Definition
Delivered Ex Ship (DES) is a term used in international trade agreements to indicate that the seller is responsible for ensuring the goods are delivered to a specific location, most typically a port. Until the goods are at the specified location, the seller bears all costs and risks. Once the goods are delivered to the agreed location, the buyer takes responsibility for them, including costs and risks.
Phonetic
The phonetics for the keyword “Delivered Ex Ship (DES)” is:Delivered: dɪˈlɪvərdEx: ɛksShip: ʃɪp(DES): diː iː ɛs
Key Takeaways
1. Responsibility and Risk: In a Delivered Ex Ship (DES) agreement, the seller carries the full responsibility and bears all risks and costs until the goods are delivered aboard the ship at the agreed port of destination. This includes any costs from instances like unexpected delays.
2. Transport and Customs: The seller is responsible for the transportation of goods, handling of cargo and any customs’ procedures. This includes any export licenses required, inspections and any documents for the buyer to claim the goods.
3. Transfer of Ownership: Once the goods have been delivered on board the ship at the agreed port of destination, it is considered as delivered and the responsibility and risk now passes to the buyer who must arrange for import customs clearance and further transportation.
Importance
The business/finance term, Delivered Ex Ship (DES), is important as it represents a specific type of international trade agreement in freight delivery. Under a DES agreement, the seller bears all the costs and risks associated with transporting goods to a port of destination stated by the buyer. The seller’s responsibility ends once the goods have been delivered onboard the ship, and doesn’t cover any extra costs or risks involved in offloading, import customs, or further transportation. It provides clear guidelines about the division of costs, duties and risks between the buyer and seller, thereby avoiding potential disputes or misunderstandings. It is a crucial term in international trade contracts, especially maritime shipping. However, it’s worth noting that DES is no longer in use and has been replaced by Delivered At Terminal (DAT) or Delivered At Place (DAP) in Incoterms 2010 and 2020.
Explanation
Delivered Ex Ship (DES) is a trade term that outlines the responsibilities and obligations of parties involved in shipping goods under international trade. The primary purpose of this term is to provide a clear mutual agreement that brings a balance in responsibilities between buyers and sellers. Specifically, DES stipulates that the seller bears all the risks, costs, and responsibilities associated with delivering the goods to an agreed port of destination.Furthermore, the Delivered Ex Ship term is used to specify that the onus is on the seller to ensure safe delivery of goods on the vessel at the port of destination. Once the goods are safely on-board, all liability shifts from the seller to the buyer. This includes situations where damage or loss occurs due to events happening after delivery. Thus, it provides a safeguard for sellers against after-shipment uncertainties, while informing buyers that they are responsible for import clearance, duties, and other associated costs once the goods have been delivered on the ship at the destination port.
Examples
1. Oil Trading: An oil company based in the US sells a large quantity of crude oil to a company in India. The American company arranges for the oil to be loaded on a ship and transported to the port of Mumbai. With the term Delivered Ex Ship (DES), the US company retains the responsibility and risk of the cargo until the ship arrives at the designated port. 2. Car Manufacturing: A car manufacturing company in Japan sells a bulk order of cars to a dealership in Australia. Under the DES term, the manufacturer in Japan is responsible for loading the cars onto the ship and arranging transportation to the desired port in Australia. The responsibility and risk transfer to the buyer only when the ship has reached the Australia port.3. Timber Industry: A Canadian timber company sells lumber to a company in China. The shipping terms indicate Delivered Ex Ship (DES), and the ship arrives at the port in Shanghai. Under these conditions, the liability of the timber stays with the Canadian company until the cargo is offloaded at the port in Shanghai.
Frequently Asked Questions(FAQ)
What does Delivered Ex Ship (DES) mean?
Delivered Ex Ship (DES) is a term used in international trade, referring to an agreement where the seller delivers the goods on board a ship at the destination port. The seller bears all the risks and costs of the goods up to that point, including loading and transportation costs.
What responsibilities does the seller have under DES?
Under DES, the seller is responsible for the cost of transporting and delivering the goods onto the vessel at the agreed port. This includes all the necessary documentation, customs formalities and insurances up to this stage.
When does the buyer assume responsibility under DES?
The buyer assumes responsibility the moment the goods have been delivered on board the ship at the destined port. This includes unloading costs, import duties, taxes and other charges related to the import.
Is DES applicable to all modes of transport?
No, DES is exclusive to sea or inland waterway transport. It is not applicable for other modes of transportation.
Is DES the same as DEQ (Delivered Ex Quay)?
No, although similar, DES and DEQ have a key difference. In DES, the seller’s responsibility ends when the goods are on board the ship in the destination port. However, in DEQ, the seller remains responsible until the goods are unloaded on the quay (dock, wharf) at the destination port.
Why would a business use the DES term instead of other trade terms?
Businesses might choose DES to provide clarity about cost and risk distribution. It is especially beneficial when sellers have better access to shipping connections or can negotiate better shipping rates.
What happened to the DES in Incoterms® 2010 and 2020?
The DES term was abolished in Incoterms® 2010 and not included in 2020 version. It was replaced by two similar terms: Delivered at Terminal (DAT) and Delivered at Place (DAP). Businesses are advised to use the current Incoterms.
What does the buyer need to do under DES?
Under DES, the buyer is responsible for all costs and risks associated with unloading the goods from the ship and subsequent delivery to the final destination. The buyer also needs to arrange local import customs formalities.
What risks are associated with DES?
The main risk is that it may not be entirely clear when exactly the risk transfers from the seller to the buyer. This can lead to disputes if the goods are damaged at the point of transfer. It’s important for all conditions to be clearly defined in the contract.
Related Finance Terms
- Freight Forwarder: A third-party company responsible for arranging shipments for businesses/individuals to get goods from the manufacturer to the final point.
- Incoterms: A set of pre-defined commercial terms published by the International Chamber of Commerce related to international commercial law.
- Bill of Lading: A legal document between the shipper and a carrier that details the type, quantity, and destination of the goods being shipped.
- Cargo Insurance: A policy that provides financial protection to the shipper in case of loss or damage to goods in transit.
- Destination Port: The port to which a ship is scheduled to arrive, and where the seller will deliver the goods under the Delivered Ex Ship (DES) terms.
