Please be advised that contacting Miller Johnson or one of its attorneys by email does not constitute establishing an attorney-client relationship or otherwise confidential relationship between you and the Firm. Please do not give us any information you regard as confidential until a formal attorney-client relationship has been established. Any information you give to us before establishing an attorney-client relationship will not be regarded as privileged or confidential. Do you wish to proceed?
"*" indicates required fields
Building on our discussion of Incoterms® 2020 in our previous article, this installment delves into the last four Incoterms used for any mode of transportation: CIP, DAP, DPU, and DDP. These terms, pivotal for stakeholders in international trade, dictate the allocation of costs, risks, and responsibilities between buyers and sellers. Grasping these terms enhances negotiation capabilities and contract precision, essential for optimizing cost-effectiveness and risk management in global transactions.
CIP (Carriage and Insurance Paid To):
What is CIP?
Carriage and Insurance Paid To, or CIP, extends the seller’s responsibilities beyond what CPT covers. Under CIP, the seller is obligated not only to arrange and pay for the transportation of goods to a named place but also to procure transportation insurance against the buyer’s risk of loss or damage to the goods during transit. The goods are delivered, and risk transfers from seller to buyer, once the goods are handed over to the carrier, not at the final destination. However, the seller must secure insurance on the goods through their journey to the named destination.
Common Mistakes:
DAP (Delivered at Place):
What is DAP?
Delivered at Place (DAP) requires the seller to deliver the goods, ready for unloading, at a named destination. The seller bears all risks and costs associated with bringing the goods to the specified location but not the costs and risks of unloading itself. However, contrary to CIP, the seller is not obligated to contract for coverage insurance. This term offers flexibility in terms of the delivery location, which could range from the buyer’s premises to a transport hub in the destination country.
Common Mistakes:
DPU (Delivered at Place Unloaded):
What is DPU?
Delivered at Place Unloaded, previously known as DAT (Delivered at Terminal), also places the maximum obligation on the seller, including the risks and costs associated with transporting to the goods to buyer’s destination. Seller must complete export formalities, arrange/contract carriage, and bear the risk until delivery is made. However, DPU goes one step beyond DAP by requiring the seller to unload the goods at the named destination. DPU is best when the seller has direct access to the delivery location or can manage unloading efficiently.
Common Mistakes:
DDP (Delivered Duty Paid):
What is DDP?
Delivered Duty Paid, better known as DDP, places the highest responsibility on sellers. Under DDP, the seller delivers the goods ready for unloading at the named destination, covering all costs and risks, including transport, insurance, and any import duties or taxes. This term significantly reduces the buyer’s responsibility, making it an attractive option for buyers looking to minimize their involvement in the shipping and customs processes.
Common Mistakes:
Conclusion:
Understanding these Incoterms, CIP, DAP, DPU, and DDP, is indispensable for parties involved in international trade, providing a framework to negotiate terms that align with their strategic interests and risk management policies. As we continue to navigate the complexities of global commerce, familiarity with these Incoterms can foster more secure and efficient transactions. In our next installment, we will discuss FAS and FOB, terms applicable to sea and inland waterway transport.
As always, consulting with a specialist in international trade law is advisable to ensure contracts are tailored to your specific needs and comply with applicable laws and regulations. Please contact Marcus Hoekstra or your Miller Johnson attorney if you have any questions about this blog post.