DDU vs DDP Shipping: How eCommerce Sellers Can Grow Their Business

DDU vs DDP Shipping How eCommerce Sellers Can Grow Their Business

International eCommerce has never been more accessible – or more daunting. With the global eCommerce market averaging $6.3 trillion in 2023 and set to reach $8.1 trillion by 2026, cross-border sales promise profits for retailers of all sizes.

Pretty much anyone with business savvy, an internet connection and a website can set up an online retail business. And it makes sense that more people are jumping at the opportunity to sell products almost anywhere in the world. The relatively low barrier to entry appeals to smaller retailers and individuals starting ‘side hustles’, who might have limited experience in selling/shipping goods on a national and international scale.

The various shipping methods available can be overwhelming, especially when combined with different options for customs duty and taxes.

We’ve created this guide to help you understand the difference between Delivered Duty Paid (DDP) and Delivered Duty Unpaid (DDU) shipping, and what each option means for both seller and buyers.

Whether you’re a small retailer or a larger company looking to scale your business, read on to learn about DDU vs DDP and find the best option for your shipments.

DDU vs DDP

Delivered Duty Unpaid (DDU) and Delivered Duty Paid (DDP) are two types of cross-border shipping arrangements particularly common with eCommerce shipments. Depending on the agreement, either the buyer or the seller is responsible for paying import duties, sales tax (VAT, GST etc.) and other fees such as customs clearance.

DDU shipping involves the customer taking responsibility for all shipping fees, and duties and sales tax. In contrast, the cost and risks under a DDP delivery agreement are covered by the seller.

Both DDU and DDP are commercial terms established by the International Chamber of Commerce (ICC). Better known as ‘Incoterms’, these standardised rules define the responsibilities and obligations of buyers and sellers in cross-border transactions.

Incoterms are widely used in shipping contracts to clarify the distribution of costs, risks and tasks between the parties involved. While there are currently 11 Incoterms referring to various responsibilities, DDU and DDP are the ones that specifically focus on eCommerce.

What are the implications of shipping goods DDP?

Delivered Duty Paid (DDP) is an international trade term where the seller/retailer takes responsibility for all the costs and risks involved in a shipment. This includes paying any applicable duties and taxes associated with delivering goods to a specific destination. It ensures that delivery duty and import fees are paid in full before the goods are shipped.

With DDP, the seller’s financial obligations cover:

  • Import Duty
  • Taxes (VAT or Goods and Services Tax)
  • Customs clearance fees
  • Documentation
  • Handling expenses
  • Transportation/local shipping

This might seem like a lot of responsibility, but it’s not as scary as it looks. Retailers usually incorporate these expenses into the price of the commodity listed on the website, establishing special rates and processes with preferred freight forwarders. This ultimately saves money and time, both for them and the customer.

What are the implications of shipping goods DDU?

Delivered Duty Unpaid (DDU) – also known by the Incoterm DAP (Delivered at Place) – is a shipping agreement in which the buyer or importer holds greater responsibility. While the seller pays for the parcel’s packaging and delivery to the destination country, the buyer or importer is on the hook for any import or customs clearance fees.

The buyer is responsible for:

  • Import Duty
  • Taxes (VAT or Goods and Services Tax)
  • Unloading
  • Customs clearance/inspection costs
  • Documentation
  • Any extra transportation costs to the buyer or importers address

The seller assumes the risk of accidental loss, damage or theft until the delivery reaches the destination country. But, if the buyer wants insurance to cover storage and transportation from the initial delivery point to the final destination, they’ll have to spring for that themselves.

Benefits of DDP shipping

DDP shipping helps eCommerce retailers provide a seamless and hassle-free shopping experience for their customers. By eliminating any uncertainties or surprises related to customs duties and taxes, the entire importation process becomes transparent and convenient for the buyer.

You might be thinking the advantages of a DDP delivery are a bit one-sided in the customer’s favour. But consider how keeping your customers happy is the key to both new and repeat business. While you’ll shoulder most of the liability and costs, you’ll also have a clear overview of the entire shipment process and ensure that it clears customs.

DDP delivery reduces the risk of shopping cart abandonment, customer churn, negative reviews and customer complaints. It also limits costly return-shipping fees.

The best bit? It doesn’t even have to cost you more. You can arrange preferential rates and processes with the carrier of your choice; plus, you can add these costs to the final price the buyer pays, so there are no hidden payments on their side.

Even though your customer ends up absorbing the costs, it can work out cheaper for them, too. Look at this example of selling a T-shirt with DDP shipping in the UK:

T-shirt value: £36
Delivered priced: £36

Under a DDU arrangement, however, the costs might look a little more like this:

T-shirt value: £30
VAT: £6
Clearance admin: £12
Delivered price: £48

You can see how the DDU option might grab someone’s attention… only to lose them once they get to the checkout.

Generally, people like to know what they’re paying upfront. A surprise import tax or customs clearance fee can be the difference between an ecstatic, satisfied customer and a customer that leaves a negative review. That’s the great thing about DDP shipments – no nasty surprises.

Challenges of DDP shipping

The obvious disadvantage of DDP shipping is that the retailer takes on all the risk and costs to the point of delivery. Although you have control of the whole process, you also need to have knowledge of individual countries’ import regulations and tariffs. Some countries have more complicated customs than others, which you’ll need to be aware of for the buyer to benefit from less stress and risk.

If you’re new to international shipping, DDP could seem daunting. While it might be tempting to leave it to customers to pay duties and taxes, our specialist eCommerce software can do the heavy lifting for you (and your customers) instead. They can automate product classification and international duties/tax calculations while you sit back and enjoy your cappuccino.

Benefits of DDU shipping

The Delivered Duty Unpaid agreement relieves the retailer of the stress and expense of customs clearance. Buyers might also have a shipping company or courier in mind they want to use from the couriers offered.

They can also have better visibility into the supply chain with the ability to track more progress compared with DDP cargo.

Challenges of DDU shipping

DDU shipping carries a huge risk of annoying the people you want to impress the most – your customers. Putting the liability on them can be frustrating for customers who aren’t used to international shipments and who may not realise they have to pay extra fees.

Sometimes Delivered Duty Unpaid can seem deceptive. Many customers spend lots of time researching products and comparing prices before choosing you as their supplier, so they expect the price they see on screen to be the final figure they pay. If you’re going the DDU route, you must ensure the customer knows they are liable for the tax and customs costs or they will lose trust in you.

Imagine you’re a customer impatiently waiting for your son’s birthday present to arrive. There will be tears and a miserable day ahead if he doesn’t get his much-anticipated new toy from the United States to show off to his friends. If the arrangement is DDU, you’ll probably be the one shedding tears from the time spent arranging customs clearance or sticker shock of extra import and customs fees!

Even if the seller is upfront about fees, potential customers can still change their minds when they see the price of tax and handling fees at checkout. According to the Baymard Institute’s research, 48% of customers blame high extra shipping and tax costs for cart abandonment. A further 16% of customers claim that a lack of clarity around the total price of their order caused them to abandon the cart.

The customs brokerage fees are bigger for individual customers than the ones you could negotiate as a retailer. The short-term gain of saving a few bucks is not really worth the long-term damage of bad reviews, return shipments and losing customers.

DDP: A customer-friendly shipping choice

Paying duties is an essential component of a smooth international shipment process. From stock levels to supply chains, retailers already have an overwhelming number of logistics balls to juggle.

It’s no wonder the uninitiated may be tempted to go the DDU route. After all, it looks simpler and cheaper. But looks can be deceiving.

The short-term gain of saving some money and paperwork on DDU shipping can backfire when unsuspecting customers realise they have to pick up the slack. Surprise import fees and other costs aren’t conducive to a great customer experience.

DDP shipping is chock-full of advantages for the seller and the customer. Most customers just want to complete an order in a few clicks and then wait for their product to arrive. In the world of DDU vs DDP for retailers, the latter generally has the edge.

The better the data, the easier the process. And that’s where our lightweight and user-friendly Kona API shines. Integrating with any eCommerce site, it collates every piece of information, including shipping, duties and taxes and customs fees, to give shoppers the exact total of their cart.

The Hurricane Kona One Call API doesn’t leave anything to chance when it comes to making your eCommerce site a surprise-free zone. Not only does it provide a better experience for your customers, but it also helps keep you data compliant. Win-win!

If you’re interested in any of our automated customs solutions, contact us to find out more.

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David SpoTtiswood
Co-founder

Interesting Fact: I am an amateur baker, but I still have no idea how sourduogh starter actually works, and am intrigued how it all reacts together to produce an incredible taste.

Favourite Music: November Rain by Guns ‘n’ Roses.  Going to Wembley with my wife our go to fun thing in our early years, our youth with long hair and rock clothing and not a care in the world other than getting the best spot in the house.

Favourite Quote: “Insanity is doing the same thing over and over again, and expecting different results ” – Albert Einstein

Harry Reilly
Non-exec

Interesting Fact:  I learned Arabic for five years!.

Favourite Music:  A Long December by Counting Crows.  Memory of best family time together in California.

Favourite Quote: “Don’t forget execution, boys. It’s the all-important last 95%”

Tom Lee

Technical Director

Interesting Fact:  I am completely self-taught from a technical skills persepctiuve, and left formal education at 18.

Favourite Music:  Blink 182 – Aliens Exist.  Brings back fond memories of stickly floors and cheap beer.

Favourite Quote: “He sprayed water in my face – thta’s not allowed” – James Haskell.  The whole event surrounding it is hilarious and shows the power of a good wind up

Martin Palmer
Co-Founder

Interesting Fact: I started my working life training to be an accountant but decided I hated numbers. (Ironically I now love them!). I really wanted to join the Hong Kong Police force but couldn’t do that until i was 24. I took a temporary job in Imports and 47 years later here I am.

Favourite Music: There only was one choice. Harry Chapin. Meant a lot to me in my early years as an import broker. We played Chapin for hours and this one seemed to cover so many modes.

Favourite Quote: “No man is an island”

Neil Harmer

Operations Director

Interesting Fact:  As a Geologist my idea of the perfect beach holiday is going to the beach and investigating the rocks in the cliffs behind.

Favourite Music:  Broken Stones – Paul Weller, I’m a huge Paul Weller / The Jam fan; Broken Stones is a very relaxing song, I love the use of the electric piano in it

Favourite Quote: “Don’t put off until tomorrow what you can do today”. This is a great quote by Benjamin Franklin, to have in your head when working through a series of tasks to help keep focused.

Robert Dundas
Sales Director

Interesting Fact:  One of my life goals is to be able to speak French, I’ve been doing Duolingo every day for the last five years, and I’m still rubbish! 

Favourite Music: Where do I even start! Tom Petty Running Down a Dream, this is my top-down driving next to the ocean song

Favourite Quote: “This time will pass”

ASHLEY DEXTER
CFO & Co-founder

Interesting Fact: I was nearly named Battle Dexter (I would have probably now been residing in one of His Majesty’s establishments)

Favourite Music: Even though I spent a few years in the music industry my taste of music was always a cause for concern with my colleagues, so to surprise them all my current favourite is Kids by MGMT (absolute belter)

Favourite Quote: “Quitters never win and winners never quit”

Ian Venner
CTO & Co-founder

Interesting Fact: Runs Red Lantern Records, a not-for-profit, ethical label as a side project, whose artists have regular national BBC radio airplay.

Favourite Music: Tom Waits, pretty much all of his work.  Beautifully observed avante-garde vignettes of life.  Oh, and anything really loud!

Favourite Quote: “It’s not the mountains we climb, but the grit in our shoe that grinds us down” – which sums up taking a business from start-up to enterprise.

Martyn Noble
CEO & Co-founder

Interesting Fact: Played a high standard of semi-professional rugby union (too many years ago now!)

Favourite Music: Led Zeppelin – Stairway to Heaven…my first live gig – Knebworth 11th August 1979, the track never grows old and is the iconic song of ‘hope’ whatever mood you are in when listening too it…and I’m still trying to work out what the lyrics mean!!

Favourite Quote: “Know your customers, Know your People, Know your Numbers” – plagiarised from Sir John Harvey Jones when I met him very early on in my career and values I stick to in my business life.