If you have ever shipped a package internationally, you have probably heard of the terms DDU and DDP shipping. While these terms, which stand for Delivered Duty Unpaid and Delivered Duty Paid respectively, might seem similar, they are quite different when it comes to cross-border shipping.
When a parcel is shipped to another country, there are certain taxes and duties that must be paid in order for the package to get through customs and arrive on a customer’s doorstep.
Delivered Duty Unpaid (DDU) shipping is a shipping method that requires customers to pay any taxes and duties that are owed for an item they purchase internationally. With this shipping method, customers are responsible for paying taxes and duties, often without knowing these costs in advance, before they receive their products.
With Delivered Duty Paid (DDP) shipping, all taxes and duties are paid by the ecommerce business upfront. This means that all taxes and duties are prepaid at checkout, and the customer will not have to pay any additional costs in order to receive their products.
While there are advantages for each of these shipping methods, the shipping industry is slowly but surely moving toward DDP shipping, and for good reason.
Why DDP shipping will become the industry standard
While Delivered Duty Unpaid shipping is the most common method for international shipping, and it might immediately appear to be more cost-effective for ecommerce businesses that ship globally, it can also present costly problems for both ecommerce retailers and their customers.
When businesses put the onus on their customers to pay taxes and duties, they end up paying more in return shipping and customs fees when customers ditch their items, and they also risk losing loyal, repeat customers.
Delivered Duty Paid Shipping is going to become the industry standard for ecommerce retailers because it prevents these issues and helps both businesses and their customers with cross-border ecommerce.
In addition to benefitting businesses and their customers, new Value Added Tax (VAT) measures will also make it necessary for ecommerce businesses to move to DDP shipping. In order to stay competitive when these new policies are put into place, international retailers will need to use DDP shipping providers.
Here are few reasons why DDP shipping will be the preferred shipping method for ecommerce merchants:
DDP shipping is the answer to new VAT measures
The European Union has put new VAT compliance measures into place that will affect international shipping. While there used to be a de minimis threshold under which imported goods were sales tax and duty free, the EU is doing away with this threshold in 2021, effectively ensuring that all cross-border purchases will be subject to Value Added Tax.
Because all imported goods will require a VAT tax in 2021, it is more important now than ever for international ecommerce businesses to provide the total costs for their products upfront. All European consumers who make cross-border purchases will be subjected to this tax, increasing the chance for unexpected fees or customs delays if they are unable to pay the full landed costs at checkout.
Because of the new VAT measures enacted by the European Union, DDP shipping will eventually become a must for international merchants shipping their goods to Europe.
DDP shipping offers countless benefits to consumers and ecommerce retailers, and there is no doubt that these benefits will lead to DDP become the industry standard for ecommerce retailers.
DDP shipping is great for customers
One of the main reasons why DDP shipping is becoming more common among ecommerce retailers is because it allows all taxes and duties to be paid at checkout.
Prepaid taxes and duties prevent customers from being hit with costly and unexpected fees in order to receive their goods. When customers are responsible for paying taxes and duties, they are often unpleasantly surprised by these additional fees when they are waiting for their parcel.
If these customers do not want to pay these extra costs, they have to surrender their package at customs, which is not good for either the customer or the retailer who has to pay to return the item. These customers will not be satisfied because they will never receive their parcel.
Customers that are willing to pay the fees are less likely to trust a business if after dealing with these unexpected additional costs. Ultimately, putting the responsibility for paying taxes and duties on the customer can damage the business-customer relationship.
DDP shipping gets rid of this headache by allowing customers to see exactly what they need to pay at checkout. With the confidence that there will not be any hidden costs or unexpected fees, customers are often more willing to make a purchase. 55% of customers will avoid making a purchase online because they are worried about unexpected, extra costs like taxes and duties.
With DDP shipping, ecommerce retailers can give their customers peace of mind when they shop internationally by letting them know accurate landed costs upfront.
DDP shipping is great for ecommerce retailers
In addition to helping customers, DDP shipping is also beneficial for ecommerce merchants. DDP shipping helps ecommerce retailers save money, and it ensures that all packages will clear customs without any headache.
Although Delivered Duty Unpaid shipping might seem cheaper, it often ends up being more expensive than Delivered Duty Paid shipping. This is because DDP shipping fees are fixed. Whereas with DDU shipping, there are unpredictable brokerage and storage fees that are impossible to estimate in advance, with DDP shipping, you will know the exact landed costs owed at checkout, and there will be no reason for any additional fees to accrue during the shipping process. Because of this, DDP shipping can be several times cheaper than DDU shipping in the long run.
Businesses that use DDP shipping also reduce the risk of customers abandoning their products at customs, which results in costly return fees and a loss of sales and repeat customers. DDP shipping is great for ecommerce retailers, especially those that ship products internationally.
DDP shipping is preferred by consumers in Europe
DDP shipping is becoming one of the preferred shipping options for consumers in the European Union. Considering that ecommerce in Europe is worth over 602 billion euros, and this market is only growing, it is important for shipping providers to keep up with the growing demand for transparent delivery.
DDP shipping is especially useful for consumers living in Europe because the European Union charges taxes and duties on products as low as $25 US. This means that consumers that purchase online will face unexpected fees if they make purchases above this amount. European consumers value transparency when it comes to shipping costs and fees, which is encouraging many businesses to search for providers that offer DDP shipping.
This is a major reason why many shipping providers are starting to incorporate DDP shipping into their own shipping practices. Major ecommerce solutions have recently added features like a landed cost calculators so that e-commerce retailers and consumers can see their duties, taxes, and fees at checkout. As shipping providers continue to recognize the advantages of DDP shipping, it is slowly becoming the norm.
DDP shipping and Zenda
When it comes to cross-border shipping, Zenda is ahead of the curve. Zenda is a Delivered Duty Paid shipping provider that recognizes the benefits that this shipping method can have for both ecommerce retailers and their customers. Powered by British Airways, Zenda makes international, DDP shipping a breeze through our taxes and duties calculator, SKU mapping, and automatic customs clearance.
Taxes and duties calculator
Thanks to Zenda’s accurate taxes and duties calculator, customers can see real-time landed costs at checkout. This will ensure that these fees are paid during the checkout process rather than later for product delivery. With this calculator, your customers will know their total costs upfront, and your business will not have to worry about bearing the costs that come with return shipping, product abandonment, or losing repeat customers.
In order to make sure that all the taxes and duties for a customer’s item are calculated correctly, businesses need to make sure that all of the products they are shipping internationally are properly declared and labeled.
Zenda makes this easy with SKU mapping. When you start using Zenda, all of your products will be mapped to commodity codes based on your product description and materials ensuring that the total landed costs will be as accurate as possible at checkout.
Automatic customs clearance
Because Zenda will map your products to commodity codes, provide accurate labelling, and allow all taxes and duties to be prepaid at checkout, your business will not have to worry about getting a parcel through customs. With automatic customs clearance, your customers will be able to trust that they will receive their products without any hassle.
As the global ecommerce market becomes increasingly competitive, Zenda knows how important it is to help businesses to get a leg up and stay on the cutting edge. With our reliable DDP shipping methods, fast 4 to 8 day delivery from the USA to Europe, and trustworthy door-to-door tracking, we guarantee that you will be able to offer your customers the shipping experience they deserve.
For more information about Zenda and how we can help your ecommerce businesses sell products to Europe, contact us!