DAP shipping term

Do you know what DAP shipping term is and how it differs from other terms?

The world of e-commerce is increasing day by day and that means the e-commerce authorities have to make sure that sellers and buyers are conducting business efficiently.

To make the business efficient and effective, the International Chamber of Commerce (ICC) introduced the DAP shipping term.

Since its release, DAP has changed the way how buyers buy products from sellers. More importantly, the term has made it possible for new people to enter the market of e-commerce easily.

In this blog, we are going to tell you about the DAP shipping term and how it works. We will discuss in detail how bears the cost and what is the role of seller and buyer in this agreement. Let’s talk about this term and how it originated.

Table of Content

Chapter 1: What is DAP Shipping Term? Main Things About it You Need To Know Before

Chapter 2: What are the Responsibilities of Concerned Parties in the DAP Shipping Term?

Chapter 3: Pros and Cons of DAP Shipping Term for Buyers

Chapter 4: Situations That DAP Agreement Can Be Used

Chapter 5: Frequently Asked Questions about DAP

Chapter 1: What is DAP Shipping Term? Main Things About it You Need To Know Before

What-is-DAP-Shipping-Term

Now that you have an idea of what this blog is about, let’s talk about the term DAP and how it is linked with the e-commerce business.

1. Background of DAP – What is the meaning of the DAP shipping term?

  • Delivered-At-Place meaning

DAP or also known as Delivered-At-Place is an international shipping term that is used in an e-commerce business. The term states that the seller has to handle all costs and bear every loss until the products are delivered to the buyer’s location.

This does not mean that buyer has no role in this whole process. Here, the buyer has to sign an agreement.

It states that he/she has to pay the duties and other taxes (local and international taxes) once the items have arrived at the location.

  • The background of DAP

DAP was launched by ICC (International Chamber of Commerce) and it replaced the term DDU (Delivery Duty Unpaid).

DAP is used by a lot of businessmen because it diminishes the need to handle the complex process. A buyer only has to pay the import duties and make customs officers release the items.

2. How does the DAP shipping term work for your business?

DAP shipping term simply means that the seller (from whom you are buying the products) will have to handle all the processes.

That includes manufacturing the product, packing the items, creating paperwork, getting export papers, arranging shipping methods, and handling delivery.

As for the buyer’s side, he/she only has to unload the items and pay taxes/duties, and clear the items from the port.

DAP shipping term works with any type of form and the combination of different forms. It basically states that buyer will only take the financial responsibility of the whole process.

How DAP shipping term works for your business

3. What do you need to consider when dealing with DAP shipping term?

ICC has made it possible for buyers and sellers to be on the same page by launching different terms. These terms make it clear about what is stated in the contract. These terms give a clear understanding about what is the role of each party.

With these terms given by ICC, the parties can refer to these terms and when they sign, they are admitting their roles.

The same is the case with the DAP shipping term. In this term, the supplier will handle all the processes required for making and delivering to the location of your choice.

When they are on your desired location, then your responsibility comes into action. It is your role to pay the import duties and taxes related to your country. Then the items are released and you are good to go.

What do you need to consider when dealing with DAP shipping term

4. Things that can go sideways in DAP

Yes, there are plenty of benefits of DAP contract. However, with the benefits, there are some downsides to this shipping term. Here are some of the things that could go wrong.

Point to be noted, DAP contract depends on your country and product type. That means the downsides will be related to that. The mentioned ones are that are common.

  • Goods coming in without proper documentation

The first and foremost thing is that your goods may come to the port without proper documentation. See, in this contract, the seller or the manufacturer has to do all the processes and you only have to receive the products.

Now, what sellers do is they don’t place the proper paperwork with the items in order to save their time.

This leads to you getting stuck with the inventory with the customs. The only option is to contact the chinese supplier/manufacture and ask them to send the documents.

Those documents can be the bill of materials, Bill of Lading, or certifications. Altogether, this can cause a lot of delays.

  • Customs clearance getting delayed

Now, we move on the second downside that most of the DAP shipping term contractors have faced. It usually happens that custom taking a lot of time in clearing the items because of incomplete papers. However, there are other things also related to that.

For instance, the port is busy or the country is on lockdown. You will get a notification about the delivery. At that time, getting those items out of customs clearance will be a headache for you.

Things that can go sideways in DAP

  • Delay on duties

The third downside is from the buyer’s side. As mentioned, when the items reach the destination, it is the buyer’s responsibility to clear those off paying the duties. If the buyer takes days to clear off the customs fee or taxes, it can cause delays.

Suppose, you have placed an order through a friend. If your friend takes time in clearing the taxes, or your friend don’t have experience in it, it will become a problem for you.

5. Supplier or Buyer- Who pays the extra expenses?

The idea of DAP is simple. Seller handles the cost before the item’s arrival at the port and after that, the buyer is responsible. See. the thing is this can be considered as a gray area because the expenses are handled by both parties.

However, there is a catch, if there is any damage to the items before they reach the port, it is on the seller. And, if anything happens to items when they are picked up by the buyer, then the buyer is responsible for the expenses.

6. Misunderstandings in DAP

There is a lot of confusion in the DAP term because it is relatively new to the e-commerce domain. To avoid those misunderstandings, follow these points.

  • Point out the destination clearly and do mention it on the contract deal.
  • Make sure that both parties (buyer and seller) are on the same page about delivery time.
  • It is in the seller to notify about the arrival of the goods in advance.
  • The seller should add the important documents to avoid customs seizing the product.
  • Discuss who will pay for the unloading the items.
  • Discuss who will pay for the storage fee if there is a case of detention or customs taking the items.

7. Is DAP worth it?

dap-incoterm

Well, looking at the advantages, we say that the DAP shipping term is relatively easier to handle than other incoterms. That is because there is less load on the buyer and the seller has to do all the processes until the destination.

However, that does not mean that there is no downside to the DAP contract. There are few and all of those are related to delays. Altogether, we can say that DAP is worth it, provided you understand what you need to do.

Chapter 2: What are the Responsibilities of Concerned Parties in the DAP Shipping Term?

Let’s talk about what are the responsibilities of each party in the DAP contract. This chapter highlights what sellers and buyers have to follow if they are having a DAP contract deal.

What are the Responsibilities of Concerned Parties in DAP Shipping Term

1. Responsibilities of Buyers in DAPshipping term

  • Unloading the items

If we talk about the deal from the buyer’s side, the first role that he/she has is unloading the items from the ship or plane.

Yes, the buyer can avoid that if the seller agrees on unloading the items. However, most of the time, this responsibility is on the buyer.

To give you ease of mind, if the seller has sent the proper paperwork, the buyer can easily perform this procedure.

  • Import duties and taxes

The second thing that buyers have to do is paying all the taxes and duties that are applicable to the items. It is on the buyer to check what type of taxes and duties are valid on the items they are ordering.

If there is a customs examination, then the buyer has to fill in the costs of the exam. Furthermore, if there is any need for any special certifications after the items have reached the port of destination, the buyer has to pay and arrange the certificate.

Import duties and taxes

  • Getting the items out of the port

The third responsibility of the buyer is to arrange the transport to get the goods out of the port. After getting the clearance from the customs, the buyer has to provide a transport method that he/she feels suits the best and get the items out of the port.

2. Responsibilities of Sellers in DAPshipping term

  • Packaging

The responsibility of the seller in DAP does not end with creating the items. He/she has to arrange the packaging for the items and prepare the cargo so that it can be exported without any hassle.

  • Charges of loading items and delivery at the port

Moving towards the second responsibility, the seller has to bear the charges that will be taken when the items are loading on the truck at the seller’s warehouse.

And the seller has to add the cost when the DAP contract is under negotiation. Moreover, the seller also has to pay the fee linked with delivering the items at the export port.

  • Export taxes and duties

When the items are at the port, the seller has the role to pay the duties and taxes that are related to exporting the items.

Charges of loading items and delivery at the port

  • Origin Terminal Handling Charges

There is another type of fee that the seller has to bear and that is Origin Terminal Handling Charges (OTHC). OTHC is also called container service charges.

  • Other charges

Apart from all these charges, there are fees like loading on carriage charges, freight charges, and destination terminal handling charges (DTHC).

When you are negotiating the DAP term agreement, make sure that these charges are discussed. So that the seller can give you the best price possible.

That is because when the seller gives you the quote, he will add these additional charges to the price per item.

Chapter 3: Pros and Cons of DAP Shipping Term for Buyers

In the above chapters, we gave you an idea about what actually DAP shipping term contract is. This will make it easy for you to understand the pros and cons and will help you in choosing whether you should go for this type of contract or not.

Pros and Cons of DAP Shipping Term for Buyers

1. Pros of DAPshipping term

  • Buyers will take less risks

The first advantage of a DAP contract is that the buyer has to take minimum risks because all major processes are done by the seller. Let’s take an example here.

Suppose, you are ordering items that are fragile. We all know that these fragile items can break easily, and the buyer has to bear the charges. However, if you are on the DAP contract, you are safe from this mishap.

That is because it is the responsibility of the seller to deliver the exact number of items in exact shape to the destination that you have chosen. Yes, if the items break after you have cleared the items from customs, then it is on you.

Moreover, the seller has to arrange the required paperwork so that also saves you from the risk of missing papers.

  • Cash flows can be managed easily

Another advantage of the DAP term is that it helps in managing cash flows. See, some buyers order items that are expensive and that leads towards additional costs because of special storage and packing.

If you have a DAP term agreement and the quality is guaranteed, you reorder the items and will know exactly how much you have to pay. By this, you can easily manage the cash flows that you are putting into the business.

Cash flows can be managed easily

  • Buyers will take minimum liability

As DAP states that the seller is responsible for the items until they reach the named destination, this puts a minimum liability on the buyer. He is not responsible for the items until they reach the port.

For instance, let’s take an example of the EverGreen ship incident. The ship stuck for many days in the canal. If that ship contained any items under the DAP agreement, the sellers of those items had to pay the storage and extra expenses related to that.

  • Lower Quantity can be bought

Sellers who offer the DAP shipping term give an option of buying items in lower quantities. When sellers see that their items are getting a good sale in a specific country, they send items to the nearest warehouse in that country in advance.

Then, they offer the deal of buying the items in lower quantities because they have already paid the charges. This way they can offer you an optimum rate as well as lower quantity.

2. Cons of DAPshipping term

  • Delays and increased shipping time

The first disadvantage that DAP has to offer is the delays. The buyer has to clear all the items from the port and that can cause increased delay because custom clearance takes time.

Moreover, if there is incomplete paperwork sent by the seller, it can also lead to more delays because rearranging the documents will take time. Until then, the products are not getting out of the port.

Delays and increased shipping time

  • Higher than normal overall cost (some cases)

Another con of the DAP term is that sometimes sellers offer a higher rate of the product. That is because some sellers store the items in the country where the sales are high.

That means that they have already paid the customs and other charges. This leads towards more than the normal price of that single item.

Moreover, some sellers give a high rate because they adjust the costs of additional fees into the product. And, as we know that shipping, customs, and transport charges vary from time to time, because of that, sellers offer a higher price to cover the costs and be on the safe side.

Chapter 4: Situations That DAP Agreement Can Be Used

DAP offers an agreement that is beneficial for both parties. If a seller is open to the agreement, you should definitely consider the DAP contract. DAP decreases the risk and obligations if new people are entering the e-commerce business.

However, these businesses have to keep that in mind that they have to pay higher than normal rates.

Situations That DAP Agreement Can Be Used

If already running businesses are looking to improve their cash flows, then DAP is the option for them. These are some of the scenarios where you can consider using the DAP contract.

1. When named place is buyer’s warehouse

If the buyers’ name of the destination is their own warehouse, then DAP can be considered. Because buyers only have to pay for the cargo once the items arrive at their location.

With this, buyers will pay for the items when they arrive at the location instead of paying up when the items are shipped.

2. When the seller is shipping inventory in large quantity

If the seller is willing to send the items to his own local warehouse in your country, then you can negotiate the DAP agreement.

With this, you will only have to pay for the price of that item. And there will be no extra charges like shipping fees or customs charges. Moreover, you will be able to buy as much quantity as needed.

3. When products are imported in multiple countries

When products are imported in multiple countries

The last point where you can negotiate the DAP term is when you are dividing the items into multiple countries.

If the buyer is buying items for multiple countries, then you can contact the seller for the DAP term. That will help in minimizing the freight charges.

For instance, if you are buying items from China and looking forward to selling those in the US and Canada, you can choose a middle point as a port of destination.

From there, you can divide the items according to the quantity and send them using local transport. This way, the seller will add the freight charges according to the location of the port rather than adding charges for two different ports.

Chapter 5: Frequently Asked Questions about DAP

Frequently Asked Questions

1. Who pays the freight in DAP agreement?

If you are getting into the DAP agreement, then the seller is responsible for all the charges until the items arrive at the port of destination.

That also includes the freight charges. Yes, the seller will arrange the freight and will deliver the items to the export port.

2. How DAP differs from DDP?

DDP and DAP at first look very similar. However, these both are different. Yes, in both terms, the sellers have to assume the risk and charges until the items arrive at the port of destination and then the risks are transferred to the buyer.

However, in DDP incoterm, the buyer is responsible for unloading the items and paying those charges. Whereas, in DAP, the buyer only has to clear the items from customs and he does not have to worry about unloading as that will be handled by the seller.

3. Which one is good? DAP or CIF?

If you have a small cargo and are new to the business, then the perfect option for you is CIF because here the charges are calculated based on the container.

However, DAP is best for new businesses if they have bulk cargo and the method of shipping is sea shipping.

4. What are the advantages of the DAP shipping term?

DAP has multiple advantages. However, those advantages are related to the items you are ordering and the country you are operating from. Some of the most common advantages of the DAP term are:

  • Minimum liability for buyers
  • Fewer risks
  • Improved cash flows
  • Lower quantity can be bought

Conclusion

In this blog, we have added a detailed guide about what the DAP shipping term is and how you can get the most out of it. We have given examples to help you understand it better.

As you see, the DAP shipping term has a lot of benefits because the major load is on the seller.

We prefer you to use the DAP shipping term contract if you are new to the business. But, still, if you are facing any problem related to the DAP agreement, feel free to contact us by going towards the contact page.