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Delivery Duty Paid – What is it and How Does it Work?

As you carry out your international ecommerce trade, you will come across some common terms: DDP and DDU related to these duties or taxes. The two are among many different terms defined by the International Chamber of Commerce, an organization that plays a part in defining the rules of international trade, payments, and even the delivery modalities. Although some online merchants use DDU, DDP shipping is the most popular among both sellers and buyers.

This article explains more about delivery duty paid, what they are and how it works.

What is Delivery Duty Paid? (DDP vs. DDU)

Delivery Duty Paid (DDP) is a type of delivery whereby the sender or seller takes the responsibility of paying the duties. The seller pays for all costs of shipping goods to the destination country of a buyer. These costs include any stipulated import duties and taxes, including Goods and Services Tax (GST). 

In DDP, the senders typically pay any VAT unless otherwise specified. If you wish to implement DDP shipping, you must confirm any VAT requirements before you sell your products online to calculate their full impact on shipping costs and profit margin.

DDP also includes customs clearance; that is, the sellers pay for customs clearance. Online merchants who wish to embrace DDP should also carry out thorough research early on and account for the extra cost of customs clearance and its effect on the overall delivery costs and profits. 

On the other hand, an online merchant may opt for Delivery Duty Unpaid (DDU), whereby the customer gets contacted as soon as their shipment arrives and has to settle any costs themselves before the customs can release the shipment and deliver it to the customer.

Which is Better, DDP or DDU?

DDU shipping has no processing fees on top of the required duty and thus may seem to be a cheaper shipment option at checkout. But it is the sender’s responsibility to inform the customers that the duties will apply when the goods arrive in customs. Any miscommunication could lead to angry customers.

Most of the time, customers are not even aware they need to pay for duties. It often becomes a surprise when they receive a call from customs requesting payment. In fact, it can negatively affect your customer experience. Even worse, it may become more expensive when customs forward the shipment to an independent customs broker who may add storage, late payment, and brokerage fees. Independent customs brokers have different fee structures; thus, it is nearly impossible to establish what the final cost will be.

DDP shipment may be more expensive upfront since express couriers charge an additional fee to process payments to customs on your behalf. However, the fee may be several times lower than DDU brokerage fees and are also fixed. 

Some couriers can even pay additional fees in advance on your behalf, ensuring that the clearing at the customs and delivery happens without the customs having to reach out to your customer and directly collecting the additional fees.

Sometimes, customers may decide to abandon the shipment in customs, especially when they encounter additional fees they never expected. DDP shipping helps curb such incidences since you may lose your product, sale and even pay extra fees if you want the shipment back. Therefore, DDP shipping remains the best for a smoother delivery experience.

Why is Delivery Duty Paid Used?

It ensures safe shipping by air or sea freight.

Safe shipping by sea or air can be a challenge depending on the type of shipment and the destination country. DDP shipping ensures the senders do not take customers’ money and go into hiding without delivering.

It protects the buyer from scams.

DDP helps protect buyers from scammers. DPP shipping is a time-consuming and costly process that keeps away swindlers. The seller takes responsibility for all the costs and risks of delivering the shipment, thus striving to ensure the customers get the products they ordered.

It improves purchasing experience.

DPP improves the purchasing experience since the customers do not have to worry about paying the fees. If the burden remains on the buyer, chances are it may not happen since they are not aware of these international fees.

It ensures safe shipping across countries.

Countries have specific laws governing transport, import duties, and shipping fees. Considering that anything can go wrong when delivering packages, DDP ensures the seller is diligent and ships only through the best and safest routes.

How to Best Implement DDP on Your Web Store

If you wish to implement the delivery duty terms, you should actively communicate your expectations with your customers on your web store. Give an in-depth explanation of how you will handle taxes and duties on the following sections of your website:

  • Email confirmations
  • Product pages
  • Frequently asked question’s page
  • Within the shipping policy
  • Store checkout

OSW can Assist You with DDP

DDP is among the most popular shipping options for global commerce due to its popularity with customers. Consumers feel this shipping type is in their best interest since it has less risk for the shipments until delivery. Unfortunately, DDP can be unprofitable for online merchants if there are too many issues.

If you have an eCommerce business, you need to partner with a fulfillment company such as Our Service Works (OSW) who can shoulder the responsibilities of international shipping. We understand that shipping activities can overwhelm an ecommerce business, making DDP unprofitable and, even worse, hurting the customer experience.

That is why we have been managing outsourced fulfillment and customer support services to local and national companies for over three decades. We commit to advancing your brand, providing excellent service to your clients, offering safe inventory management and cloud data analysis tools at an effective cost for your business. Contact us today for help and more information on warehousing, fulfillment, and shipping services.

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