Delivery Terms

The delivery term covers the financial aspects of the contract, indicating the responsibilities of the buyer and seller in relation to any costs associated with the shipping process. The delivery term defines when the title and control pass from the seller to the buyer; that is, the point at which the seller's responsibility ends.

There is a universally recognised set of definitions and international trade terms known as INCOTerms (International Commerce Terminology). For the official list and short descriptions, see https://iccwbo.org/resources-for-business/incoterms-rules/incoterms-rules-2010/. Examples from iccwbo.org:

• FOB Free On Board

  “Free On Board” means that the seller delivers the goods aboard the vessel nominated by the buyer at the named port of shipment or procures the goods already so delivered. The risk of loss of or damage to the goods passes when the goods are aboard the vessel, and the buyer bears all costs from that moment onwards.

• CFR Cost and Freight

  “Cost and Freight” means that the seller delivers the goods aboard the vessel or procures the goods already so delivered. The risk of loss of or damage to the goods passes when the goods are aboard the vessel. The seller must contract for and pay the costs and freight necessary to bring the goods to the named port of destination.

The delivery term is related to the default fulfilment type although no automatic check is performed. The delivery term defines when the sale is recognised in an accounting sense, as well as when the title and control pass from the seller to the buyer.

For example, a shipment is loaded and the delivery term on the despatch order is FOB, which means that the control transfers from the seller to the buyer when the goods are loaded into the hold while the shipment is at the loading port. As soon as the shipment's end of loading time has been defined, and at least one (bulk or discrete units) loading transaction, opening survey, draft survey or certificate has been entered, the shipment can be recognised as a sale in terms of accounting and reporting, determining within which month the value of the sale is recognised.

In some cases, a service or freight rate needs to be included as part of the FOB value, even if the service is insurance or freight. Therefore, rate types that will be included in the FOB calculation can be configured for the delivery term.