Delivered Duty Paid (DDP) shipping has become a popular option among both consumers and ecommerce business owners that sell and ship goods internationally – and with good reason! If you’ve ever bought an item online and have pre-paid customs fees at checkout, that’s DDP. However, when an international buyer is shopping online without DDP, they are often surprised by customs and brokerage charges due upon delivery. The uncertainty and inconvenience of paying these surprise fees can make the online shopping experience a negative one — which can then impact your ecommerce conversion rates. DDP shipping ultimately provides a hassle-free process for buyers, resulting in happier customers, more cart conversions, and fewer customer support issues.
However, if you haven’t used DDP fulfillment before and don’t know the right way to tailor the process to meet your demands, it can result in expensive shipping costs for both the shipper and the end customer. To ensure you turn a profit, you need to know the ins and outs of the shipping method.
What is DDP shipping?
Delivered Duty Paid (DDP) fulfillment is regulated by the International Chamber of Commerce’s Incoterms (International Commercial Terms) – a set of globally recognized rules that define the responsibilities of buyers and sellers.
With DDP, you, the seller, take responsibility for the risks and costs associated with shipping your goods to the named place of destination, usually the buyer’s home. This means you’re responsible for importing the goods, which can include using a customs broker to pay entry fees, duties, taxes, inspection fees, storage fees, and dealing with foreign currencies. Read further to learn how to pass on these fees to the end customer.
How does DDP compare to other shipping methods?
*The latest version of Incoterms® 2020 replaces the term “DDU” (Delivered Duty Unpaid) with the term “DAP” (Delivered at Place).
Another international shipping option under Incoterms shipping is Delivered At Place (DAP). There are pros and cons to both shipping methods, so it’s important to understand each to determine which one makes the most sense for your business.
Delivered At Place (DAP)
DAP, another form of international shipping, transfers shipping responsibility to the buyer once goods reach the border. At the border, customs will contact the buyer, requiring them to pay the import fees and taxes to release the goods. Sometimes, the buyer may have to go to their local post office or the customs agency to pick up their order.
If you’re not transparent with your customers about your shipping method, the added duties and taxes may come as an unwanted surprise. If the buyer is caught off guard and refuses to pay the extra fees, their order will ultimately be sent back to you at an added expense – plus, you’ll be hit with a chargeback.
How DDP Benefits Your Business
Choosing DDP comes with several benefits, including the ability to help optimize your business.
Boosts Conversion Rates
Getting hit with huge and surprising customs and brokerage fees at the moment of delivery is a major concern among ecommerce customers. If the customer discovers that they have to pay additional fees when their goods arrive at the door, they can be left feeling short-changed. This can erode trust between you and your customers, hurting your chances of having the customer turn into a repeat buyer.
DDP, however, allows for transparency with your customers. You can include all fees associated with shipping upfront so that there are no surprises for your customer during the shipping process. Clarity boosts trust and removes uncertainty and anxiety among your customers, improving your conversion rate.
Simplifies International Orders
DDP fulfillment streamlines the international shipping process. It requires less back-and-forth with the customer, meaning the goods arrive faster and with fewer customer support issues.
Offering a DDP solution can provide businesses with a single point of contact for customs clearance and delivery, which can help to simplify the international shipping process and reduce the risk of delays or errors.
Another advantage of using a DDP solution is that it offers businesses a comprehensive set of features for managing customs clearance and logistics. This can include tools for calculating tariffs and taxes, tracking shipments, and handling paperwork. These features can help businesses better understand and manage the costs and logistics associated with international shipping, which is especially important for companies that ship to multiple countries. DDP partner solutions also offer a high level of support, providing businesses with access to expert advice and assistance throughout the shipping process. Businesses can get help with any questions or issues that may arise, such as import regulations, tariffs, or compliance requirements.
If you want to simplify international orders further, it’s worth looking into a Third-Party Logistics (3PL) company to handle your DDP shipping. Or better yet, outsource fulfillment to a fulfillment company that can take on your whole 3PL inventory fulfillment process, including inventory management, storing and transporting goods, finding a customs broker, and providing the right documents for import.
If you choose to outsource fulfillment, it’s important to understand that 3PL prices can vary depending on the size and weight of the goods, as well as the distance they’re being shipped. Shipfusion’s 3PL service offerings include the option to integrate DDP with your sales channel by utilizing our DDP partnerships. If the partnership makes sense, a 3PL can free up a lot of your time by taking over the complex international shipping process so you can have more time to devote to growing your business.
Improves Customer Experience
There’s a reason companies like Amazon and eBay use DDP; putting the customer experience first helps them grow their business in the long term. Rather than effectively importing the goods themselves, customers receive a streamlined checkout and a smooth, high-quality post-purchase experience. All they have to do is enter their information on your website and click “buy.” This increases your chances of good reviews, improves your conversion rate, and broadens your appeal among international customers.
Fees Associated with DDP Shipping
By offering a DDP solution, you transfer all costs and risks associated with shipping and importing your products internationally to the end customer. These fees are added upfront to the customer’s bill – and are passed onto and paid for by the customer. With DDP, your customers won’t be surprised by customs or duties charges, and your business won’t be held liable for any of these extra fees that are charged upon delivery.
Some potential costs you’ll want to keep in mind include the following:
- Sales Tax and/or Value-Added Tax (VAT) can be substantial and reach 15-20% of the item’s value plus duties.
- Customs duties and taxes are required to be paid to the importing country’s government for bringing in the goods. The amount depends on the type of product, origin, and destination.
- Import clearance fees, including customs brokerage, agent fees, and other charges, are often required to clear the shipment through customs in the destination country.
- Offering insurance will help protect against potential damage or loss during shipping, an ecommerce business may choose to include the option of insurance in the cost of DDP. This will add an additional expense to the overall cost of the solution.
- Fee for using a DDP software such as Passport.
Note that the exact fees will depend on the specific circumstances of each shipment, including the country of origin, the country of import, and the type of goods being shipped.
When offering a DDP solution to customers, it’s crucial to understand all the fees involved and ensure that pricing is competitive and provides value to your customers. Besides the sales tax, VAT, customs duties and taxes, import clearance fees, and software fees, there may also be other costs, such as inspections, certifications, or permits, that need to be considered. Make sure to research the import regulations of the destination country and include any additional fees in your calculations. By doing so, you can provide a clear and transparent solution to your customers and help them understand the total cost of the DDP shipping service. By being upfront about all the fees, you can build a strong and trusting relationship with your customers and avoid any potential disputes or misunderstandings.
How Do You Know if DDP Shipping Is Right for You?
Now that you know what DDP is, you have to decide whether it’s right for your business.
For DDP to be relevant to your business, you need to either be consistently shipping your goods internationally or planning to in the future. For example, if you’re a U.S.-based company with a healthy customer base in Canada and Mexico, you’d likely benefit from shipping DDP. If, however, you’re shipping one-off sales to a country like China, you might be better off using DAP unless you want to actively grow your sales in that country.
If you’re interested in learning more about how DDP can work for your ecommerce business, check out Shipfusion’s service offerings, which include DDP solutions. Shipfusion can help you optimize cart conversions and keep international shipping costs predictable.If you’re ready to optimize your international shipping methods with a 3PL, book a call with one of Shipfusion’s fulfillment specialists today to discuss our customized rates.