Delivered Ex Ship (DES) Explained Seller Risk Until Arrival

Core Description

• Delivered Ex Ship (DES) is a legacy Incoterms rule where the seller completes delivery when the vessel arrives at the named port of arrival and the goods are made available to the buyer on board.
• It places voyage costs and voyage risk on the seller, then shifts unloading, import clearance, and onward delivery responsibilities to the buyer after arrival.
• Even though DES was removed from Incoterms effective 2011, investors and trade teams still study it to interpret older contracts and to understand how shipping terms can affect cash flow, risk, and reported margins.

Definition and Background

What “Delivered Ex Ship (DES)” means in plain English

Under Delivered Ex Ship, the seller must arrange transport by sea (or certain inland waterways) and deliver the cargo to a named port of arrival, typically still on the vessel. Delivery is considered completed when the ship arrives and the goods are at the buyer’s disposal on board, ready for discharge. After that moment, the buyer takes over: unloading, terminal handling after discharge, import customs clearance, duties and taxes, and inland transport.

Why DES existed, and why it faded out

DES grew out of bulk commodity and charter shipping practice, where the seller often controlled the charter party and wanted delivery to occur “ex ship” at destination. As ports became more complex (separate terminal charges, congestion surcharges, stricter security rules) and containerization made “on board at arrival” less operationally clear, market practice shifted toward terms that define delivery at a terminal or named place (for example, DAP or DPU in modern Incoterms language). Incoterms 2010 removed DES (effective 2011) to reduce ambiguity and reflect modern logistics.

The one sentence that prevents most confusion

DES is delivery at destination while still on board, it is not “delivered and unloaded.”

Calculation Methods and Applications

DES is not a pricing formula, it is a cost and risk allocation rule. Still, practitioners often use simple, verifiable structures to translate DES into a workable quote and a budgeting model.

Landed-at-port budgeting (operational use)

A common approach is to separate costs into “to arrival port” versus “after arrival.” Teams often model:

• Seller budget (to DES delivery point): export packing + inland to load port + export clearance + loading + ocean freight or charter + voyage-related insurance (if the contract requires) + arrival-related port charges up to making cargo available on board.
• Buyer budget (after DES delivery point): discharge + terminal handling + storage (if any) + import clearance + duties and taxes + inland trucking or rail + buyer-side insurance after arrival.

Simple cost checklist table (practical application)

Investment-facing application: linking DES to financial statement drivers

For investors analyzing shipping-intensive businesses, Delivered Ex Ship can affect:

• Revenue recognition timing risk: if delivery is defined at arrival, delays may shift when a sale is considered completed under the contract’s commercial logic (accounting treatment depends on the company’s policies and applicable standards, but contract terms can influence operational evidence).
• Working capital: the seller pays freight earlier and carries risk longer, which can increase cash tied up in transit.
• Margin volatility: when the seller bears voyage risk to arrival, freight spikes or disruption can compress margins unless hedged or priced in.

Comparison, Advantages, and Common Misconceptions

DES vs. CIF, DAP, and DEQ (what changes, exactly?)

Advantages and disadvantages (beginner-friendly)

Pros — seller’s perspective

• More control over the main carriage can improve schedule reliability and bargaining power with carriers.
• Clear responsibility for booking the vessel reduces “who arranged transport?” disputes.
• The seller may price higher because it is providing delivery to the arrival port and bearing voyage risk.

Cons — seller’s perspective

• The seller holds risk longer: storm damage, deviation, port delays, and disruption remain the seller’s exposure until arrival.
• Cash flow is front-loaded: freight and voyage costs occur well before the buyer takes over.
• Documentation errors can lead to demurrage or port charges, even if risk transfer is technically at arrival.

Pros — buyer’s perspective

• The buyer does not need to arrange ocean transport, which can help when logistics capability is limited.
• Arrival timing can be easier to plan around than shipment timing when the buyer’s operations depend on port delivery.
• Mid-voyage risks sit with the seller up to arrival.

Cons — buyer’s perspective

• After arrival, the buyer bears discharge, terminal handling, customs clearance, and inland transport, often the more variable costs during congestion.
• Less control over routing and carrier choice can reduce flexibility for inventory planning.

Common misconceptions that cause costly disputes

“DES means delivered to the terminal.”

No. Delivered Ex Ship ends on board at the port of arrival. Terminal operations start when the cargo is discharged.

“If the ship is waiting at anchorage, delivery clearly happened.”

Not always. Many disputes depend on what counts as “arrival” and what evidence proves goods were at the buyer’s disposal on board (notice of readiness, port agent confirmation, and contract wording matter).

“Risk and cost always move together.”

They often do, but not necessarily. Contracts can reallocate items like demurrage, documentation penalties, or specific port dues. Good drafting separates who pays from who bears risk.

Practical Guide

When it is reasonable to see Delivered Ex Ship language today

Even though DES is obsolete under modern Incoterms, it can still appear in:

• Long-running commodity master agreements with older templates
• Charter shipping documentation that preserves historical “ex ship” wording
• Disputes or renegotiations where parties must interpret legacy clauses

A practical checklist for interpreting a DES clause

Define the delivery point precisely

• Name the port of arrival (and optionally the terminal or berth if relevant).
• State what counts as “arrival” (anchorage vs. alongside berth).
• Define the evidence of tender or availability (for example, acceptance of notice of readiness, or a port agent notice).

Separate obligations into “before arrival” and “after arrival”

• Before arrival: seller handles carriage to port and keeps voyage risk.
• After arrival: buyer handles discharge, customs, duties and taxes, and onward transport.

Align documents with the intended handover

• Ensure the bill of lading, arrival notices, and any inspection clauses match the contract’s DES delivery logic.
• Set deadlines for document tender, because late or inconsistent documents often trigger storage and demurrage.

Case study (hypothetical scenario, for learning only; not investment advice)

A U.S. chemical producer sells a bulk liquid cargo under Delivered Ex Ship, Port of Rotterdam to a European industrial buyer.

• Commercial intent: the seller wants to control the ocean leg, the buyer wants to control discharge scheduling and local compliance.
• Operational sequence: the vessel reaches Rotterdam roads and tenders an arrival notice. Due to berth congestion, it waits 36 hours before berthing.
• Dispute trigger: a minor contamination claim appears after sampling during discharge. The buyer argues the issue occurred “before delivery” because the cargo was still on board. The seller argues delivery occurred at arrival when the cargo was made available on board.
• How good drafting can reduce disputes: the sales contract defines “arrival” as acceptance of notice of readiness at the port limits and requires joint sampling immediately upon tender. The parties also specify which side pays demurrage if delay is caused by missing documents (seller) versus terminal congestion after delivery (buyer).

This illustrates why Delivered Ex Ship is best treated as a risk allocation story: the exact definition of “arrival” and the operational handover steps determine who absorbs losses.

Practical takeaway for investors reading disclosures

When a company mentions destination-based delivery (DES-like wording), consider:

• Freight and disruption sensitivity (who bears the ocean-leg risk)
• Working capital tied up in inventory in transit
• Exposure to port congestion costs and claims patterns

Resources for Learning and Improvement

Primary rule references and trade guidance

• International Chamber of Commerce (ICC) Incoterms publications (for historical DES context and modern alternatives)
• U.S. Customs and Border Protection (CBP) and HMRC (UK Border Force) guidance (import clearance processes and documentation)
• Port authority and terminal operator rules for major hubs (berthing, discharge windows, storage, cargo release procedures)

Maritime operations and contract practice

• BIMCO guidance and standard charter party resources (laytime, demurrage, notice of readiness mechanics)
• Carriage of goods regimes and commentary (Hague-Visby Rules, Hamburg Rules, Rotterdam Rules) to understand carrier liability boundaries around discharge

Trade finance and documentation discipline

• ICC UCP 600 and ISBP (letters of credit and documentary compliance basics), which can help explain why proof of delivery and document consistency matter in DES-style trades

FAQs

Is Delivered Ex Ship still valid after 2011?

DES was removed from Incoterms effective 2011, but it can still appear in legacy contracts. If parties keep the wording, they should explicitly define the delivery point, unloading responsibility, and evidence of arrival to avoid relying on outdated shorthand.

Under Delivered Ex Ship, who pays for unloading and terminal handling?

Typically the buyer. DES delivery occurs on board at the port of arrival, before discharge. Unloading, terminal handling after discharge, storage, and onward transport generally sit with the buyer unless the contract reallocates them.

When does risk transfer under Delivered Ex Ship?

Risk usually transfers when the vessel arrives at the named port and the goods are made available to the buyer on board. A common dispute is what “arrival” means in a congested port (anchorage, port limits, or alongside berth), so the contract should define it.

How is Delivered Ex Ship different from CIF?

CIF transfers risk much earlier: when goods are loaded on board at the port of shipment, even though the seller pays freight and minimum insurance to destination. Delivered Ex Ship keeps voyage risk with the seller until arrival at the destination port.

If my contract says DES, what modern term is closest?

There is no perfect one-to-one replacement because DES is “on board at destination.” Parties often use DAP or DPU as a starting point and then add clauses to replicate the intended split (especially unloading and the precise delivery trigger). A common approach is to write the obligations out in plain language.

What is the biggest operational pitfall in Delivered Ex Ship deals?

Ambiguity about the delivery trigger at the arrival port. Without a defined handover process (arrival notice, sampling or inspection timing, and documentary deadlines), delays can lead to demurrage, storage, and claims disputes.

Conclusion

Delivered Ex Ship is best understood as a vessel-centric allocation: the seller carries cost and risk through the sea voyage to the named port of arrival, then the buyer takes over from discharge onward. Although DES is no longer an active Incoterms rule, it remains relevant for interpreting older agreements, assessing disputes about “arrival,” and understanding how shipping terms can influence cash flow, operational risk, and margin stability in global trade.