About DDU and DDP
The Basics - Starting With B2B Shipping
Manufacturers and general wholesale providers have typically used the Delivered Duty Unpaid (DDU) approach due to the nature of the products’ classification and the actual value of the products being shipped. Typically, express providers have streamlined this process by creating specific localized relationships with their customers (buyers). This is ideal and possible because there are regular shipments sent to and received by a consistent consignee, helping import clearance.
The Typical Business to Consumer Shipper
For businesses selling directly to consumers, there will be a more diverse and larger customer set who buy a larger assortment of products. These purchases do not fit a typical pattern in the way a manufacturer / supplier and customer will. Because the shipments are unique and in larger volume, customs clearance will not be as simple of B2B.
The Amazon Effect
US Consumers have come to expect their shipments to be delivered fast, at low or no cost. This is largely due to the Amazon Effect of Prime, and the Amazon customer experience.
This same level of service has also become the norm for products that are being shipped internationally. This is a challenge for the seller, as the buyer could be anywhere in the world, and will now need to meet the criteria and process of cross border shipping.
Each country has it's own unique set of requirements and restrictions that affect value of the product, quantity of what is being shipped and so on. These requirements constantly change, which can have an impact on the customer experience.
Understanding "Delivery Duty Unpaid"
The most commonly used method of shipping orders to customers, DDU shipments are the obvious choice for B2C businesses with a few pros and cons. Firstly, the responsibility for any duties and taxes are that of the buyer. The customer wants their order to be delivered as fast as possible, at the cheapest cost. DDU shipments can be slower as they will typically run through a longer customs receiving period, plus the buyer could also pay the costs of any extra duties or taxes.
"Delivered duty paid" means that the seller fulfills the obligation to deliver when the goods have been made available at the named place in the country of importation. The seller has to bear the risks and costs, including duties, taxes and other charges of delivering the goods thereto, cleared for importation.
To meet the expectations of customers, sellers typically use DDP when shipping cross borders. The customer will have a better, seamless experience (faster, no customs) however, the burden of duties and taxes are now the responsibility of the seller. Typically, these costs need to be paid upfront. For typical e-commerce businesses who sell a limited number of products, this can be optimized as the associated duties of products can be more effectively managed.
It becomes more of a challenge to manage for larger sets of products mainly as a result of countries frequently changing rules and regulations.
Because the various rules and restrictions of each country can vary, it's recommended that as the seller, you understand the local value rules for the countries you ship to. As a general rule of thumb, DDU is generally the better approach to high value shipments.
Using DDP when shipping is the best approach to have a great customer experience, however, it can be more expensive for a seller when dealing with the duties and taxes due to the nature of international shipping.