More risky for the exporter
Use of the D rules is more challenging for exporters than the C rules – seller remains at risk until the goods have been delivered at the named place.
The logistics may involve a journey from a port to the buyer’s premises over a relatively unreliable transport infrastructure, where delays are commonplace. (By contrast, when a C rule such as CIP is used, the seller is “off risk” before the main carriage, after delivering the goods to a carrier.)
Example: An exporter in Germany sold goods to a buyer in Chicago using the rule “DAP Chicago”. They were forced to pay for transport from a depot to the customer’s premises on the outskirts of Chicago at US “Teamster” union rates.
DAP and DAT.
The customer is responsible for import clearance, but what are the implications if they fail to do this in a timely manner?
Example: transport is by road, and import clearance is at a border post. If the buyer fails to clear the goods and pay duty etc. there will be extra costs by way of driver’s expenses and possibly penalties.
There needs to be close liaison on this matter, and ideally the contract should deal with the allocation of extra costs that may arise.
This is even more problematical for the seller. Import procedures may be complex and bureaucratic, and best left to the buyer who has local knowledge.
Some taxes can only be paid by business entities who are known to the authorities in the buyer’s country (often the case with VAT).
The amounts due in import taxes and other costs may be difficult to establish beforehand, and may be subject to variation during the course of the business transaction
Our eBook “Practical guide to the Incoterms 2010 rules“ – contains many more tips for managing costs and reducing your risks
The Incoterms rules affect many different job functions - sales, purchasing, accounting, logistics, compliance, tax etc.