Delivered at the Place (DAP) is among the 11 incoterms included under Incoterms (r) 2020, which is a part of the International Chamber of Commerce.
In the DAP incoterm, there is a location of delivery (called “location”) that is decided jointly by the buyer and seller. The seller’s duty is to ship the items to the designated location; the buyer’s responsibility is to get rid of the items (import clearing customs) through the payment of import duties and then unloading them at the designated location.
DAP can be used for any type of transportation. It’s suitable for multiple modes of transport.
warehousing, packaging, loading primary transportation at origin, customs clearance for export ocean freight, as well as shipping to the destination to be coordinated by the seller. Import clearance and duty on imports, as well as unloading at the destination, will be coordinated by the buyers.
Risk of DAP Incoterm 2020
The risk in DAP remains with the seller until the goods are delivered to the designated location, without loading.
Insurance:
The seller organises insurance in the event of a DAP.
An Example for DAP Incoterm 2020:
Let’s understand DAP incoterm, also known as delivery term, with the aid of an illustration.
Let’s say a cotton trading company (exporter/seller) from Mumbai, India connects with an apparel manufacturer (buyer) from Shanghai, China who needs raw cotton. They talk about future business opportunities.
The seller removes cotton and other items from several bales from different lots. They then ship them to the buyer in Shanghai.
Negotiations under DAP Incoterm 2020:
If the samples have been passed over the parameters set by buyers in accordance with the requirements of the buyer, the company starts discussions about the cost.
The exporter is in contact with a handful of good freight forwarders located in Mumbai who can help arrange local transportation to China as well as operations at the origin, so they choose to use DAP incoterm. The buyer would like the product to be delivered to their manufacturing facility located in Shanghai, China.
DAP Incoterm 2020 contract:
Based on the discussions between seller and buyer, the contract is agreed to by both parties, and the operational LC is accepted. The contract is drafted using a variety of variables.
Delivery time: DAP Buyer’s factory in Shanghai
The payment term is LC at the point of sight and 30 days.
The buyer then prepares the purchase order and distributes the same to the seller.
The operations process under DAP Incoterm 2020:
When the deal is completed and the contract signed, the seller in Mumbai, India informs its warehouse to ensure that the bales are ready for dispatch from the approved lots. They then contact their local freight forwarder to reserve containers and trucks, respectively. A freight forwarder reviews the availability of containers as well as places to book them. The seller also contacts their clearing agent and gives the agent information about the expected arrival date of the goods at CFS.
When cotton bales are in the process of being ready, the seller requests the transporter to put trucks in a position where they can transport the bales of cotton to CFS. A transporter puts trucks at the seller’s location in Mumbai for loading. Goods are delivered to CFS following the completion of loading, and information is sent to the freight forwarder as well as clearing agents (CHA) about the delivery of the cargo to CFS. CHA asks for permission to stow the goods from customs at the time of the arrival of the goods to CFS, while the freight forwarder takes empty containers out of the container yard before placing them in the loading area. After receiving permission to stow, the CFS supervisor arranges forklifts and manpower for stuffing. After the stuffing is completed, CHA asks the plant and quarantine officer or plant protection officer to conduct an inspection of the goods. Keep a record of the inspection here for the import or export of any plant products. A “No objection certificate” must be issued by the plant quarantine department. The plant quarantine officer visits CFS and inspects the cargo physically and takes samples. After testing the samples, if they obtain a satisfactory test result, they will issue a “No objection certificate.” CHA takes the NOC and stores it in the file with other documents that are original, and that same document is provided to the customs department. The CHA then asks the customs officer to examine the cargo. The customs officer inspects the cargo and, if all is found to be satisfactory, the customs officer releases the cargo and issues a “Let export order.”
The CHAexporter has already informed the authorities on fumigation, and they have issued a work order. The fumigation is performed by the agency in dosages that are prescribed by the guidelines of the destination country.
Once cleared, containers are delivered to the port at Nhava Sheva. The containers are handed over to the terminal when they are secured, and the same containers will be transferred to the vessel on their arrival.
After the vessel has been boarded, the seller (exporter) collaborates with the freight forwarder as well as the clearing agent (CHA) to obtain documents.
The freight forwarder visits the liner’s office to request a Bill of Lading.
CHA contacts various offices to collect the remaining documents, and they ensure that all documents are prepared in accordance with LC.
Documents were issued:
- commercial invoice
- List of packing materials
- A Bill of Lading
- Certificate of origin.
- Certificate of phytosanitary
- Fumigation certificate
- Certificate of insurance
- Other documents, if any,
After all, documents are received, the seller sends these documents to the negotiation bank in accordance with LC’s conditions and terms. negotiating bank check documents and forwarding them to the issuing bank. The issuing bank notifies the buyer/importer in Shanghai, and the importer takes the documents following the completion of formalities.
Once the documents have been received, the importer forwards the documents to their CHA to clear the formalities.
When the cargo arrives at the buyer’s CHA in Shanghai, they begin the clearance process. They clear the cargo of customs with the aid of post shipment documents and notify the buyer or importer.
In the case of cotton shipments, buyers and sellers jointly decide and select the controller (inspection agency) to monitor the weight. Likewise, they are in agreement to establish a lab where samples are checked for quality.
The controller examines the cargo and weighs each cotton bale, and also notes the weights for all bales. Based on these weights, the controller produces a report on the landing that is acceptable to both parties (seller and buyer). If there is a shortage of weight, the buyer can issue the seller a debit note to cover the short amount, and in the event of an increase in weight, the seller will issue an account with the buyer to cover the quantity that is in short supply and declare gains in weight.
Then the seller calls their freight forwarder to arrange for the additional transportation for the shipment. The counterpart of the forwarder in China will arrange the transportation to the buyer’s factory in Shanghai. The transporter transfers the cargo to the buyer, collects the proof of delivery, and then sends the evidence of delivery to the seller. The seller’s liability ceases when goods arrive at the factory of the buyer.
This is the procedure for the shipment of goods in the DAP incoterm.
All this is about FCA incoterm and we hope the above article would have helped you to understand what is FCA shipping and the operation mode. If you have any consultations required for air freight, ocean freight, customs clearance, and Logistics transportation then we have a very committed team of professionals to help you out. You can get in touch with us at Consolidation Shipping Line any time of the day or drop an email at inquiry@cslindia.net