What Is Delivered Ex-Ship (DES)?
Delivered ex-ship (DES) was a trade term that required a seller to deliver goods to a buyer at an agreed port of arrival. The seller assumed the full cost and risk involved in getting the goods to that point. After arrival, the seller was considered to have met its obligation and the buyer assumed all ensuing costs and risks.
This term applied to both inland and sea shipping and often in charter shipping. It expired effective 2011.
- Delivered ex-ship (DES) was an Incoterm (an international commercial term) that applied to both inland and sea shipping and often in charter shipping.
- DES stipulated that a seller had to deliver goods to a buyer at a certain port of arrival, as specified in an international shipping contract. After delivery, all obligations shifted to the buyer.
- Discontinued in 2011, DES was replaced by two new Incoterms, delivered at terminal (DAT) and delivered at place (DAP).
Understanding Delivered Ex-Ship (DES)
Contracts involving international transportation often contain abbreviated trade terms that describe details such as the time and place of delivery, payment, at what point the risk of loss shifts from the seller to the buyer, and who pays for the costs of 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.
International Commercial Terms (Incoterms)
The most commonly known trade terms are known as "incoterms," short for "international commercial terms." The International Chamber of Commerce (ICC) publishes them, aiming to foster global trade and commerce. ICC promotes and protects open markets for goods and services.
Incoterms are often identical in form to domestic terms such as the American Uniform Commercial Code (UCC), but they have different meanings. Parties to a contract must expressly indicate the governing law of their terms as a result.
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.
Replacements for Delivered Ex-Ship
Delivered ex-ship (DES) was replaced in 2011 by two new terms: delivered at terminal (DAT) and delivered at place (DAP).
DAP entails that the seller is responsible only for the packaging costs of the goods, arrangement of the cargo for ensuring that the goods arrive safely to the point of delivery or final destination on time. DAT stipulates that the seller assumes all transport costs until after the goods are delivered and unloaded at the specific delivery terminal. In addition, the seller also assumes responsibility for export goods clearance.
Delivered ex-ship also differed from Ex Works (EXW), another international trade term. In this sort of agreement, the seller makes a product available at a designated location, and the buyer of the product must cover the transport costs. 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.
Examples of Delivered Ex-Ship
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.