Incoterms 2010 – DAT – A new incoterm?

DAT (Delivered at Terminal) can be applied to all types of shipping contracts.  With a DAT term, the price offered by the seller to the buyer should include (as with CPT) all the costs of getting the goods to the port of import, but additionally, the cost of unloading the cargo from the transport used and depositing it, customs uncleared, in a pre-agreed place.  It is at this point that all further costs are borne by the buyer.

Delivery versus Shipment terms

Apart from having some additional costs, there is another very important difference between DAT and CPT.  The ‘D’ terms – DAT, DAP (Delivered at Place) and DDP (Delivered Duty Paid) differ from all the other 2010 incoterms because they are ‘delivery’ terms as opposed to being ‘shipment’ terms.  With shipment terms, the seller’s risk and responsibility passes to the buyer (usually) at the port of export.  (FCA can be slightly different).  With delivery terms, the seller’s risk remains until the goods are delivered in the country of import.  This can have implications for the seller with regards to consequential losses.

History of changing conditions

In the 2000 edition of incoterms there were 5 ‘D’ terms – DAF (Delivered at Frontier), DES (Delivered Ex-Ship), DEQ (Delivered Ex-Quay), DDU (Delivered Duty Unpaid) and DDP (Delivered Duty Paid).

DEQ covered shipments where the seller’s risk and responsibility passed to the buyer when the goods were unloaded off the method of transport and lodged at a quay or other named place at the port.  The buyer was responsible for ensuring that import customs formalities were undertaken; that the goods were cleared through Import Customs; that any duties or taxes due were paid and to arrange for the goods to be transported to a final destination.  This was a direct reversal from previous versions of this term, which required the seller to arrange for import clearance.  Furthermore, DEQ was only to be used with maritime and inland waterway shipments.

The reason I mention all of this is due to a recurring problem in International trade, where some traders get used to various incoterms and their conditions, but then either remain ignorant, or are indifferent to any future changes.  There is a belief that the incoterm remains the same over the decades and this was definitely not the case with DEQ.

In the new revision for 2010, only DDP remained.  DAF and DES were dropped because, essentially, they were not well used.  DDU was replaced with DAP (Delivered at Place) and DEQ was replaced with DAT (Delivered at Terminal).  Part of this change of title was because the word Quay was seen as old fashioned and also heavily associated with sea shipments.  The ICC wanted to avoid this because one of the changes from DEQ was that DAT can be used with any form of shipment.  However, the seller is still deemed to have completed their part of the contract when the goods are unloaded from the method of transport and placed in a terminal at a named port.  At this point, the risk and responsibilities (and all costs associated thereafter) pass to the buyer.

Importance of defining Terminal

The ICC (International Chamber of Commerce) defines a terminal as any place (which does not need to be covered) such as a quay, warehouse, container yard, or road, rail or air terminal.  If there is a problem area with the DAT incoterm, it can be that the terminal is not fully and completely defined in the sales contract.  For example, if the goods being delivered are prone to water damage, then it must be clearly specified in the terms of the contract (and preferably as part of the incoterm itself) that the terminal is a place that is covered and suitable for the storage of the cargo until it is collected by the buyer.  A named terminal is best.

This is particularly important with ‘soft’ commodity shipments, such as wheat, rice, pepper, etc, which due to their hygroscopic nature, can easily be damaged if not delivered to suitable premises after being unloaded.  If the buyer fails to give the seller any specific instructions, then the seller can select the terminal which best suits their purpose.  It is important to realise that if the cargo is damaged due to this choice, then it can result in legal grey areas which might not only affect the viability of the goods in transit insurance for the cargo, but may also be very costly to both parties if the matter needs to be resolved in a Court of law.

Goods in Transit Insurance

The other matter that should be detailed in the DAT sales contract is to precisely state which party is responsible for the goods in transit insurance.  The assumption is often that the seller is responsible, but this is not the case.  The ICC very clearly states that the seller has no obligation to the buyer to make a contract of insurance.  There have been instances in the past when both parties have presumed that the other is responsible, or will automatically provide this insurance, and the cargo has subsequently shipped without any insurance whatsoever.  This is really a very unsatisfactory state of affairs and should be avoided at all costs.

Ownership and Title 

Another common misunderstanding relates to the concept of ownership and title.  Incoterms do not, at any point, confer either ownership or title on the goods.  Ownership is determined by the terms of the sales contract.  Title only really becomes a relevant concept (sometimes) if Ocean Bills of Lading are used but, again, this has nothing to do with incoterms.

Maria Narancic from Point to Point Export Services is an independent international trade adviser who assists organisations world wide with their international trade projects, documentation, Documentary Credits and import/export training.  She is based in the United Kingdom.  If you require any further assistance with the matters mentioned above, please do contact us by e-mail on info@point-point.com or check out other articles on international trade on the Point to Point Export Services website at www.point-point.com

 

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