What it means
DAP is one of the most widely used terms in international trade, and it is part of Incoterms 2020, published by the International Chamber of Commerce, which is the edition named here. Check the edition incorporated into the actual sale contract, because a contract expressly naming an older edition needs its own review.
Incoterms 2010 removed DDU and introduced DAP, and their broad division is similar, but the old and new terms should not be silently treated as identical. Under DAP, the seller arranges and pays for export clearance and transport to the named place, such as the buyer's warehouse.
The seller normally carries the transport risk until delivery at the named point, subject to the rule and buyer obligations. Once the goods arrive and are ready to be unloaded, risk passes to the buyer, who then handles import clearance, pays any duties and taxes, and unloads the goods.
This split can work when the buyer is able to arrange import clearance, with the seller handling export formalities and the buyer handling import formalities. If clearance is delayed, the parties must examine the actual allocation of risk and costs instead of assuming every delay is the seller's.
The contract should therefore also say who pays storage if clearance is delayed. Contracts should name the place as precisely as possible, such as a full warehouse address, because vague destinations invite disputes over the final transport leg, unloading point and risk transfer.
Identify the exact point and how arrival will be evidenced. A delivery note signed at the named place is the usual proof.
Incoterms deal with delivery, risk and certain costs, but they do not by themselves set the price-payment date or transfer ownership, so check those sale terms separately. Ask the freight provider whether its quoted service includes unloading or clearance support.
That operational service does not automatically shift the Incoterms responsibility between buyer and seller.
In practice
Real-world examples.
Example
An Italian machinery maker ships to a factory in Sharjah on DAP terms. It pays freight and insurance to the factory gate, and the Sharjah buyer clears customs and pays duty and VAT. The buyer's clearing agent is booked before the vessel arrives.
Example
A Dubai trader sells spices to a supermarket chain in Oman on DAP Muscat warehouse terms. The Omani buyer handles its own customs clearance and unloading. The trader's invoice excludes import duty, so the buyer budgets for it separately.
Example
A shipment arrives damaged at the buyer's warehouse. Because the damage happened in transit before arrival, under DAP the loss falls on the seller. The seller claims against its cargo insurer using the delivery note and photographs.
Formula
Calculation
DAP price = product cost + export costs + main freight + insurance cost if chosen + delivery to named place + seller margin.
Illustrative buyer landed cost = DAP price + import clearance + duties + import taxes + unloading.
Worked example. A seller quotes DAP to a buyer's warehouse. Product cost is $50,000, export clearance $800, freight to the named warehouse $5,200, insurance $300 and seller margin $7,500. The DAP price is $50,000 + $800 + $5,200 + $300 + $7,500 = $63,800.
The buyer then pays customs duty and import VAT (illustrative) of $6,500 and clearing agent and unloading costs of $700. The illustrative buyer landed cost is $63,800 + $6,500 + $700 = $71,000, which is $7,200 or about 11.3% above the DAP price.Case study
Seen in the real world.
This illustrative and entirely fictional example follows Northwind Fabrics, an invented textile supplier. It regularly quoted "DDU" to GCC customers and assumed the terms were clear. A shipment was delayed at a destination port, storage fees built up, and the buyer claimed the seller should pay because "delivery" had not happened. The contract did not name a precise delivery place, and DDU was not a current Incoterms rule. After a costly dispute, Northwind switched to "DAP [full warehouse address] Incoterms 2020" on every contract and added a clause on who pays storage if clearance is delayed.
Northwind also asks the buyer to confirm that it can carry out import clearance. It records the delivery point and agreed treatment of delays in a separate sale clause. The chosen Incoterms rule covers specified transport responsibilities, not every tax, payment or title question in the contract. Northwind's sales team now uses a one-page quotation template that shows the DAP price, the named address and a short list of what the buyer pays on arrival. Customers see the expected import costs before they order, and disputes about who pays for what have largely disappeared from the sales log.
Watch out
Common mistakes.
- Leaving the named place vague. A precise address avoids disputes over the final leg and the point where risk passes.
- Still using DDU. Quote DAP under Incoterms 2020 so the terms are clearly defined.
- Forgetting that the buyer pays import taxes under DAP. The buyer's total cost is higher than the invoice price.
Questions
People also ask.
What is the difference between DAP and DDP?
Under DAP the buyer clears imports and pays duties and taxes. Under DDP the seller does.
Who arranges insurance under DAP?
Insurance is not required, but the seller carries the transit risk so it usually insures the goods.
When does risk pass under DAP?
When the goods arrive at the named place and are ready for unloading.
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