DDP airplane and shopping cart
DDP airplane and shopping cart
Wed 21/04/2021 - 17:09

The Advantage of Delivery Duty Paid (DDP) versus Delivery Duty Unpaid (DDU) for International Shipping

Author: John Wylie

While selling internationally allows brands to reach a larger consumer base and diversify their market presence, changing regulatory practices make shipping difficult for e-Commerce merchants.

Delivery Duty Paid (DDP) and Delivery Duty Unpaid (DDU) are two different industry-accepted shipping Incoterms (International Commercial Terms) for international parcel shipping designed to support the needs of brands expanding into international markets. While each plays a vital role in global commerce, they both have unique considerations and advantages.

For U.S. e-Commerce brands seeking to expand their international shipping, understanding the differences between DDP and DDU is paramount for successfully communicating total landed cost to the customer, managing visibility throughout the shipping process, navigating international customs, and ultimately delighting customers.

What is Delivery Duty Unpaid (DDU)?

Delivery Duty Unpaid means that the buyer is responsible for the duties, taxes, and other charges imposed by the country of destination. Once the parcel or package arrives at customs in the destination country, under DDU, only then will the buyer be contacted and informed of the required charges. The buyer must then pay the duties and taxes of their country before the package will be shipped from customs to their door. Depending on the destination country and Postal Authority or delivery agent, customs fees can also be collected at the consignee door prior to delivery. Additionally, DDU does not always include parcel tracking, nor will e-Commerce merchants be required to show total landed costs (including taxes and duties) at the shopping cart level.

The Advantage of DDU

For low-value purchases, DDU can be a good option for brands shipping internationally. It is affordable and simple for e-Commerce merchants unconcerned with transparent tracking or faster delivery. Merchants can display a lower price in the shopping cart or at checkout since they will not need to factor in taxes or duties, which can also help win customers for inexpensive purchases. Additionally, since the value of the commodity is low, tracking is not typically necessary, and the merchant may be willing to deal with the costs associated with returns and lost parcels.

The Drawbacks of DDU

While DDU can be a straightforward option for less expensive purchases, it has serious drawbacks for merchants selling higher-value goods.

First, DDU can potentially create lag once the parcel arrives at customs, as the parcels were not pre-cleared prior to entering the destination country. This could impact transit status and visibility while the parcels are in customs.

Second, DDU is typically used by postal authorities and postal consolidators, which means transit times could possibly be interrupted, depending on the country of destination’s postal system and processes.

Third, given the overlap between customs approvals, fee payments, and variations on postal delivery speed, transit time can greatly vary with DDU, spanning anywhere from 7 to 21+ days. This may not meet customer expectations. On top of this variable shipping timespan, the lack of transparent tracking means shippers and customers have no line-of-sight as to where their parcel may be, causing frustration.

Lastly, perhaps the biggest limitation of DDU is the surprise duties and/or tax charges that many customers face when the shipment arrives in their country. Under DDU, most e-Commerce shoppers are unaware that they will have to pay taxes and duties because e-Commerce merchants do not show total landed cost at the shopping cart level. Surprised and unhappy customers may refuse to pay for their parcel to be delivered from customs, which creates a major customer relation and reverse logistics challenge for merchants now having to manage frustrated buyers and the returns process. The higher value the purchase, the more challenging the process can become, as the e-Commerce seller is now charged for both the initial shipment and return shipment.

Ultimately, DDU can leave many e-Commerce brands, and their customers, with a lack of transparency in the purchase, shipping, and returns process. Customers are left waiting upward of 7 to 21+ days for their desired parcel and are also charged unexpected fees once the parcel is in-country. In short, DDU leads to unhappy customers and higher friction in the shipping and returns process.

What is DDP?

In contrast to DDU, Delivery Duty Paid (DDP) means that the e-Commerce merchant pays all value-added tax (VAT), duties, and customs clearance associated with an international shipment, passing that cost on to the e-Commerce customer upfront. These merchants can transparently communicate these additional costs to the customer at checkout, where they can then collect payment.

The Advantage of DDP

DDP solves many of the problems e-Commerce merchants and customers face with international shipping via DDU.

First, DDP navigates customs clearances upfront and does not require fees to be paid by the customer to customs, reducing lag time and streamlining the shipping process.

Second, DDP leverages parcel carriers versus postal services. Carriers typically expedite shipping based on a variety of factors in partnership with the e-Commerce merchant, reducing delivery times and placing more control in the hands of the e-Commerce merchant.

Third, most e-Commerce brands need visibility and transparency in the shipping process, especially with higher-value products. DDP ensures a transparent, trackable process for the U.S. brand and the international customer via technology integrations from the cart level through to the parcel carrier. Additionally, DDP provides customers’ flexibility with delivery options. Consumers can have flexibility regarding delivery attempts and delivery location, making for a more convenient process.

Lastly, since the buyer can see the total landed cost (all duties, taxes, and associated fees) in the shopping cart, there are no surprise fees waiting for them once the parcel arrives in-country. The merchant can calculate value-added tax (VAT) based on the destination country’s regulatory requirements via their technology integration, and customers will not have to worry about any unexpected calls from customs. This process drastically reduces cart abandonment and returns while boosting customer satisfaction.

In short, DDP provides faster transit times and more accurate delivery estimates while enhancing the customer’s overall experience. Via en-route tracking, the e-Commerce merchant and customer can both see the location and status of the package, through the destination gateway, customs clearance, and final mile delivery.

Is DDU or DDP Better?

The question is largely answered by what the e-Commerce merchant desires for their shopping, delivery, and overall customer experience. After all, at checkout, DDU will appear cheaper, with duties and taxes effectively hidden from the customer until the parcel arrives in-country. Ultimately, many e-Commerce brands will face confused, unhappy customers if they do not clearly communicate total landed cost to the customer upfront. Additionally, merchants and customers will typically want transparent tracking of their valuable goods, a DDU process typically lacking for the majority of those shipping with DDU.

While DDP may appear more expensive initially, the e-Commerce merchant faces far fewer challenges, faster delivery, and happier customers. DDP is quickly becoming the industry standard for international e-Commerce retailers because it helps both the business and its customers.

Where GEODIS MyParcel Can Help

GEODIS MyParcel makes it easy for U.S. domestic e-Commerce brands to go global. Our small parcel shipping service currently ships to 27 European countries, Great Britain, and Canada with guaranteed delivery in 4-6 days. How do we do this? By leveraging our parcel expertise, e-Commerce experience, deep understanding of global customs clearance processes, and integrated technology.

Now that you understand the advantage of DDP, we can help you strike the balance between speed of delivery and total landed cost. We offer an end-to-end global transportation network and a fully integrated digital platform to make DDP a breeze for you and your customers. You can rely on our many years of e-Commerce experience to implement. Learn more about what GEODIS MyParcel can bring to your e-Commerce business today by contacting us today.

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