The Importer's Handbook to DAP Terms

Everything you need to know about DAP terms

Choosing an Incoterm for shipping your products may seem daunting, but fret not, we're here to help.

Embarking on international trade can be both thrilling and intimidating for newcomers. One option you can pick from is DAP, which stands for Delivered at Place. This Incoterm outlines the seller's responsibility to deliver the goods to a specified location, usually the buyer's premises or another agreed-upon destination.

So what does that actually mean?

Have you ever purchased something online from another country, like a high-end designer handbag or a luxury watch valued at over $1000 to be delivered to you?

If so, the Seller organizes delivery to your designated address. However, once the goods reach the country, you may receive a notification from the courier company regarding the New Zealand customs GST owning on your purchase. This is similar to the process involved when shipping under DAP terms as an importer. The seller handles shipping your order from their location to your doorstep, but it's your responsibility to ensure that your items clear customs and that any GST or duties are settled before the shipment arrives into the country.

Let's delve deeper into this topic:

Responsibilities:

1. Delivery to the Designated Place:
   • Under DAP terms, the seller is responsible for transporting the goods to the agreed-upon destination. This includes all costs and risks associated with delivering the goods to the specified location, such as ensuring the goods are loaded onto a vessel to unloading at the buyer's premises.
2. Buyer arranges customs clearance:
   • As the buyer, it is your responsibility to arrange customs clearance before the seller can proceed with delivering the goods to you. Once the goods are customs cleared, the seller will then arrange delivery to your door and unload the goods, at which point you will take over responsibility.

Benefits of using DAP terms

• Convenience: The seller handles 90% of the shipment aspects with DAP terms, including transportation, and insurance.
• Reduced Risk: Under DAP terms, sellers bear the risk for goods until they reach the buyer's designated location. Consequently, if any incidents occur during transit, like damage or loss, it is the seller's responsibility to address the problem and ensure the buyer receives the goods intact.
• Streamlined Process: DAP terms simplify the import process for buyers, as they only have to arrange customs clearance as part of the logistics process. Sellers handle most tasks, ensuring a smoother and more efficient transaction.

Downside to using DAP terms

• Higher Costs: Under DAP terms, sellers usually bundle transportation and insurance costs into the selling price. This approach can lead to increased total expenses for the buyer compared to other Incoterms, where they retain more control over these charges. With DAP, you receive a single quote from your supplier, whereas opting for an Incoterm like EXW allows you to explore different options and prices in the market.
• Limited Control: When buyers choose DAP terms, they relinquish control of the logistics process. With the seller managing transportation, buyers have limited visibility and control over the shipment's journey. This lack of oversight could result in delays or inefficiencies.

Mastering DAP Terms:

Now that we've laid the groundwork, let's explore some strategies for mastering DAP terms as an importer:

1. Clear Communication:
   • Effective communication between the buyer and seller is essential for successful transactions under DAP terms. Clarify the delivery location, timing, and any special instructions to ensure a smooth delivery process.
2. Budget for Additional Costs:
   • While the seller is responsible for transportation costs under DAP terms, be prepared for potential additional expenses, such as customs clearance, customs duties, taxes, or handling fees upon delivery. Budgeting for these costs upfront can help avoid surprises. With customs clearance you will need a certified customs broker to arrange the clearance for you.
3. Inspect Upon Arrival:
   • When you receive the goods, carefully check to make sure they match the specifications you agreed upon. If you notice any issues or damage, make a note of it right away so you can work with the seller to resolve any problems.

Honest review:

For first time importers DAP can be a safe option because your supplier is responsible for any damages and they arrange 90% of the logistics moves.

Buyers only need to focus on arranging customs clearance prior to the cargo arrival into the country. Delaying this process may lead to storage charges, which the buyer will be responsible to cover. You can typically arrange customs clearance through the freight forwarder already handling your shipment. Alternatively, you can reach out to a local customs broker for assistance.

Final thoughts: Although DAP may not always be the most cost-effective option, it can be a favourable choice when you want your supplier to manage the transportation of your goods. If you have a strong relationship with your supplier and are satisfied with the DAP price they provide, it can be a convenient solution. For further insights on various incoterms, check out our informative Incoterms blog.

‍

‍