What are delivery terms, and how to use them in trade?

What are delivery terms, and how to use them in trade?

Every country engages in trade activities within the defined rules and regulations which are set by the government of the country. The trade regulations of one country may differ from the other but they still need to share some common terms in order to make the international trade possible. The diversity in languages and rules can be troublesome if both the parties involved do not share a common business language so that the responsibilities are well understood. Therefore, there are certain commonly used terms which are called “delivery terms” that define the trade instructions clearly.

What Are Delivery Terms?

Delivery terms, commonly known as shipping terms, are used to define the terms and conditions involved in international trade like place and time of delivery, carriers, costs, etc. It is used to clearly divide the responsibilities of costs and risks involved in the trade between both the concerned parties. This helps to avoid misunderstandings and reduce uncertainties during the shipping process. There are over hundreds of delivery terms that are used in the international trade business wherein both the parties understand and agree to it through legal documentation.

How To Use These Terms In Trade?

Whether it be an importer, exporter, trade company owner or shipping service provider, every individual involved in the global shipping industry needs to know the meaning and usage of delivery terms. These terms are used in the trade agreement to define certain instructions and responsibilities of both parties. Given below are few commonly used delivery terms and their uses.

Delivered Duty Paid (DDP)

This is used in agreements to imply that the seller is liable to bear all the costs and risks involved in bringing the goods to the place of destination, pay both import and export duties and all other custom formalities that are involved.

Cost, Insurance and Freight (CIF)

CIF is used to claim that the seller is responsible for costs and freight needed to bring the goods to the defined destination and also for insurance cover against damage to the goods that might occur during the carrier.

Bill of Entry (BE)

This delivery term is used to name the legal document that an importer/exporter needs to file for the clearance of customs formalities. The bill includes all the details of the shipping like the nature of goods, quantity and value, etc.

Lift-on, Lift-off (Lo – Lo)

This delivery term is used to describe the type of cargo vessels that are well-equipped with cranes for loading and unloading of cargos at ports. These are also commonly known as LoLo ships.

Over Dimensional Cargo (OCD)

This term is used to define cargos that are beyond the general deck of the cargo (more than 20’ or 40’). These cargos are usually delivered in flat racks and open tops.

Why Are Delivery Terms Important In The Shipping Industry?

Proper knowledge and understanding of the delivery terms are extremely important in order to avoid miscommunication that may lead to the breach of the trade deal. These terms are used in the trade agreements to signify the instructions by the client who is the stakeholder of the deal. Therefore, if the person at the receiving end of the agreement does not understand the meaning of the used delivery terms, he is likely to get misguided and might even have to bear losses in the future. For a successful trade deal, all the parties involved in the shipping process must know these delivery terms.

International trade is a very big part of a country’s economic activities which cannot run on mere verbal communication that has no legal significance. Therefore, these delivery terms came into existence to provide a common language that can be used in the legal paperwork of almost all the countries involved in the trading business.

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