What is DAP in Incoterms?
DAP stands for Delivered at Place. This Incoterm can be used for shipments moving on any mode of transport. On sales contracts the named place of destination should also be mentioned after the Incoterm. For example, if the seller is in Singapore and the buyer is in the United States, the sales contract should mention:
DAP (buyer’s warehouse) Incoterms® 2020
Under DAP terms, the following are important points for consideration;
- Delivery takes place when the goods are brought to the agreed point
- The Buyer has to arrange for unloading of the goods
- This means that delivery has taken place BEFORE unloading takes places and any damages that occur during unloading are the buyer’s liability
- Any mode of transport can be used – this includes rail road, sea & air + any combination of these
- The Seller bears all transportation costs up the point of delivery
- However, if the Buyer is not able to fulfill its obligation to arrange for import clearance, all related charges are also their responsibility
- The Buyer pays for import duties and taxes
- The Seller pays for any export duties and taxes
- There is no mandatory requirement for the seller to arrange for insurance on the shipment
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Is DAP and CIF the same or very similar?
CIF stands for Cost Insurance and Freight. This is only suitable for ocean transport and using this Incoterm, the Seller must pay for insurance. Under CIF, the delivery occurs when the goods are placed on board the vessel. Although it is not specifically mentioned in the text of the Incoterms, CIF should really only be used for containerized cargo.
Difference between DAP and CIP?
Similar to CIF, under CIP the Seller must pay for insurance. Delivery is made when the cargo is handed over to the carrier. CIP can be used for any mode of transport.
CIP stands for Carriage and Insurance Paid To.
Insurance coverage in DAP?
The Seller is not required to purchase insurance for DAP shipments. However there is nothing stopping the Seller from doing so, especially since the Seller is responsible for the cargo during transit.
A final word
DAP is best used in situations where the Seller is in a better position to arrange for transport to the destination country. For example a manufacturer with a strong existing distribution network may want to use DAP on their exports. DAP is also very commonly used for e-commerce shipments. Regardless of the Incoterms, it is also important to cover additional areas in the sales contract depending on the type of commodity being shipped. For example, when dealing with a cold chain shipment of perishables with very short shelf lives, the sales contract should also specifically indicate the liabilities between Buyer and Seller if the temperature controls were exceeded and there is disagreement whether the product can be salvaged or not.