In international trade, there are rules. Some of them, concerning the distribution of seller and buyer responsibilities for delivery, have become so universal that they were framed in the form of a set of recommendations. In some countries, he received the status of law. Consider the features of one of the main terms that exist in trade, and we will decipher the terms of delivery of DAP 2010.
General information
Incoterms are a series of predefined commercial rules published by the International Chamber of Commerce (ICC) relating to international commercial law. They are used when concluding foreign economic transactions or in the procurement processes, since their use is encouraged by trade councils, courts and international lawyers.
Incoterms rules, consisting of three-letter trade terms related to the general contractual practice of sales, are intended to clearly define the tasks, costs and risks that arise in connection with international movements of goods. The rules are often included in the foreign economic contract of sale, reflecting the agreements reached on liability, costs and risks arising from the parties entering into economic relations with a foreign partner. However, Incoterms is not a contract or law. Also, it does not affect prices and does not determine the currency of the transaction.
It must be borne in mind that Incoterms have been revised several times, so there are various versions. The document was last reissued in 2010. This edition is used most often.
Which group of conditions can be attributed to DAP
Incoterms DAP terms are included in the D term group. It describes various methods of delivery of goods and represents agreements with maximum responsibility (both cost and risk) for the seller, and not for the buyer. There were 5 abbreviations in group D once. Now there are only 3.
Previously, there were three terms to indicate the conditions for the delivery of goods to a place in this group:
- DAF - “Delivered at the Border”.
- DES - "Delivered from the ship."
- DEQ - "Delivered to the Waterfront."
Now these 3 concepts are simplified.
The delivery location is now identified as: DAT - “Delivered to the terminal” or DAP - “Delivery to the destination”. This is explained by the fact that an increase in the volume of scheduled transportation, as well as the transportation of groupage cargo to the point indicated in the agreement, has led to the fact that other terms are outdated.
We continue to consider decryption. The term DDU is “Unpaid Shipping Charges”. He was completely expelled. Instead, they proposed the term DDP, that is, "Payment of the delivery fee."
Be careful because many websites still use the old abbreviations. Most likely, they have ambiguities caused by the old notation. These points can be confusing, which threatens to increase costs when drawing up an international transportation agreement. They may cost you more than you expected.
DAP Incoterms 2010 delivery conditions –decoding
Each term in Incoterms has a specific interpretation. Incoterms 2010 defines the terms of DAP as “Delivery to Destination”. In this case, the seller is deemed to have fulfilled his transportation obligations when the goods were placed at the disposal of the buyer on a arrived vehicle, ready for unloading at the named destination.
Such a place can be any point on the globe that the parties agreed on. The seller delivers the goods in vehicles available to him so that the buyer can unload them. The customer accepts the goods when they begin to unload them.
If you ask, DAP terms - what is it in simple words, then the answer is simple. This is a situation where the seller hires transport, carries out customs clearance of the goods and takes it to the place agreed upon by the parties to the transaction. Unloading, customs clearance and other procedures are undertaken by the buyer.
This concept can be applied in the case of transportation by any means of transportation, as well as for container and multimodal transportation.
Who is responsible for customs clearance in the country of export
As soon as the goods are ready for dispatch, the necessary packaging is carried out by the seller at his own expense, so that the goods safely reach the final destination. All necessary legal formalities in the country of export are carried out by the seller at his own risk, that is, he is fully responsible for ensuring that the goods can leave the country of export without problems. Also, his duties include paperwork for the goods. The seller is responsible not only for export formalities, but also for possible nuances in the country of transit.
Who is responsible for customs clearance in the country of import
According to the DAP Incoterms delivery terms, after the goods arrive at a specific place in the country of destination, the import must be completed by the buyer independently, including the payment of all customs duties. As with the DAT, any delays or downtime are borne by the seller.
When risk transition occurs
According to the DAP condition, the transfer of all risks associated with the goods occurs when the goods arrive at their destination. If the buyer accepted the goods, he is already responsible for it.
How costs are distributed between seller and buyer
According to the DAP terms, all logistics costs are paid by the seller to the designated destination. The necessary costs for unloading the arrived goods are borne by the buyer.
If the seller decides to bear the costs of the contract for the international carriage of goods concluded by him with the logisticians associated with unloading at the destination, he cannot reimburse his costs at the buyer's expense.
If the place of delivery specified in the contract is a warehouse where the goods are transported from one point in the country of export to some point in the country of import, then the rule for this case is simple: goods can be delivered without customs legalization.
If the destination is a warehouse somewhere on the border, and the goods do not follow directly from the exporting country to the customer, but crosses the territory of third states, then in accordance with the existing customs legislation, the cargo can be granted transit status. However, he does not undergo customs legalization in those territories where he went in transit.
However, difficulties may arise if the goods must pass customs clearance before delivery, as well as if the goods are in transit. For the execution of all permits during cargo transportation, close communication between the representatives of the carrier and the buyer may be required. In the event of improper operation or uncoordinated actions, delays and disputes regarding demurrage may occur.
Is there a transfer of ownership
It is important to know that the DAP conditions, like other Incoterms terms, do not determine the moment of transfer of ownership of the object of the contract of international sale. Therefore, it is necessary to highlight this issue as a separate paragraph.
What you should pay special attention to
Parties may apply the Incoterms DAP terms, regardless of which transport they will use to transport the goods. It is necessary to clearly define and register in the contract the point where the goods should be delivered. Risks up to this point are entirely borne by the seller, so he must make sure that the name of the destination is specified by the buyer as specifically as possible.
Since Incoterms as a whole does not determine the moment of transfer of ownership and does not transfer it to the goods, nor does it name the payment terms, additional negotiations and separate approval of both parties will be required to resolve these issues. The same is true for establishing jurisdiction. Incoterms terms do not apply to goods before and after delivery. It is necessary to indicate in the contracts details of the transfer, transportation and delivery of goods. Container loading is not considered packaging and must be noted separately in the sales contract.
It is important to consider that, although Incoterms is not a law, in some countries, for example, in France, it is included in the legal field and has the status of a binding act. In this case, the provisions of the drawn up contract will play a primary role, therefore, it is necessary to prescribe in it all the moments that are contrary to Incoterms, but about which the customer has agreed with the partner.
Obligations between parties to the contract under the terms of DAP Incoterms delivery are distributed as follows:
1. Responsibilities of the seller.
- Proper quality of goods.
- Preparation of a commercial invoice and documentation.
- Export packaging and labeling.
- Export licenses and customs formalities.
- Vehicle rental.
- Loading.
- Delivery to destination.
- Providing proof of delivery.
2. Buyer Responsibilities.
- Unloading the arrived goods.
- Import formalities and duties.
- Payment of inspection cost before shipping.
- Delivery to your warehouse.
Thus, DAP is one of the modern and very effective conditions for the delivery of goods. It requires special attention on the part of the seller, who incurs most of the costs and obligations, when drawing up contractual relations.