleven rules the seller must provide the goods and their commercial invoice as required by the contract of sale and any other evidence of conformity such as an analysis certificate or weighbridge document etc that might be relevant and specified in the contract.

Each of the rules also provides that any document can be in paper or electronic form as agreed to in the contract, or if the contract makes no mention of this then as is customary. The rules do not define what “electronic form” is, it can be anything from a pdf file to blockchain or some format yet to be developed in the future.

B1 (General obligations)

In each of the rules the buyer must pay the price for the goods as stated in the contract of sale.

The rules do not refer to when the payment is to be made (before shipment, immediately after shipment, thirty days after shipment, half now half later, or whatever) or how it is to be paid (prepayment, against an email of copy documents, on presentation of documents to a bank under a letter of credit, or other arrangement). These matters should be specified in the contract.

DAP A2 / B2: Delivery

A2 (Delivery)

The DAP and DDP rules require the seller to take on almost the maximum responsibility of placing the goods at the disposal of the buyer at the agreed destination place, or point within that place, but not unloaded from the arriving means of transport. This usually would be a truck but could be a train, a barge or even a ship and unlikely though it might be a chartered aircraft.

The DPU rule goes one step further, requiring the seller to unload the goods from the arriving means of transport. DPU is the old DAT rule but expanded to mean any place to avoid the misunderstanding of the 2010 rule where many took it literally from its title to just mean a terminal, even though it meant anywhere from an open field to a covered warehouse including the buyer’s warehouse.

A common mistake with DAP and DDP especially is the reverse of the misunderstanding with the old DAT, to believe that the destination will always be the buyer’s premises, but this need not be the case. The buyer could nominate say the site of a new factory they are building for their client, it could be the container terminal in the destination country, or somewhere else. If it is the buyer’s premises or a site they have nominated then usually they would have the equipment on hand to unload the goods but sometimes the truck will have a crane mounted on it or even a forklift tucked into the rear of it, or the goods are so specialised that the seller would need to also provide the equipment to unload the goods making it DPU. If the destination is a terminal then it would be usual that the seller’s carrier would unload the means of transport or arrange for that unloading, such as the container from the truck delivering it from the quay, the goods from the chartered aircraft and so on, again making it DPU not DAP.

The delivery must be made on the agreed date or within the agreed period

B2 (Delivery)

The buyer’s obligation is to take delivery when the goods have been delivered as described in A2.

DAP A3 / B3: Transfer Of Risk

A3 (Transfer of risk)

In all the rules the seller bears all risks of loss or damage to the goods until they have been delivered in accordance with A2 described above. The exception is loss or damage in circumstances described in B3 below, which varies dependent on the buyer’s role in B2

B3 (Transfer of risk)

The buyer bears all risks of loss or damage to the goods once the seller has delivered them as described in A2.

If the buyer fails to inform the seller exactly to where it is to deliver the goods, or if the buyer fails to import clear the goods then it bears the risk of loss or damage to the goods from the agreed date or agreed period for delivery.

For example, if the seller despatches the goods to the buyer and they are held indefinitely by the importing country’s authorities because the buyer failed to obtain the necessary import permit, then the buyer bears the risk.

DAP A4 / B4: Carriage

A4 (Carriage)

The seller must arrange, or contract for, carriage to the named place of destination, and if there is an agreed point within that destination then to that point. Cost of this carriage is for the seller. As the seller has to arrange the carriage it needs to know from the buyer if there is a specific point in the place of delivery to which the goods must be transported. For example, if the destination is shown as simply “Budapest, Hungary” where in that large metropolis is the seller’s carrier to leave the goods? It could be that it is to be the buyer’s premises, or a particular location say in an empty building site, or the carrier’s premises, or the airport, or the container yard, or a particular quay on the river… the exact point should be agreed upon. If it is not then it is the seller’s choice to select the point that best suits its purpose, usually being the cheapest option such as a cargo terminal.

For DAP and DDP, if the delivery at the destination is to occur after the buyer completes any necessary import formalities then the cost of storage due to delays in those formalities being completed is for the buyer, always assuming the seller has provided the buyer with necessary documents in time. For DDP it is the seller who bears the cost of any storage due to delays in import clearance.

B4 (Carriage)

The buyer has no obligation to the seller to arrange a contract of carriage.

DAP A5 / B5: Insurance

A5 (Insurance)

Despite the seller having the risk of loss or damage to the goods up to the delivery point, the seller does not have an obligation to the buyer to insure the goods.

B5 (Insurance)

Because the seller has the risk of loss or damage to the goods up to the delivery point, the buyer does not have an obligation to the seller to insure the goods.

DAP A6 / B6: Delivery / Transport Document

A6 (Delivery / Transport document)

The seller, at its own cost, must provide the buyer with any document the buyer needs to take over the goods. What form this document takes will depend on agreement in the contract, and might simply be in the form of a receipt which the buyer is to sign. However, it might, in the case of DAP and DPU where the buyer must import clear the goods, be a copy of the seller’s transport document to evidence the export and the date of shipment.

B6 (Delivery / Transport document)

The buyer must accept the document provided in A6 as it actually takes no part in the transport process.

DAP A7 / B7: Export / Import clearance

A7 (Export / Import clearance)

Where applicable, the seller must at its own risk and expense carry out all export clearance formalities required by the country of export, such as licences or permits; security clearance for export; pre-shipment inspection; and any other authorisations or approvals.

Additionally, as the point of delivery in these rules is in the importing country, the seller must also carry out and pay for any formalities required by any country of transit before that delivery occurs.

The seller has no obligation to arrange any import clearances. However if the buyer requests, at its own risk and cost, the seller must assist in obtaining any documents and/or information which relate to formalities required by the country of import such as permits or licences; security clearance for import; pre-shipment inspection required by the import authorities; and any other official authorisations or approvals.

B7 (Export / Import clearance)

Where applicable, the buyer must assist the seller at the seller’s request, risk and cost, in obtaining any documents and/or information needed for all export-related formalities required by the country of export as well as any formalities required by any country of transit.

Where applicable, the buyer must carry out and pay for all formalities required by the country of import. These include licences and permits required for import; import clearance; security clearance for transit and import; pre-shipment inspection; and any other official authorisations and approvals.

DAP A8 / B8: Checking / Packaging / Marking

A8 (Checking / Packaging / Marking)

In all rules the seller must pay the costs of any checking operations which are necessary for delivering the goods, such as checking quality, measuring the goods and/or packaging, weighing, counting the goods and/or packaging.

The seller must also package the goods, at its own cost, unless it is usual for the trade of the goods that they are sold unpackaged, such as in the case of bulk goods. The seller must also take into account the transport of the goods and package them appropriately, unless the parties have agreed in their contract that the goods be packaged and/or marked in a specific manner.

B8 (Checking / Packaging / Marking)

In all rules there is no obligation from the buyer to the seller as regards packaging and marking. There can in practice however be agreed exceptions, such as when the buyer provides the seller with labels, logos, or similar.

DAP A9 / B9: Allocation of Costs

A9 (Allocation of costs)

The seller must pay all costs until the goods have been delivered under A2, other than any costs the buyer must pay as stated in B9.

Transport costs resulting from the contract of carriage, including costs of loading the goods and any transport-related security, must be paid by the seller. The cost of providing to the buyer proof of the goods being delivered are also for the seller.

If the contract of carriage includes unloading at the agreed destination, the seller must pay these.

The seller must pay any costs involved in providing the usual proof that the goods have been delivered.

The seller pays any costs, export duties and taxes, where applicable, related to export clearance and any transit clearance.

If the buyer is requested by the seller to provide information or documents to assist the seller in their export formalities or arranging insurance, then the seller must pay the buyer for these costs.

B9 (Allocation of costs)

The buyer must pay the seller all costs relating to the goods from when they have been delivered, other than those payable by the seller.

If the seller has been requested by the buyer to provide assistance in obtaining information or documents needed for the buyer to effect import formalities, then the buyer must reimburse the seller’s costs.

Where applicable, the buyer pays any duties, taxes and other costs for import clearance.

The buyer pays for unloading costs unless they were paid by the seller under the contract of carriage.

Additionally, and provided the seller has advised that the goods have been clearly identified as the goods under the contract, the buyer pays any additional costs incurred if the buyer fails to give notice in accordance with B10.

DAP A10 / B10: Notices

A10 (Notices)

The seller must give the buyer any notice the buyer needs to receive the goods.

B10 (Notices)

If the parties agree in the contract, the buyer must give the seller sufficient notice of when, and the point within the place of destination, where they require delivery. The contract will usually detail how much notice is to be given, and this might vary with the mode/s of transport.

Delivered at Place (DAP): Advantages and Disadvantages

DAP was the new name given in the Incoterms® 2010 rules for the previous DDU (Delivered Duty Unpaid) which first appeared in the 1990 rules. That was a misleading name because transactions under the other rules other than DDP (Delivered Duty Paid) were duty unpaid at the time of delivery, yet DDU itself actually meant that delivery occurred after the buyer had import cleared the goods and paid the duty.

Also rolled into DAP were the old DAF (Delivered at Frontier, first appearing in Incoterms® 1967) and DES (Delivered Ex Ship, originally “EXS” Ex Ship in the 1953 rules) which like DDU provided for delivery not unloaded. These two were effectively redundant as by stating “at the named place of destination” in DDU it included at the frontier or on the ship.

The DAP Incoterms® 2020 rule does not specify that the place of delivery must be the buyer’s premises even though that is the common usage. Delivery of the goods is to take place by the seller “placing them at the disposal of the buyer on the arriving means of transport ready for unloading at the agreed point, if any, at the named place of destination.” This means that the seller and buyer need to agree on precisely where that delivery is to take place because without such agreement how can the seller know where precisely to deliver?

This rule is suitable for domestic trade as well as transactions within a customs union. It can be impractical and/or problematic for cross-ocean trade.

In cross-ocean transactions the buyer must import-clear the goods so typically they will be held in a customs bonded warehouse or terminal until those formalities have been completed. Up until the time they go into customs control in the importing country they are at the seller’s risk, but while they are under customs control they are at the buyer’s risk. If the buyer has a problem, say with an incorrectly issued import permit which delays clearance or even leads to a refusal to clear, the buyer’s actions prevent the seller from delivering.

Once import clearance has been completed, and assuming the delivery point was not the customs warehouse or terminal where the goods were waiting for that clearance, the goods need to be released to the seller’s carrier or its agent to then continue the goods’ journey to the named destination.