The comparation between dap and fob rules for delivery

DAT requires the seller to clear goods for export, where applicable, withoutany obligation to clear the goods for import, pay import duty or carry outimport customs formalities.. The sel

INTRODUCTION 1

I DAT - DELIVERY AT TERMINAL 3

1, Definition 3

2, How Delivery at Terminal work? 3

3, Obligation 4

4 Benefits of DAT 5

5 Backdraw of DAT 5

6 Parties’ responsibility 5

7, Example 10

II DDU- Delivered Duty Unpaid 12

1, Definition 12

2 How Does DDU Work? 12

3 Responsibilities Under Delivered Duty Unpaid (DDU) 13

4 Seller Obligations vs Seller Obligations Under DDU 13

5 Advantages and Disadvantages of Delivered Duty Unpaid (DDU) 14

III DDP - Delivered Duty Paid 16

1 Definition 16

2 How does Delivered Duty Paid work? 16

3 Obligations 17

4 Benefits 26

5 Backdraw 26

6 Paties’ responsibility 27

7.Difference Between DDU and DDP 27

8 Example 28

IV DAP - Delivery at Place 29

1, Definition 29

2, How Delivery - at – Place works ? 29

3, Obligations 30

4, Benefits of DAP 32

5, Backdraws of DAP 32

6, Parties' responsibility 33

7, Example 34

V THE COMPARATION BETWEEN DAP AND FOB RULES FOR DELIVERY 35

REFERENCES 37

The International Chamber of Commerce have published new Incoterms

2020 that have come into effect from the 1st of January 2020 The ICC originally published Incoterms® in 1936 and have continually made updates to reflect the changes to the Global Trade environment It’s important that all parties involved in trade clearly understand the changes and how they apply to global supply chains

Incoterms play such a vital role in the world of global trade Incoterms

2010 or Incoterms 2020 may seem complicated, but it’s imperative that buyers and sellers clearly understand how they work and their own obligations along the supply chain In this article we explain the updates made and provide simple explanations, along with an Incoterms

infographic to explain Incoterms 2020

Incoterms are referred to as International Commercial Terms They are a set of rules published by the International Chamber of Commerce (ICC), which relate to International Commercial Law According to the ICC, Incoterms rules provide internationally accepted definitions and rules of interpretation for most common commercial terms used in contracts for the sale of goods’

All International purchases will be processed on an agreed Incoterm to define which party legally incurs costs and risks Incoterms will be clearly stated on relevant shipping documents

DAP,DPU,DDP,DAT is in Incoterms 2020 Group D Incoterms rules have been revised in 2000, 2010, and 2020, to ensure that the trade terms are clearer

I DAT - DELIVERY AT TERMINAL

DAT is used irrespective of the mode of transport selected and may also beused where more than one mode of transport is utilized The specific pointwithin the terminal at the place of destination should clearly be specified asagreed upon

DAT requires the seller to clear goods for export, where applicable, withoutany obligation to clear the goods for import, pay import duty or carry outimport customs formalities

2, How Delivery at Terminal work?

The named terminal is usually at the end destination in the buyer’s country

It can be a quay, a warehouse, or a container yard In addition, the namedterminal can also be designated at a road, rail, or air cargo terminal

In DAT, the location where the seller must deliver the goods should beprecise Typically, cargo terminals and ports can be large and difficult tonavigate Therefore, the seller must know exactly where they are supposed

to deliver the goods inside the terminal

The seller must unload the goods once the shipment has arrived at thenamed terminal.

Under DAT, the seller is responsible for paying for all expenses until thegoods are unloaded at the named terminal This means that the seller paysfor the export licences, clearance, and duty

After the goods have been unloaded, the seller can consider hisresponsibility complete, and the risk transfer occurs from the seller to thebuyer And the buyer is responsible for paying for import customsformalities such as import duties and tax at the destination port

The DAT Incoterm was specifically designed to meet airport and portdeliveries

3, Obligation

Seller’s Obligations

o Goods, commercial invoice and documentation

o Export packaging and marking

o Export licenses and customs formalities

o Pre-carriage and delivery

o Cost of pre-shipment inspection

3 The supplier bears the responsibility for most of thecarriage/transport of the goods from the origin to the destination

4 Less hassle and organization for the buyer of good

5 Backdraw of DAT

The disadvantages of DAT lie with the seller as they have to arrange theentire main carriage They also have to arrange the export customsformalities and unload the goods at the delivery terminal

The DAT Incoterm might also be disadvantageous to the buyer as, althoughthe seller arranges the main carriage, the shipment costs are priced into thecosts of the goods As a result, the seller has no incentive to keep the cost

of the shipment low, and the buyer usually ends up paying higher prices

6 Parties’ responsibility

Seller’s Responsibilities Buyer’s Responsibilities

Cost Payment terms for the seller

include:

Warehouse charges: for

maintaining goods till they are

delivered

Packaging charges: for marking

and labeling goods as per export

standards

Inland transportation: for

loading and transporting goods

till the first port

Deport charges: for port duties

Freight forwarding charges:

the freight forwarding agent’s fee

for handling logistics

Custom charges: for export

customs proceedings

Documentation charges: for

preparing and submitting

necessary documents required

for the shipping process

Costs borne by the buyer include:

Custom charges: for import

customs

Port charges: for port clearing

procedures

Inland transit charges: for

transportation from the port to the warehouse

Warehouse charges: for

maintaining goods after the delivery of goods by the seller

Delivery

terms

The seller has responsibilities till

the nominated place, which can

be a port, but generally tends to

be a quay, warehouse, assembly

unit etc and this is one of the key

differentiating factor from the

Under DAT terms, the buyer must accept the proof of documents provided by the seller at the destination port

He shall receive the goods

DAP 2020 incoterm, so the buyer

stays liable for the main freight

proceedings The seller's duty

stays till the delivery of goods at

the first nominated

delivered at the port

Risk

tranfer

The risk of goods stays with the

seller till the appointed place of

port He stays liable for any risk

related to damage of goods till

they are unloaded at the

nominated port

The risk of goods transfers to the buyer after the delivery Also, if the buyer fails to instruct the seller in reference

to the nominated port, the risk and damage will be borne by him/her

Insurance Since the entire freight

responsibility rests with the

seller, he is liable for insurance

coverage till the nominated place

of port He'll bear all the

insurance charges during the

course; in the case of sea/ocean

freight, he’ll have to take marine

insurance for goods

As the carriage duty rests with the seller, insurance is his responsibility The buyer has

no obligation to insurance

Duty and

clearance

The seller has duties towards

export customs proceedings He

stays responsible for preparing

all necessary documents

Payment for port charges and

customs clearing procedure,

duties, and local charges are

As the duties transfer at the nominated harbor, the buyer is responsible for import customsand duties He remains liable for all payment charges and risks thereafter This is where the difference between DAT

borne by him incoterms & DDP shipping

incoterms of 2020 are clearly delineated, under DDP, the responsibility of the duties, payments & documentation remain with the seller itself Acquiring all necessary documents provided by the seller at the appointed port andcarrying out further import proceedings are a part of his responsibilities

up until safe delivery in Canada

After successful unloading at the Canadian port facility, the responsibilityand risks are duly transferred to the Canadian buyer He will see to thecompletion of the delivery process

II DDU- Delivered Duty Unpaid

1, Definition

Delivered Duty Unpaid (DDU) is an old international trade term indicatingthat the seller is responsible for the safe delivery of goods to a nameddestination, paying all transportation expenses, and assuming all risksduring transport

2 How Does DDU Work?

Under the terms of DDU, the seller is required to deliver goods to theagreed-upon destination in the country of importation The buyer wouldthen be responsible for the rest of the costs and further delivery of theshipment unless other terms have been laid out ahead of time

3 Responsibilities Under Delivered Duty Unpaid (DDU)

According to DDU arrangements, the seller secures licenses and takes care

of other formalities involved in exporting a good; it is also responsible for

all licenses and costs incurred in transit countries, as well as for providing

an invoice at its own cost

The seller assumes all risk until the goods are delivered to the specifiedlocation, but it has no obligation to obtain insurance on the goods

The buyer is responsible for obtaining all necessary licenses for importingthe goods and paying all relevant taxes, duties, and inspection costs Allrisks involved in this process are borne by the buyer Once the goods areplaced at the disposal of the buyer, all further transportation costs and risksfall on the buyer

4 Seller Obligations vs Seller Obligations Under DDU

Seller Obligations Buyer Obligations

Delivers the goods, as well as the

documentation that proves the

buyer can take legal possession of

them

Pays for the delivered goods

Responsible for all documentation

required to export the goods

Responsible for all documentationrequired for import clearance once theshipment has arrived

Once the goods are delivered to

the destination country, all risk is

transferred to the buyer

Once the goods are delivered alongsidethe ship, the buyer is responsible for anyloss or damage from that point on.Seller pays for the delivery,

loading, labor, and transportation

Buyer pays for the import duties andtaxes, customs charges, unloading costs,

costs up to the destination country and delivery costs to their own

warehouses.

5 Advantages and Disadvantages of Delivered Duty Unpaid (DDU)

Delivery Duty Unpaid would have benefitted both parties in some ways.The seller would be responsible for all the risks and costs associated withdelivering the goods until the shipment reaches the destination country But

at that point, the buyer becomes responsible for import clearanceprocedures and any costs incurred in that process

This would have been the most efficient method since sellers may not beaware of all the requirements of the destination country, but the buyersusually are familiar with them since this is where they most likely do themajority of their business For the seller to be responsible for delivery pastthe entry point as in DDP, they have to familiarize themselves withnecessary formalities in a foreign country so that they can coordinatearrangements with foreign institutions This can lead to delays and mistakes

in shipping procedures that could cost both parties time and money, hencewhy DDU is no longer used as an Incoterms rule

Another benefit of DDU would have been its ability to effectively trackshipments Tracking a shipment within one’s own country is much easierthan tracking it once it has left the country and is in someone else’s hands.This means the seller is able to track its shipment all the way to thedestination country and then the buyer takes possession of it and is able tohave precise control over when and where the goods are delivered andunloaded

Cost savings to both parties can also be significant The seller wouldobviously save money on export fees, while the buyer could possibly

negotiate a larger discount for the goods for agreeing to incur these feesand responsibilities themselves.

Of course, there are also disadvantages to DDU shipping The biggestproblem for buyers is the possibility of surprise duties or tax charges whentheir shipment finally arrives Obviously, that’s a big negative for buyers.But it’s not ideal for shippers, either, because disgruntled customers mayrefuse to pay for their parcel to be delivered

7 For example

DDU Bangalore means, the seller needs to deliver goods to thebuyer up to the destination (Bangalore) mentioned in contract.Bangalore is a place in India about 350 kilo meters away from ChennaiSea port Under DDU terms, the seller’s obligation is to deliver goods tothe buyer up to Bangalore As mentioned under DDU terms, the duty andtaxes at importing country has to be met by the buyer (importer) Allother expenses of carriage, insurance, customs clearance, and otherexpenses up to the place (Bangalore) need to be spent by the seller of

goods

III DDP - Delivered Duty Paid

1 Definition

Delivered Duty Paid (DDP) is a delivery agreement whereby the sellerassumes all of the responsibility, risk, and costs associated withtransporting goods until the buyer receives or transfers them at thedestination port

This agreement includes paying for shipping costs, export and importduties, insurance, and any other expenses incurred during shipping to anagreed-upon location in the buyer's country.

2 How does Delivered Duty Paid work?

Stage 1: Preparing

The seller packs the goods and provides the goods to a suitable carrier Healso draws up the sales contract and arranges the necessary documents likeBill of Lading, Commercial Invoice, Insurance Certificate, Export License,and more

Stage 2: Shipping

Next, the seller arranges for the loading of goods and transports them to theport Once reached, the goods are unloaded and finally shipped to theimporting country

The seller satisfies all the formalities like customs clearance (export andimport) and authority approvals He also pays all the freight costs andfreight forwarding fees

Stage 3: Delivering

After the goods reach the importing country, the seller bears all thetransportation costs for the final delivery to the buyer’s destination.The seller must also arrange for the proof of delivery and pay all additionalcosts such as inspection expenses, cost of damage, and the like

During the shipment process, the seller also has to notify the buyerregarding any transportation and delivery terms

3 Obligations

Seller’s obligations Buyer’s obligations

A1 General

obligations

The seller must

provide the goods and

the commercial

invoice in conformity

with the contract of

sale and any other

The buyer must pay the price of goods as provided in the contract of sale.Any document to be provided by the buyer may be in paper or electronic form as agreed or, where there

is no agreement as is customary

A2 Delivery The seller must

deliver the goods by

placing them at the

disposal of the buyer

on the arriving means

of transport ready for

unloading at the

agreed point, if any, at

the named place

The buyer must take delivery of the goods when they have been delivered under A2