When looking into the logistics of selling your goods internationally you’ve no doubt come across the terms DDP and DDU. So what do these terms mean, and how do they affect your cross-border e-commerce ambitions?
The country you’re shipping to may impose duty or tax on your shipment, depending on factors such as origin, e country of origin, retail value of an order, reason for export and shipping destination. Every country has its own set of rules, regulations, and taxes for importing, and it’s important to know your options if you’re looking to spread your sales net far and wide.
These duties and other charges can be paid by either the sender (you, the seller) or the receiver of the shipment (your customer). Delivered Duty Paid (DDP) and Delivered Duty Unpaid (DDU) play key roles in global commerce.
This means you, the seller, will pay all customs clearance, duties and taxes associated with shipping a product into another country. Generally speaking, the logistics providers you work with do the background administration on customs and duties and bill you the total before an item is imported into the country of destination, allowing for final mile delivery.
In this instance, the recipient/ customer will get contacted by customs once their shipment arrives and will have to settle any charges in order for customs to release the shipment and allow your goods to be delivered.
So which to use – DDP or DDU? There is no “correct” answer here, circumstances will differ from one seller to another. Each service has its positives and negatives.
If you choose to ship DDP, you pay the cost for shipping, VAT or sales tax, customs and any duties. As a result, your customer does not have to deal with the delay and hassle of paying a customs broker in their home country before they can receive a package. Your carrier will bill you for the customs costs.
However, this still leaves you with the expense. You may choose to absorb this yourself, pass it on at checkout, or include it in your item’s price. Whichever method you choose, the price you display to the customer will be the actual price they pay – with no unwanted surprises on delivery, creating a better delivery experience and promoting repeat business.
Without taxes and duties factored in, bargain-hunting customers will see a lower price at checkout.
However, if you aren’t careful to spell out at checkout that taxes and duties are due on arrival, this may create a negative experience. Customers will not appreciate being suddenly hit with additional costs, this will result into negative reviews and little chance of repeat business.
We understand that such terminology can sound complex and daunting. But rest assured, we have the expertise and experience to plot the best path for your business. If you’re looking to ramp up your international sales, please do get in touch. Your global customer base awaits.