Delivered Ex-Ship (DES) was an important term in international trade that defined the responsibilities of sellers and buyers in shipping agreements. While it has been discontinued since 2011, understanding its implications is crucial for grasping the evolution of shipping contracts and international commercial terms.
Key Features of Delivered Ex-Ship (DES)
1. Definition and Responsibilities Delivered Ex-Ship indicated that the seller was obligated to transport goods to a specified port of arrival. This included assuming full responsibility for all costs and risks until the goods reached the port. At that moment, the seller's obligations were considered fulfilled, and the buyer took on subsequent responsibilities, which included unloading the cargo and clearing it through customs.
2. Scope of Application These terms applied to both inland and sea shipping, accommodating various modes of transport, including freight via cargo vessels. It was commonly used in charter shipping arrangements, where specific contracts govern the use of vessels for transportation.
3. Transition from DES to Modern Incoterms As of 2011, DES was officially replaced by two new Incoterms: Delivered at Terminal (DAT) and Delivered at Place (DAP). This change aimed to simplify and clarify the responsibilities of sellers and buyers in international trade.
The Development and Discontinuation of DES
International Commercial Terms (Incoterms) Incoterms are a series of pre-defined commercial terms published by the International Chamber of Commerce (ICC). They serve to facilitate international transactions by defining the responsibilities of buyers and sellers in global commerce. DES was one of several terms designed to clarify these responsibilities, alongside other legal terms like Ex Works (EXW) and Delivered at Quay (DEQ).
However, due to evolving trade practices and feedback from the international business community, the ICC decided to discontinue DES to move towards clearer terms with well-defined responsibilities, leading to the introduction of DAT and DAP.
The Responsibilities of Sellers and Buyers Under DES
Seller’s Responsibilities: - Deliver goods to the agreed-upon port of destination. - Bear all shipping costs and risks until the goods arrive at the port. - Purchase insurance for the goods during transit. - Ensure the products were placed on the ship and among the correct documents.
Buyer’s Responsibilities: - Assume responsibility once the goods were delivered at the port of destination. - Handle the unloading of goods and any required customs clearance. - Manage the additional costs of transportation beyond the port. - Secure and pay for insurance coverage for the goods once received.
Case Studies Illustrating DES Application
Case 1: Lost Shipment during Transit Seller X ships contracted goods to a port in Kennebunkport, Maine. Midway, the shipping vessel sinks due to a storm. In this scenario, Seller X bears the entire loss as the goods had not yet arrived at the destination port.
Case 2: Loss after Acceptance of Delivery Similarly, if the goods successfully arrive at Kennebunkport, but a storm sinks the ship while at dock after Buyer Y has taken contractual possession, Buyer Y is responsible for the loss as they have accepted delivery.
Transportation Costs and Risk Management
Under DES agreements, all transportation costs up to the designated port were the seller's responsibility. After the delivery of goods at the port, the buyer assumed responsibility for additional transportation and associated costs. This bifurcation of responsibility is crucial to understanding risk management in shipping contracts.
Conclusion: The Legacy of Delivered Ex-Ship (DES)
While Delivered Ex-Ship (DES) may no longer be a valid Incoterm, its legacy lingers in contemporary international shipping practices. The transition to DAT and DAP reflects the fluid nature of global trade and the ongoing need for clarity in commercial transactions. As international commerce continues to evolve, businesses must remain informed and adaptable to ensure compliance with current practices and regulations in shipping agreements.
With an understanding of terms like DES, current and future trade practitioners can navigate the complexities of global commerce more effectively, ensuring smooth transactions that cater to both seller and buyer interests.