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What Is Delivered Ex-Ship (DES)?
Delivered ex-ship (DES) was a former Incoterm used in international shipping contracts that required sellers to deliver goods to a specified port of arrival, covering all costs and risks until that point. Once the goods arrived, responsibility shifted to the buyer, who then assumed all further costs and risks. DES was commonly applied to both inland and sea shipping, often in charter arrangements, but it was phased out in 2011 and replaced with Delivered at Terminal (DAT) and Delivered at Place (DAP). Understanding these changes is important for navigating international trade agreements.
Key Takeaways
- Delivered ex ship (DES) was a trade term requiring sellers to deliver goods to a buyer at an agreed port, after which the buyer assumed all risks and costs.
- DES was replaced in 2011 by two new Incoterms: Delivered at Terminal (DAT) and Delivered at Place (DAP), which shifted responsibilities differently between sellers and buyers.
- The seller in a DES transaction covered all transportation costs and risks until the goods arrived at the port, but was not responsible for unloading or customs clearance.
- In contrast to the newer terms, DES required the seller to fully manage shipping and risks up to the port.
Detailed Overview of Delivered Ex-Ship (DES)
Contracts in international trade often use short terms to specify delivery time and place, payment, when risk shifts from seller to buyer, and who pays for freight and insurance. DES was just one type of such an international trade contract.
DES was a legal term, and the exact definition differed somewhat by country. Typically, though, the seller remained responsible for products until delivery. It bore the costs and risks that come with bringing goods to port. The seller had total responsibility for shipping, and it must pay the shipping company and purchase insurance for the goods.
The seller’s obligation ended when it delivered the merchandise to the agreed-upon port, aboard the ship, and not yet cleared for import. Buyers were responsible for all costs to receive and unload the goods, and to clear them through customs.
Exploring Incoterms: Essential International Commercial Terms
The most well-known trade terms are “incoterms,” which stand for “international commercial terms.” The International Chamber of Commerce (ICC) publishes Incoterms to promote global trade. The ICC supports open markets for goods and services.
Incoterms are similar in form to domestic terms like the American Uniform Commercial Code (UCC) but differ in meaning. Contracts must specify which laws govern these terms.
Fast Fact
Delivered ex-quay is another now-discontinued Incoterm. It specified that the seller must ship the goods to the wharf or quay at the destination port (DES didn’t cover wharves). Delivered ex-quay could note a duty as either paid or unpaid. The seller was obligated to cover costs, like duties, if it paid, and was responsible for providing the merchandise. If unpaid, those obligations and responsibilities shift to the buyer.
Transition From DES to DAT and DAP: Understanding the Shift
In 2011, delivered ex-ship (DES) was replaced by two terms: Delivered at Terminal (DAT) and Delivered at Place (DAP).
In DAP terms, the seller covers packaging costs and ensures the goods arrive safely at the destination on time. DAT requires the seller to cover all transport costs until the goods are delivered and unloaded at the terminal. In addition, the seller also assumes responsibility for export goods clearance.
Delivered ex-ship differed from Ex Works (EXW), where the seller provides goods at a set location and the buyer pays for transport. The seller must make the goods available for pickup at its place of business in Ex Works. All costs and risks of transportation are taken on by the buyer from there.
Real-World Scenarios: How DES Transactions Unfold
Seller X ships contracted goods to a pier and port in Kennebunkport, Maine. Midway there, the ship encounters a storm and sinks. Seller X absorbs the loss because the shipment has not yet arrived in port.
Alternatively, Seller X’s shipment makes it safely to Kennebunkport. The storm hits while the ship is docked after the point when Buyer Y has contractually taken possession of the products. The ship sinks in port. Buyer Y absorbs the loss because it has accepted delivery, even though the goods have not yet left the ship.
What Responsibilities Did the Seller Have in a DES Transaction?
The seller’s responsibilities in a DES transaction included delivering the goods to the named port of destination, covering transportation costs, and assuming risks until the goods arrive at the port. However, the seller was not obligated to unload the goods or clear them through customs at the destination.
What Responsibilities Did the Buyer Have in a DES Transaction?
The buyer’s responsibilities commenced upon the goods’ arrival at the designated port. The buyer would of had to bear the costs associated with unloading, importing duties, and any subsequent transportation. Additionally, the buyer was responsible for securing and paying for any necessary insurance coverage.
How Was the Risk of Loss or Damage Handled in DES?
The risk of loss or damage in a DES transaction is borne by the seller until the goods are delivered to the named port of destination. Once the goods arrive at the port, the risk transferred to the buyer.
How Were Transportation Costs Allocated in DES?
Transportation costs in a DES transaction were primarily the responsibility of the seller. The seller covered the expenses associated with transporting the goods to the named port of destination. Any additional transportation costs beyond the port generally became the responsibility of the buyer.
The Bottom Line
Delivered ex ship (DES) was a now-discontinued trade term that placed full responsibility for transport costs and risks on the seller until the goods reached the agreed port of destination. At that point, responsibility transferred to the buyer, who handled unloading, customs clearance, and further transport.
In 2011, DES was replaced by Delivered at Terminal (DAT) and Delivered at Place (DAP). Under DAT, the seller covers costs and risks until goods are delivered and unloaded at a terminal, while under DAP, the seller delivers to a specified place, but unloading is the buyer’s responsibility.
Though DES was widely used in international shipping contracts, its interpretation sometimes varied by country, which is why it’s important for buyers and sellers to clearly define obligations in contracts using Incoterms to avoid disputes and ensure smooth global trade.
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