With the seller not only contracting for carriage to the buyer’s country but also contracting for delivery to occur there – the difference between the C rules and the D rules – the seller not only bears the transit risk but potentially puts itself in jeopardy of breaching the sales contract.
In the D rules delivery does not occur until a named destination place. How it gets there, what origin port or place it left and when it left are all irrelevant. This puts the D rules completely at odds with the typical LC that requires a port of shipment, port of destination and a latest shipment date.
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Certified Documentary Credit Specialist Ravi Jinugu explains the motivations and rationale for variation of Incoterms® rules.
We currently live in uncertain times, both geopolitically, and from a macroeconomic perspective. TFG asked two risk management experts for their take on how businesses can navigate through this period of economic volatility.
The usual answer is because delivery occurs, and risk transfers, when the goods leave the seller’s direct control, such as when the goods are loaded into the container at the seller’s premises or at the CFS or CY, long before the goods go on board. This would be the case with FCA, CPT and CIP.
Traditionally each rule has repeated all ten of the obligations for each of the seller and buyer. Most of them are identical or near-identical across each rule, and for some, the variations hang off the delivery obligation.
For FAS, delivery is when the goods are placed alongside a vessel which must logically be present at that point. This can be on the quay beside the vessel, or on a barge beside the vessel.
We have DAP Delivered At Place (not unloaded) and DPU Delivered at Place Unloaded with in both cases the buyer import clearing. Then we have a step beyond DAP with DDP Delivered Duty Paid, with identical delivery but the seller is responsible for import clearance and VAT/GST.
Delivery is identical to that in DAP. The danger of DDP is in the requirement that the SELLER must import clear.
Delivery of the goods is “not unloaded” by the seller at the destination place, in this case the port of discharge. That means that the buyer needs to be able to unload the vessel at its own risk and cost.
It would be unusual but possible that delivery by road would be to a terminal for the buyer to then collect.
With DPU Destination Terminal for railfreight the goods are indeed unloaded from the railcar at the terminal as part of the seller’s contract of carriage.
Delivery of the goods is “unloaded” by the seller at the destination place, in this case the port of discharge.