DAP Shipping: Pros and Cons for Ecommerce Businesses

If you’re a small business owner, purchasing inventory from international suppliers can be exciting. You can access a wider variety of goods and materials from a diverse group of vendors. Suddenly, the world very much becomes your oyster. Overseas sourcing is also a common cost-reduction strategy, with businesses often using it to boost profits.

Shipping, of course, is the only dilemma. You can purchase the wool off the back of a yak grazing the Tibetan steppe at this very moment—but how can you get it from the Himalayas into your hands? A shipping agreement called delivered-at-place (DAP) shipping is one popular option. DAP shipping can reduce administrative burdens and lower shipping risk and might just be the right choice for your business. 

What is DAP shipping?

Delivered-at-place (DAP) shipping is an international shipping agreement in which the seller pays nearly all the costs of transporting goods to a specified destination. The seller retains shipment liability until the delivery is complete. Buyers are responsible for unloading the shipment at the destination and paying import duties, taxes, or customs clearance fees.

DAP shipping is an international trade term. It’s one of 11 formal rules set by the International Chamber of Commerce (ICC) to standardize trade between international buyers and sellers. These International Commercial Terms, or Incoterms®, apply to international trade shipments transported by air, ocean, road, or rail and become legally binding when included in a contract.

How DAP shipping works

Here’s how the DAP shipping process works:

1. A buyer and seller agree on a transaction and select DAP shipping as the shipping option.

2. The seller prepares a sales contract that aligns signing parties on payment terms, shipping method, and named destination—often the buyer’s warehouse, the buyer’s destination port, or a local bonded warehouse (a private or government-owned building where imported, dutiable goods are stored).

3. The seller packages the goods, selects a shipping carrier, arranges transport to the carrier’s facilities, and pays all loading charges and freight charges.

4. The seller handles export customs clearance and pays any applicable taxes or fees.

5. The goods carrier transports the shipment per their contract with the seller.

6. Once the carrier finishes transporting the goods to the buyer’s location or contractually agreed-upon location, risk transfers to the buyer.

7. The buyer is responsible for unloading the goods, handling import customs clearance, and covering any additional costs associated with the shipment, such as import duties, taxes, and storage fees.

Of course, it’s always wise to speak with a lawyer well-versed in global fulfillment before signing any high-stakes contracts.

Buyer and seller responsibilities with DAP agreements

Here’s an overview of each party’s responsibilities under a DAP shipping agreement: 

Seller’s DAP shipping responsibilities

The seller bears all costs associated with transporting the shipment to the named destination. They alsoretain shipment liability until the cargo arrives at the destination. Here’s an overview of their responsibilities:

• Export packaging. Sellers are responsible for packaging shipments for transport.

• Documentation. The seller prepares shipment documents and is responsible for obtaining proof of delivery when the cargo arrives. 

• Export clearance. Sellers purchase export licenses and pay applicable export duty or customs clearance fees.

• Transportation. Sellers arrange and pay for transportation from the seller’s warehouse to the named destination, including any losses during shipment. 

• Handling. Sellers pay origin terminal handling changes and destination terminal handling charges.

Buyer’s DAP shipping responsibilities

The buyer assumes the risk and covers any costs incurred after the cargo arrives at the named destination. Buyers also pay import customs fees. Here’s an overview of their responsibilities:

• Import clearance. The buyer is responsible for paying import duties, import taxes, and any applicable local taxes. 

• Unloading. The buyer pays to unload the shipment at the named destination. 

• Additional transport or storage. If the named destination is not the buyer’s premises, the buyer arranges additional transportation and pays to move the shipment to its final destination, such as a warehouse or distribution center.

Advantages of DAP shipping

• Reduced buyer risk
• Flexible terms
• Simplified financial planning and logistics

A DAP agreement can benefit both the buyer and the seller. Here are three advantages:

Reduced buyer risk

Under DAP Incoterms®, risk transfers to the buyer only when the cargo arrives at the named destination. If the destination is on the buyer’s premises, the buyer’s only potential shipment liability is exposure during the unloading process. This significantly reduces the buyer’s risk exposure for international shipments. 

This risk distribution can also benefit sellers. Sellers who offer DAP shipping may attract more buyers by retaining the bulk of the shipping liability. This increase in business can outweigh the shipping cost.

Flexible terms

DAP shipping terms allow for flexibility in the named destination and payment timing, and buyers and sellers can negotiate DAP Incoterms® according to their needs. 

Buyers may also be able to negotiate favorable terms for large or repeat purchases. For example, it can be cost-effective for a seller to ship a large quantity of frequently purchased goods to a bonded warehouse near the buyer’s location and offer fast, low-cost delivery on subsequent orders.

Simplified financial planning and logistics

DAP shipping establishes clear guidelines around financial responsibility for buyers and sellers. Sellers have greater cost control with the ability to use their trusted shipping and insurance partners and maximize budget efficiency. Buyers have simplified cash flow and inventory management—especially when the seller agrees to accept payment for goods on delivery. For small businesses with limited international experience, DAP shipping’s streamlined logistics can also lower the bar for engaging in international commerce.

Disadvantages of DAP shipping

• Increased seller risk and cost
• Import customs issues
• Reduced buyer control

DAP shipping can be more expensive for experienced buyers and riskier for sellers working with new or inexperienced clients. Here are three drawbacks:

Increased seller risk and cost

Under a DAP agreement, the seller assumesall the risks and nearly all costs associated with the shipment. Risk is particularly high for sellers working with new buyers and those who agree to defer payment until the cargo arrives at the named destination. If the buyer mishandles import formalities or refuses to pay for goods on delivery, the seller risks losing their entire shipment. 

Import customs issues

If the named destination isn’t where the shipment will go through import customs, buyers need to pay the import duty and arrange proper clearance through customs remotely. Buyers are also responsible for demurrage or detention charges—fees relating to shipping container delays—and may have to pay for damaged goods. 

Reduced buyer control

Buyers have limited control over shipping costs, routes, and freight partners. Because sellers handle administrative labor and set terms, the overall cost of DAP shipping to buyers can be high. This is particularly true relative to the cost of shipping goods via a third-party logistics provider (3PL), a popular option for more experienced importers.