What Is DAP Delivery Term and How Is It Calculated?

DAP delivery term is one of the popular methods that can be applied between importers and exporters. Since borders and responsibilities are clearly stated, it can provide a very smooth process for both parties.

So, what is the DAP delivery term and how is it applied? Everything about DAP, from the responsibilities of the carrier and buyer to the advantages and disadvantages, is on the rest of the page!

What is the DAP Delivery Term?

The DAP delivery term stands for delivered at place. Its full expansion is 'Delivered at place'. It is one of the delivery terms determined in Incoterms 2010. It is located in the D group on the relevant list.

In the DAP shipping method, the organization of the shipment is carried out by the seller company. In other words, the exporter continues the shipment from the loading phase until the goods are delivered to the terminal or transport location determined by the importer, completing the transport operation.

To explain with an example, let's assume that the delivery method in the agreement made between the parties is, for example, "DAP: London". Let the location of the exporter company be Ankara.

The exporter company is responsible for planning and executing the entire operation from loading the goods in Ankara to delivery at the specified address in London, excluding foreign customs and tax processes in the buyer's country.

The difference of the DAP delivery term from the CIP model is that the transport processes after the goods reach the buyer's country and the delivery order fee also belong to the seller.

How is the DAP Delivery Term Applied?

The operational process of the DAP shipping method is specified in 12 stages according to Incoterms. 8 of these stages belong to the exporter, and 4 belong to the buyer.

The application steps of the seller's DAP shipping method:

• Selection of transit mode.

• Packaging the goods to be transported.

• Loading the goods.

• Carrying out the domestic transportation of the goods.

• Export customs clearance.

• Loading for international transport.

• Execution of carriage.

• Insurance of goods.

The application steps of the buyer's DAP delivery term:

• Unloading the incoming goods to the warehouse.

• Import customs clearance.

• Inland transportation.

• Delivery of freight.

At this point, even though it is the responsibility of the buyer, all costs except for the import customs clearance still belong to the exporter.

How is Price Calculation Done in DAP Delivery Term?

DAP price calculation covers quite a few cost components. To determine the DAP price, you need to calculate these items:

• Product cost

• Unit profit

• Packaging cost

• Loading cost

• Inland transport cost

• Exporter customs costs

• Insurance cost

• Freight expenses

• Inland transport costs in the buyer's country

By adding all these together, you can perform the price calculation for DAP delivery.

What are the Responsibilities of the Buyer and Seller in DAP Delivery Term?

In the DAP delivery term, the buyer and the seller have various responsibilities and costs. These responsibilities and costs can be listed as follows:

What are the Advantages and Disadvantages of DAP Delivery Term?

DAP offers more convenience and minimum responsibility to the buyer than the seller. Therefore, it is relatively more advantageous for the buyer.

An important advantage of DAP is that it clearly states the responsibility of the parties in case of additional costs during the shipping process. According to this Incoterm, the buyer is responsible for all risks and losses after the cargo is delivered to them. On the other hand, the seller bears any additional costs during the transportation process.

Although DAP eliminates the rights and responsibilities of the buyer and seller, scenarios exist that can lead to disputes between parties. One such scenario is when the carrier is subjected to delay. Demurrage is, essentially, the price of not unloading the cargo on time. And it is primarily caused by not obtaining proper permission from either the buyer or the seller.

In such a case, the fault lies with the party that failed to provide timely and appropriate permission. However, sometimes, due to the laws of different countries, it might be difficult to determine whose fault it is. In such an ambiguous situation, usually the seller has to bear the cost of the demurrage.

Is DAP Insurance Necessary?

There is no insurance obligation in the DAP delivery term. However, since the seller has the maximum responsibility and liability, they usually purchase insurance for the safe transport of the goods to the destination.

A seller can cover only a part of the shipment they are liable for. However, experts recommend that the seller obtain full transportation, i.e., end-to-end insurance.

In addition, it is important for buyers and sellers to clearly state the insurance terms and conditions in the sales contract to prevent disputes and therefore jeopardize the shipment.