DDP Shipping

DDP shipping, or Delivery Duty Paid shipping, is a shipping term that means the sender will pay the fees associated with delivering an international shipment and assume all risk for that package. DDP shipping is the alternative to DDU (Delivery Duty Unpaid) shipping, in which the package recipient is responsible for paying these fees once the package arrives. 

Under DDP shipping, the sender assumes responsibility for all fees and risks associated with shipping; but that doesn’t necessarily mean the sender is bearing the full expense. Many direct-to-consumer brands that ship internationally will bake the cost of duties, taxes, and other fees into their prices or into the shipping costs that the customer pays at checkout. This way, the customer is still footing the bill, but the company is assuming responsibility for any and all fees. 

DDP shipping is used to protect the buyer by holding the sender responsible until the customer receives their product. Delivered Duties Paid shipping can make the overall shipping process simpler.

The International Commercial Terms, or incoterms, are the rules that define the responsibilities of buyers and sellers engaged in international commerce. They are intended to standardize commerce to ensure clarity and consistency. DDP incoterms are the rules within the International Commercial Terms that govern DDP shipping.

DDP is commonly used for sending international ecommerce orders because it simplifies the sales process for the buyer, which makes them more likely to complete a purchase. Growing companies often find it easier to use this type of shipping when expanding into new markets.

DDP encourages international sales in four primary ways: 

1. DDP protects the buyer. Delivery Duty Paid shipping can help consumers avoid scams. When the seller is responsible for all the fees associated with delivering a package, they’re incentivized to ensure their customers actually get what they paid for. The nuances of shipping DDP represent too high of a bar for scammers to attempt to clear.
2. DDP ensures the safe delivery of international shipments. When the risks of sending a package are the seller’s responsibility, it becomes a priority for the seller to find the best, safest means of sending the package. 
3. DDP holds sellers responsible for fees. Consumers don’t have the tools to accurately predict the cost of shipping internationally, including international duties and taxes. If packages are shipped DDU, consumers are less likely to buy because they’ll be committing to paying an unknown amount when the package arrives.‍
4. DDP streamlines the delivery of international shipments. When a package is delivered DDP, it can be dropped at a customer’s doorstep because the fees associated with shipping it have been paid by the sender. Customers may have to pick up their package at the post office to pay the necessary duties and taxes when their order is shipped DDU.

As we’ve mentioned, DDP shipping means the sender is responsible for all fees and risks until a package is delivered. This responsibility includes obtaining necessary licenses, organizing transport through a reliable carrier, securing customs clearance, satisfying all customs and inspections requirements, and paying for all costs associated with transportation, fees, taxes, and damages.

Let’s go a step further by breaking down the DDP shipping timeline.

Step 1: The seller hands the package over to a carrier.

After a customer places an order, the seller will begin order fulfillment and prepare the package for shipment at its closest fulfillment center and hand the package over to a carrier. At this point, the seller assumes all liability for the package. Fees: Cost of shipping, carrier surcharges, optional shipping insurance 

Step 2: The carrier ships the package to its destination country. 

Depending on where the package is starting out and where it’s headed, it may travel by land, sea, or air. International shipping usually requires the package to change hands quite a few times, so sellers are better off using trusted carriers. The seller still holds all liability for the package, so they’ll want to minimize the risk of the order being damaged or lost in transit. Fees: Applicable export fees and damage fees

‍Step 3: The package arrives in its destination country.

Once the package arrives in its destination country, it will be charged VAT, or value-added tax. Both the VAT and any customs duties associated with importing the package are charged to the sender. Fees: Import fees, customs duties, VAT, applicable storage and demurrage fees

Step 4: The package is delivered to the customer. 

When the package is dropped by the carrier at its final destination, the liability is transferred to the buyer. It’s at this point that DTC brands may hear from customers if there is an issue with the order. Proof of delivery is the responsibility of the sender.

Delivery Duty Paid generally benefits the buyer, as they'll only be responsible for the cost of the goods and any shipping fees charged by the seller. That said, DDP shipping can be very beneficial for ecommerce businesses that are selling abroad.

DDP shipping may reduce the rate of cart abandonment that ecommerce brands—especially those in the DTC space—see in international markets. DDP shipping signals to the consumer that the price they see is the price they pay—they won’t be gambling on the unpredictable cost of duties and taxes. DDP adds another layer of convenience for these consumers, because the package can be delivered to their home, as opposed to their local post office. 

Of course, the expense of DDP shipping can be prohibitively high for many ecommerce businesses; but the company doesn’t have to eat the entire cost. Many businesses calculate their average shipping costs to specific regions and bake a portion of those expenses into their product pricing or shipping fees. In some cases, third-party software or the company’s 3PL may be used to calculate the landed cost of a shipment on a per-order basis at checkout, which allows the brand to charge customers based on the cost of shipping their individual order.

While DDP shipping is attractive to the buyer and can increase overall sales and orders abroad, it’s also complex. So much responsibility is placed on the seller, including compliance with international customs agencies, the risk of loss or damage, and the expense of international shipping fees. 

These cons can be mitigated through a handful of strategies. Companies that are just branching into international fulfillment may elect to use DDU shipping until they feel ready to take on the responsibility of DDP shipping. Brands with established international demand may use localized fulfillment centers to fulfill international orders at domestic rates by using an origin point within the destination country. In both cases, these brands benefit from working with a fulfillment partner that can assume some or all of the responsibility of international fulfillment.

Delivery Duty Paid, or DDP, is common in ecommerce, especially among large and established retail brands, because it simplifies the international shipping process for consumers and may make them more likely to complete a purchase with an international company. 

But customs rules and fees vary by country and can be lengthy, complicated, and expensive. In some cases, it may make sense for an ecommerce company to use Delivered Duty Unpaid, or DDU, shipping instead.