International shipping is one of the biggest and most significant milestones for any eCommerce business. There are countless factors to consider when you’re deciding to offer global shipping, and one of the crucial ones is the customs fees and charges.
Say, for example, you have a customer in South Korea waiting for her delivery. After all the waiting and excitement, she’s asked to pay an extra charge as part of the import duties when the package is delivered. The delivery executive says she won’t receive the package unless she pays this. This is not a one-in-a-hundred occurrence, and this, without a doubt, ruins the customer experience and affects your brand too.
This is a common problem every eCommerce business faces when they first step into international shipping and delivery. You can avoid this unpleasant experience by understanding and using these two global trade terms: DDU ( Delivery Duty Unpaid) and DDP ( Delivery Duty Paid). DDU and DDP are standardized terms and conditions released for the sale of goods internationally, and they help determine who is responsible for paying the import duties. Let’s take a look at each of them in detail.
DDU: Delivery Duty Unpaid
Your current marketing and promotional strategies should be based on the local customer As simple as it can be, the term means that the customer pays for the additional duties and charges when the package is delivered to them or when the package arrives at the customs. The payment must be made either to the local post office or to the third-party delivery agent. Because of this, the packages are often held up at customs for many days, creating a delay in the customer receiving them. Most eCommerce businesses choose DDU shipping only for low-value goods as the customs duties and charges only get applied when the value of goods goes over a certain threshold in most countries.
Advantages of DDU
- Cheaper shipping charges: When customers buy the product on your eCommerce platform and check out, they only pay for the product. This also lowers the cart abandonment issues.
- Avoid legal complications: All you have to do is get the packages to the specified country where your customer is, and the rest is taken care of by your customer. They’re more aware of their country’s import and customs duties and processing, saving you from involving with any complications that may occur.
- Better tracking of products: DDU shipping allows you to track every stage of the product journey even after it reaches the country.
Disadvantages of DDU
Most often, when a customer buys a product from an international eCommerce brand, they expect customs duties and charges. However, if they face any significant delay or complications while paying the customs or receiving the product, they are likely to not purchase again with the eCommerce provider. Customer retention becomes difficult, and your brand loyalty might take a hit.
The customer could also reject the package by not paying the customs, leading to the package getting abandoned in customs.
DDP: Delivery Duty Paid
In a DDP shipment, the seller takes complete responsibility for the risks, customs duties, taxes, and everything involved with shipping a product to another country. The customer is made aware of the total cost before the transaction is done and the complete payment is made at the checkout, including possible customs and other duties.
Advantages of DDP
- Better control over the order fulfillment process: As every cost and processing is taken care of by the seller (your eCommerce business), you control how efficient the order fulfillment and customer experience should be.
- No surprise costs for the customers: DDU might be cheaper because the customers are taking care of the shipping, customs, and other charges, but with DDP, there are no surprises or additional costs that they’ve to bear.
Disadvantages of DDP
DDP means higher order fulfillment and shipment costs for the seller. You’ll also have to take responsibility for any damage, delay, and additional costs that may occur during the transit.
Some countries do not accept DDP, which means you may lose out on a potential customer base. To prevent this from happening, it’s essential to understand and learn the export and import policies of each country you are targeting.
Choosing the Best Option: DDP or DDU?
Each country has a different set of rules and regulations regarding import, export, or
- Do your research: Every country has a different import and export rules. It’s important to know these before deciding which shipping option you want to go for. Some countries do not allow DDP deliveries, for example, Russia. It’s the same for some goods as well. Some might be duty-free in one country, but it might be charged for in another.
- Be transparent with your customers: Depending on their location, you need to let the customers know about the possible charges and duties they might incur when placing an order. Let them know what shipping option you offer and why. This communication will bring your customer a little closer to your brand, and they will consider purchasing from you again.
- Choose a logistics and delivery partner: It’s daunting to learn and keep tabs on every market and change their policies when running an eCommerce business. Partnering with a 3PL fulfillment center can help you understand the target markets well and choose the best shipping option for each of them.
At ShipBots, we partner with Passport to offer you the best international DDP shipping experience. You get an easy-to-use tax and duties calculator and world-class logistics services with us. To learn more about we can help you streamline your order fulfillment and international shipping services, get in touch with us today.