Incoterms 2010: What is Incoterm DAT Delivered At Terminal?

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Incoterm 2010 DAT Delivery At Terminal
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Overview

The Incoterms 2010 DAT means Delivery At Terminal.

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Ask An Expert

Discussion on Incoterms 2010 DAT with renowned global trade expert Murdo Beaton and Abdul Mann, creator of the cloud based export solution EdgeCTP.

Geoff:

Today we’ll be discussing DAT, including how and when to use it. So Murdo, what is DAT?

Murdo:

The Incoterm DAT stands for Delivered At Terminal. Now this means that the seller is responsible for bringing the goods in question to a terminal in the buyer’s country of destination. Now that terminal will commonly be found in the area of the point of entry into the destination market and the seller is obliged to have the goods unloaded from the main carriage vehicle. Be that and aircraft, be that a ship, be that a road vehicle. The seller is obliged to take the goods to that final terminal and unload them and carry the risk of unloading them so that they are available to the buyer at that terminal in a position from which the buyer can lift them and load them onto the buyer’s own instructed vehicle.

Now that might sound similar to CPT but we have now to look at where the risk to the seller is actually terminated. Under CPT we know that the seller’s risk in the goods whilst they are being carrier is actually complete when they are loaded onto the main carriage vehicle in the seller’s country of export. So the buyer is the party who is at risk while the goods are in transit to his market. Now with DAT this is not the case. With DAT the seller has the risk in the goods whilst they are in transit to the buyer’s country. That is the distinct difference.

Abdul:
OK so let’s just recap Murdo. In the Incoterm 2010 CPT we had the situation where I was sending goods to Rio De Janeiro. I took them from my factory to the airport and they were put on the aircraft from the UK to Rio De Janeiro. As soon as they were placed on the aircraft the risk transferred.

Murdo:

Not necessarily to that degree. If I was taking goods via CPT to Rio De Janeiro my obligation as far as being liable for these goods in transit, would terminate once I had actually taken them to the airport and made them available on my delivering vehicle in a position where from the agents of the airline I was using were able to lift them from that vehicle.

Abdul:

So I am not responsible for the loading of that vehicle under CPT?

Murdo:

So I am not responsible for the loading of that vehicle under CPT.

Abdul:

So putting them on the aircraft?

Murdo:

I’m not responsible for that. The buyer is responsible for that. So you could almost say that with CPT my risk in the goods is the same level as it is for FCA, and that is correct. So that the seller’s risk level at FCA is identical at CPT but when it comes to DAT (Delivered At Terminal) now the seller’s obligations are far more extensive. The seller now, or the seller’s risks I should say are far more extended. The seller is now at risk until they are unloaded from the main carriage vehicle on their arrival at the country of destination.

Abdul:

So in the case of DAT the aircraft has landed in Rio De Janeiro and has made itself available for unloading. The authorities or carrier there is unloading, then as soon as they’ve unloaded the aircraft

Murdo:

On the airport terminal. That’s it. The exporter is now finished.

Abdul:

Whether it’s put down on the airport terminal or it’s put on their vehicle it’s the same thing.

Murdo:

Same thing, but they have been unloaded. So if the buyer is choosing to make his vehicle available at the airport to take them direct from the aircraft then at the moment they rest down on the platform of his vehicle, that moment will be determined as being similar to the ground level of the terminal.

Abdul:

And it’s usually up to the entry point i.e. the main leg if we want to call it that, which this refers to.

Murdo:

Yes, that would be one of the more common applications of delivered at terminal.

Abdul:

OK so the term itself explains it. Delivered at the first terminal of entry point in the destination market.

Murdo:

Yes that would be the most common. Does that suggest however that one could not use DAT if I was actually delivering to a terminal that was actually 30/40 miles inland from the sea pot or the airport? No that it alright, but remember if that is the terminal that has been named as the destination terminal the same principles would apply.

Abdul:

Can I fan out an example again? I’m in the UK and I’m sending something to the United States this time. If I was sending the goods from say London and I’m using DAT and they were put on the aircraft in London. They fly from London all the way to Houston, Texas; my client is in Austin, Texas miles away from Houston. As soon as they arrive and are offloaded in Houston, under DAT my obligation for the risk of the goods is now complete.

Murdo:

Correct.

Abdul:

So they could put them on their lorries and move them across to Austin and that is now in the buyer’s category.

Murdo:

Correct.

Abdul:
Why would I use that then as opposed to some of the other Incoterms?

Murdo:

Again, a matter of negotiation between the two parties to the transaction. Now it may very well be that the seller is a much more mature and developed exporter than the buyer is as an importer. So the seller may have much more definite influences on the level of carriage costs that can be commanded. So it may be that the seller feels they can get better carriage rates than the buyer can. Both of them may feel this.

So yes, that would encourage that the seller negotiates the transport costs and delivers them. On the other hand the buyer might have a mind Oh, I want you to bring them to my market. I want you to make them available somewhere in my particular market. Why would the buyer want this? Maybe the buyer doesn’t want to be involved in the logistic exercise and maybe the buyer actually feels that he’s going to be more comfortable if the seller delivers them to the market. At least he knows that the seller has now actually delivered the goods. There are numerous reasons why the parties in question would use or give a reason for selecting a term like this. It’s all about negotiation.

Abdul:

Is it usually the buyer or the seller that would dictate that they want to go with DAT, or is it again a negotiation?

Murdo:

I would say they would negotiate this again. The seller may wish to show off their prowess as an international trader and try to gain some competitive advantage in illustrating that they are willing to bring their professionalism of logistic administration into play. OK, fair enough, that’s fine and it’s all to the goods but there could be other reasons as well. It may be the case that there are import licences required for the products and the seller might say I don’t want to get involved in this, in securing an import licence for this. So that goes over to the buyer and the buyer may say Yes, I’ll take over the responsibility of securing an export licence. So these are all things that have to be considered.

Again, if I may, I would say on this issue we have said that if we use the term DAT the seller is responsible for the goods right up to the point when they are discharged from the main carriage at the terminal entry in the country of destination. Now what has happened there is that the seller has now taken the goods into the market, so it is the seller that brought the subject goods into the foreign market, not the buyer. The buyer has ordered them but it is the seller that has brought them there. Now if these goods are the subject of an import licence in the buyer’s country for whatever reason, the seller has to be extremely cautious on this matter. Having brought the goods to that market the Customs Authorities of that particular market would probably have every right to say to the seller

You brought these goods here. Where is the import licence for them?

Ah well, I’m not responsible for that. My buyer is responsible for that.

Has he secured one?

Well I don’t know.

Well maybe when you do know you might find that the buyer has not secured one and now the goods are in huge jeopardy.

Abdul:

They’re impounded.

They could very well be if there is no licence forthcoming. So it is important that when you use a term like DAT that you actually make sure that the buyer has got the required import licence if that be the case, and indeed that the buyer has any other requirements fulfilled as far as regulatory provisions from the buyer’s position is concerned.

Abdul:

Let me recap then Murdo. When you use a term like DAT and you want to show your prowess of international logistics and trade and you bring the goods to terminal of the buyer’s market, are you also responsible for the clearing of those goods through customs?

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Murdo:

No, not necessarily. The Incoterm that you use clearly determines whether that was the intention or not. There are Incoterms that clearly show that was the intention and DAT is not once such term. DAT does not bring the obligation on the seller to actually pay for the taxes and the duties that may be involved. That is different from the seller now having brought the goods to this destination market and here they are without a licence. Massively important.

Now you would turn around and say Well Murdo, what’s the difference? If we were to use CPT and he brings them to the destination market it’s the seller that actually still brings them under CPT because he is responsible for paying for the carriage up to their arrival in the country of destination. Now the Incoterms make it quite clear that under CPT yes the seller is responsible for carriage but it is expected that that carriage is going to be recovered from the buyer. The main thing here is that under CPT as we’ve already said, it is the buyer who is at risk in the goods during their physical transportation. So one would argue under CPT that it is actually the buyer who is bringing them to his own country of destination, albeit it that he’s got his own overseas supplier to pay for the carriage cost.

Abdul:

Murdo, what about insurance? I mean we’re talking about a transfer of risk.

Murdo:

Again we say that the risk in the goods can only be transferred from the seller to the buyer when he has unloaded them at the terminal in the buyer’s market. Only from that point does the buyer have any risk in the goods, therefore it’s logic that if they wish to protect their own interest then the seller would do well to insure them up to that point. The buyer will bring no pressure on the seller to do so; it is in the seller’s own interest that they are insured up to that point.

Abdul:

So very much like CIP, which we discussed earlier regarding the insurance aspects. It becomes even more important now on the seller to seek and obtain some insurance for the goods to arrive up to the terminal under DAT.

Murdo:

Totally, because when you talk about DAT it also helps you understand more about CPT. Under the basic CPT term we know that the seller has no risk while the goods are in transit, that the risk has been discharged at the same delivery point as equates to FCA. Now that would be the case when one says ,well the seller is responsible for the carriage of goods to the country of destination but is not responsible for their wellbeing, so it is the party who is responsible for their well being that is likely to have more interest in insurance.

So under CPT, the party that is responsible for their well being is the buyer. So of course the buyer would have more interest in insurance under CPT than the seller would have, so that is why CPT is fine insured by the buyer, but then we have CIP. This is where the buyer has actually suggested to the seller I would like you to insure them for me. That doesn’t mean that the seller is responsible for their well being while they’re in transit, they’re not. The seller actually evidences this by endorsing the insurance certificate over to the buyer. Look pal I’ve insured them for you but you’re the guy who’s at risk while they’re in transit so here’s the insurance certificate I took out for you.

Abdul:

OK, that makes sense.

Murdo:

For DAT it is different. It is me, the seller that is fully responsible and I don’t endorse a certificate over to you.

Abdul:

So if you do insure it you keep it for yourself.

Murdo:
You keep it for yourself until the buyer comes back and says Look I do understand that these goods were damaged in the main transit whilst they were in the main carriage. Over to you chap because you were responsible for them and I hope you had them insured

Abdul:

And if you haven’t you owe me So it’s important to know the elements of insurance. With CIP, with CPT and now with DAT, if I was a new exporter my default position would be to put it all on my logistics company. So I call up one of my favourite carriers or my logistics company and I basically say to them Do you do insurance? and they say Yep, we’ll insure your goods all the way to the destination Port. which is pretty much DAT. Then I go Yippee, do it all for me. Also quote me for the insurance and quote me also for the logistical elements of moving the goods as well. Is that a good position to be in? What are the risks with doing it that way?

Murdo:

There is absolutely nothing wrong with that provision at all. The logistics cost yes, the agent would be wholly provisioned in securing that for you. As far as insurance is concerned, yes they could act in the capacity of a broker but bear in mind that is exactly the capacity that they would be occupying for insurance. It would still be your responsibility as the seller to make sure the terms they were securing for the risk against physical misadventure were the terms that were appropriate for the transaction and ones with which you and your buyer would be comfortable. Under DAT it would not matter so much from the buyer’s position, it would be entirely your own position.

Abdul:

So even though I’ve used a logistics company, if somebody said to me can I use a logistics company to insure my goods in the international trading leg, I would say Yes I can but I still have the obligation to ensure that the correct clauses are being used, the correct cover is being applied and so forth.

Murdo:

Absolutely.

Abdul:

And it also would be beneficial for me to shop around because I might not get the best deal from the logistics carrier. What about breaking that up on the commercial invoice? I know with CIP we spoke about showing the logistics carriage as one element on the commercial invoice, the goods as well prior to that. Then as an addition we would show the insurance on a separate line. Would we still do that even though we’ve combined the whole service within one logistics carrier? Would we still insist on saying to the logistics carrier Don’t give me one figure for logistics, break it down for me.

Murdo:

A matter of choice. A matter of choice and a matter of requirement as far as the destination customs authorities are concerned. Again, since you the seller are already negotiating with the buyer you would have already identified what style of invoice costing the customs authorities in that market prefer. Are they quite comfortable with a one off cost or do they prefer the cost to broken down to identify the purchase price, the carriage cost and the insurance premium?

Abdul:

Is there anything else you think we need to be aware of when choosing DAT from the seller’s point of view?

Murdo:

It’s a new term. It is one of the new terms that have been introduced for the first time into Incoterms in the revised edition of 2010. A useful term? Yes a very useful term but again as long as the exporters who use this term are aware of the things that we have spoken about and not just simply to go blindly into these terms. I hope our discussion so far have illustrated the importance of paying more than lip service to these Incoterms. The importance of actually looking at them for what they are and identifying exactly what it is they are expecting you, as the exporter to do and what it is they are expecting the buyer to do. Now when I use the word expecting it almost makes it sound as if they are mandatory. Of course they are not, so maybe the word expecting is not the right one but they clearly do show the level of obligations that both parties should consider in order to conclude on a successful transaction.

Geoff:

I hope you enjoyed this audio. If you’d like more information on international trade go to www.edgedocs.com. All material in this audio is copyrighted and all reproduction rights reserved by Morgan Goodwin Ltd, thank you.

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