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DDP vs. DDU Defined for eCommerce Sellers

Author: Jennifer Dunn  |  January 2, 2019
tax-1-min

When shipping cross-border, you’re quickly going to run into the acronyms DDP and DDUHere are those acronyms defined:

  • DDP stands for “delivery duty paid” and means that you, the merchant, have paid all customs, duties and associated fees on the shipment. Generally the shipping carrier you’ve contracted with will handle the heavy lifting on customs and duties and then bill you the total.
  • DDU stands for “delivery duty unpaid” and means that your buyer is responsible for paying any customs and duties fees associated with the purchase. Your buyer will be contacted by a customs broker and will be required to pay duties before receiving the shipment.  DDU is also sometimes referred to as DAP (Duties at Place).

What do DDP and DDU have to do with my eCommerce business?

When shipping cross-border, many countries will impose a duty or tax on your shipment. Whether a duty or tax is required depends on factors like the declared value of the shipment, the purpose of the shipment and origin and destination of the shipment.  

Every country sets it’s own customs and duties, and they can get complicated. For example, the U.S. Harmonized Tariff Schedule (i.e. the U.S. government document spelling out what customs and duties are owed on what products) is 3,863 PDF pages long and updates annually. Ouch.

When shipping products cross-border, a duty or tax may be owed on your product. As an online seller, it’s up to you whether you want to pay the duty or pass that cost along to your customer.

Should you ship DDU or DDP to your international customers?

The short answer is: It depends.

Shipping DDU Cross-Border
If you choose to ship DDU, your customer is ultimately responsible for paying customs and duties before she can receive her package.

Your carrier will deliver the package to a customs broker in your customer’s home country. A customs broker can be your carrier, the local post office, or another company who handles customs fees. Your customer is then responsible for paying the duty before she can take final possession of the package.

Shipping DDU has advantages when it comes to winning a sale. Without taxes and duties factored in, your price-conscious customer sees a lower price at checkout. A 2017 KMPG survey found that 57% of online shoppers hit “buy now” on the lowest price they can find.

If you aren’t careful to spell out during checkout that taxes and duties may be due on arrival, this may create a negative experience with your store when your customer realizes she has to pay even more just to spring her package from customs jail. Worse, if your customer isn’t quick to pick up her package, storage fees and other fees may apply. Or if she abandons the package, you may be on the hook for fess, return shipping and fines and penalties. In the worst-case scenario, your customer abandons the shipment at customs and cancels the sale, meaning you’re liable for paying the penalty yourself.

Shipping DDP Cross-Border
If you choose to ship DDP, you pay the cost for shipping, VAT or sales tax, customs, duties, etc. Because the duty has been paid upfront, your customer does not have to deal with the delay and hassle of paying a customs broker in her home country before she can receive her package. Your carrier will bill you for the customs costs.

However, this still leaves you with the expense. You may take the cost on yourself, pass this on at checkout, or include it in your item’s price.  ShipperHQ’s upcoming cross-border feature will help merchants finally understand total landed cost before shipping, and arm you with the knowledge you need to mitigate the cost of shipping DDP. 

Shipping DDP also has advantages.  Your shipment will arrive more quickly because it isn’t delayed in customs. And as eCommerce matures, savvy online shoppers now expect that they will have to pay customs and duties on cross-border purchases.

Conclusion

Whether you ship DDP or DDU will ultimately depend on the mix of products you ship internationally, and how receptive your customers are to either paying taxes and duties up front or dealing with customs brokers after the fact.

We want to hear from you. Do you ship DDP or DDU? What made you decide this? Do you plan on changing up your shipping strategy in the future?

ShipperHQ is actively working on a solution to make cross-border shipping easier for merchants.  Want in? Contact us to learn more about this .

 

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