DAP Incoterms: Meaning, responsibilities and advantages

Among the 11 internationally recognized terms, DAP Incoterms transfer most of the logistical tasks to the supplier.

The supplier (exporter) takes care of the export, freight, and delivery to the buyer's destination. However, the buyer (importer) controls the final unloading and the import process. This approach makes DAP Incoterms an interesting option for importers who want the supplier to handle the bulk of international shipment while still maintaining some control.

In this guide, you’ll learn:

• Meaning of DAP Incoterms 
• Buyer’s and supplier’s responsibilities
• An example of DAP Incoterm
• Advantages and disadvantages
• Answers to frequently asked questions about DAP

What are DAP Incoterms?

DAP Incoterms (Delivered At Place) is one of the 11 Incoterms defined by the International Chamber of Commerce (ICC). Under DAP, the supplier's responsibility is fulfilled by delivering the goods to the named place of destination, ready for unloading. The risk transfers to the buyer once the goods are prepared for unloading.

DAP Incoterms rule is suitable for buyers who prefer the supplier to handle almost all aspects of transportation, up to the point of delivery, but wish to control the unloading process.

Key features of DAP Incoterms explained:

• Point of delivery: The parties can agree on a specific address, warehouse, port, terminal, or another location within the buyer's country as the shipping destination.
• Modes of transport: Delivered At Place Incoterms rule is applicable to all modes of transport (sea, air, rail, or road), including multimodal.
• Insurance coverage: Negotiable. The supplier doesn’t need to provide insurance.

💡 The International Chamber of Commerce refreshes the Incoterms guidelines every decade. The latest updates are Incoterms 2010 and Incoterms 2020. When you use DAP or any other Incoterm in a contract, specify the edition to avoid potential misunderstandings or misinterpretation.

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Read more: What are the types and rules of Incoterms?

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Supplier’s and buyer’s responsibilities under DAP Incoterms

Delivered at Place Incoterms set out the obligations of both the supplier and the buyer, to ensure a smooth transaction. Let's break down these responsibilities:

Supplier’s responsibilities

• Export packaging: Ensuring that the goods are appropriately packaged for international transportation.
• Loading charges: Covering the costs of loading the products onto the first carrier at the pick-up location.
• Delivery to port/location: Handing over the goods to the carrier or another party as specified in the contract at the named port or location.
• Export formalities: Handling of export duties, taxes, and customs clearance procedures.
• Origin terminal charges: Paying the costs associated with the origin terminal, including handling fees.
• Loading onto carriage: Overseeing the loading of the consignments onto the main means of transport.
• Main freight charges: Handling the costs of the main transportation to the assigned location.
• Destination terminal charges: Paying the costs at the destination terminal, e.g. for unloading and handling, up to the agreed-upon place of delivery.
• Delivery to final destination: Assuming responsibility for the goods after their arrival at the specified location, port or terminal and for onward transportation to the final destination (buyer’s premises or designated place).

Buyer’s responsibilities

• Unloading at destination: Assuming the costs and responsibility for unloading the goods, unless otherwise agreed.
• Import formalities: Handling all import formalities and related costs, including customs duties, taxes, and clearance in the country of destination.

What is an example of DAP Incoterms?

Let us illustrate the application of DAP Incoterms with a real-life example. Imagine TechMart GmbH, a German electronics retailer, orders 1,000 high-end laptops from NipponElectrics, a Japanese manufacturer. They agree to use Delivered at Place Incoterms, with delivery to TechMart’s warehouse in Berlin.

Supplier’s Responsibilities (NipponElectrics)

NipponElectrics is responsible for packing the laptops, compiling all necessary export documents, and handling export customs clearance in Japan. They arrange and pay for transportation from Japan to TechMart’s warehouse in Berlin, including sea freight to Hamburg and road transportation to Berlin. 

The risk of loss or damage passes to TechMart upon delivery to the Berlin warehouse.

Buyer’s responsibilities (TechMart GmbH)

TechMart will take care and pay for import customs clearance, duties, and taxes upon arrival of the laptops in Germany. They are responsible for unloading the laptops at their Berlin warehouse and for checking that the laptops meet the specifications of the order.

Advantages and disadvantages of DAP Incoterms

Like any Incoterm, the DAP has a number of advantages and disadvantages. Knowing these will help you decide whether Delivered at Place Incoterms is suitable for your specific situation.

Advantages of DAP Incoterms 

• Simplified logistics for the buyer: DAP Incoterms simplify the import process for the buyer, as the exporter takes care of most of the logistics. This is particularly beneficial for SMBs with limited experience in international trade.
• Greater control for the supplier: The supplier retains control over the transportation and delivery process, allowing them to optimize logistics and potentially reduce costs.
• Flexibility of destination: DAP allows the buyer to specify any place of delivery, providing the flexibility to choose a suitable location for receiving the goods.

Disadvantages of DAP Incoterms 

• Limited buyer control: The buyer has limited control over the transportation and delivery process, which can lead to possible delays or unforeseen problems.
• Higher costs for suppliers: Suppliers bear the majority of transportation costs, which can be significant, especially for long-distance shipments.
• Transfer of risk at the destination: The buyer assumes all risks of the international trade associated with the goods once they are delivered to the named place, even if they haven't physically taken possession of the products.

💡 The specific advantages and disadvantages for each party may vary depending on the negotiated terms of the contract and the unique circumstances of the transaction. Factors such as the type of goods, the transportation distance, and the mode of transportation chosen can affect the overall benefits for both exporters and importers.

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Learn more: What is export finance and how can it help SMEs?

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DAP Incoterms: Frequently Asked Questions (FAQs)

Who pays the freight for DAP?

Under the Delivered at Place Incoterms, the supplier is responsible for paying the freight costs for transporting the goods to the agreed destination. However, the buyer is accountable for any charges associated with unloading the products at the destination.

DAP Incoterms: Who pays duties?

The buyer is responsible for paying any import duties, taxes, and other official charges incurred once the goods arrive in their country. The supplier only handles the export duties and all costs up to the point of delivery.

DAP vs. DDP Incoterms

Delivered Duty Paid (DDP) is another Incoterm that is often compared to DAP. With DDP, the supplier bears all costs and all risks, including import duties and taxes, until the goods are delivered to the buyer's location. With DAP, the buyer pays the import duties and taxes, making DDP more comprehensive but also more expensive for the exporter.

Is DAP the same as FOB?

No, DAP and FOB (Free on Board) differ primarily in terms of transportation responsibility and risk transfer. DAP requires the supplier to arrange and pay the transport, whereby the risk is transferred to the buyer at the destination. FOB requires the importer to organize transport and the risk is transferred as soon as the goods are loaded onto the vessel at the port of shipment.

When to use DAP Incoterms?

Delivered at Place Incoterms can be a great choice when the buyer wants a simplified import experience while retaining control over the final unloading process. 

By having the supplier handle the export clearance, freight, and delivery to the named destination, importers can benefit from the exporter’s expertise in international logistics.

In other words, DAP Incoterms is particularly beneficial for buyers lacking the experience or infrastructure to handle complex cross-border shipping themselves. Rather than shouldering risky transportation tasks, they can rely on the supplier's capabilities.

Ultimately, choosing the appropriate Incoterm is crucial for ensuring legally compliant and cost-efficient international transactions. These standardized trade terms provide clarity and define responsibilities to avoid misunderstandings that could derail shipments. 

As businesses increasingly operate on a global scale, mastering Incoterms like DAP is critical to facilitate smooth trade, minimize risk, and maintain a competitive edge. 

Learn more about other Incoterms:

• EXW (Ex Works)
• FCA (Free Carrier)
• FAS (Free Alongside Ship)
• FOB (Free On Board)
• CFR (Cost and Freight)
• CIF (Cost, Insurance, and Freight)
• CPT (Carriage Paid To)
• CIP (Carriage and Insurance Paid To)
• DPU (Delivered at Place Unloaded)
• DDP (Delivered Duty Paid)

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