Group D Incoterms: delivery at destination
DAP Delivered At Place Incoterms 2020 is the first Incoterm of the D group. In contrast to the C group, under the D group Incoterms delivery and transportation occur at the same place, i.e. the transfer of risk from the seller to the buyer takes place when the goods are physically delivered to the buyer.
In contrast to the E and F groups, where the place of delivery is always at origin, under the D group Incoterms delivery takes place for sure at destination.
What is the outcome from all this? That under the D group Incoterms, the seller’s responsibility, both in terms of risks and obligations, is the highest in the whole Incoterms.
Therefore, if you are an exporter, you should pay particularly attention if you sign up for a contract regualted under a D-group Incoterm.
On the other side, D group Incoterms such as DAP are the most advantageous for the import company.
How DAP Delivery At Place works
DAP is written: DAP Delivered At Place (named place of destination)
As its name already suggests, DAP can be used for any mode of transport («place of destination» instead of «port of destination», typical of waterway-only Incoterms).
Under DAP, the seller delivers when the goods are made available to the buyer at the named place of destination, not unloaded from the delivering vehicle. Additionally, the seller must pay all transport costs up to that delivery point.
However, the seller is not responsible for off-loading, customs clearance, duties, or taxes.
DAP has been modified in the Incoterms 2020 publication, so that now sellers and buyers are specifically allowed to use their own transportation at origin or destination.
A practical example
Let’s make an example to clarify what the seller signs up for under DAP. A Thai company based in Bangkok sells electronic products to a German company based in Cologne. The contract would state:
DAP Delivered At Place (German company’s address, Germany).
The price agreed is USD 100,000.
From the seller’s perspective, the USD 100,000 of consideration will include: the goods, the transportation from its own premises to the port of Bangkok, up to the port of Rotterdam, and then again up to Cologne at the buyer’s door. Alternatively, it could have been from Bangkok airport to Frankfurt airport, and then by truck or rail to Cologne.
From a risk perspective, the Thai seller remains responsible until the goods are delivered to the German buyer in Cologne. If the electronics is stolen, lost, or damaged, it is the Thai company to bear the cost of it.
The Thai seller does not have to pay for customs clearance in Germany, duties, taxes, import VAT etc, all of that will be on the German buyer; the Thais seller is also not responsible for off-loading the goods, just to deliver them.
Anyway, you see that the amount of costs and responsibilities on the seller is extensive.
Could the place of delivery have been Frankfurt airport? The answer is yes: DAP says «named place of delivery», therefore, as long as delivery occurs at destination, it is up to the parties to negotiate the exact location.
To conclude, if the Thai company is able to deliver efficiently or can negotiate a higher price due to the additional services, DAP is a great way to earn additional revenue.
Otherwise, parties should be careful of what they are signing up for in Incoterms.
Globartis Research
Does your company deal with the import of goods? Visit our B2B portal and get in touch with global suppliers.
