Guide to DDP shipping for e-commerce shippers

May 23, 2024
Guide to DDP shipping for e-commerce shippers

International e-commerce is thriving, but navigating customs can be a daunting challenge. Especially as shippers often want to avoid passing along the hassle of extra fees to end customers. Shippers can avoid passing along costs by delivering DDP or Delivery Duty Paid.

What is DDP shipping, and what does it entail?

Delivered Duty Paid (DDP) is one of the 11 incoterm rules established by the International Chamber of Commerce, placing the highest responsibility on the seller and the least on the buyer. The seller is accountable for all costs and risks of transporting the goods to the specified destination, including clearing the goods for export and import and completing all necessary customs procedures. When a seller ships goods to customers in countries with customs borders using DDP, they are responsible for all duties and taxes associated with the shipment. This means that the customer pays no additional charges upon delivery.

These four main steps are important to remember and follow to simplify the complicated supply chain process and make DDP successful.

Step 1: Seller drops off package with a carrier - seller liability 

The seller either delivers the package to a trusted carrier or the carrier picks it up. Using trusted carriers is encouraged as it reduces overall shipping costs.

Step 2: Package is shipped to delivery location - seller liability

Parcels can be shipped using various methods, including ships, planes, and trucks. Partnering with a reliable shipping company lowers the seller's risk and ensures the package is delivered.

Step 3: Package arrives at the destination and incurs Value Added Tax (VAT) + duties - seller liability

A key advantage of DDP shipping is that the buyer does not have to pay VAT or duties. The seller covers the VAT cost and duties for the shipment.

Step 4: Package is delivered to the destination - buyer liability

Upon delivery, the buyer assumes responsibility for the product. For D2C companies, this is the point at which customers might reach out if there are any issues with the delivery.

DDP, Delivery Duty Paid

What are the challenges with DDP incoterms for international shippers?

With DDP shipping, sellers are to bear the most responsibility and risk as they are in charge of delivering the goods to the buyer's location, handling customs clearance, and paying duties and taxes. This responsibility, of course, comes with some potential challenges. Two of the main concerns are:

Risk of higher costs: While the seller bears the responsibility for covering all expenses such as duties, taxes, and transportation in a business transaction, this can pose a risk of escalating their costs. As a result, sellers may need to price their goods higher to compensate for these additional expenses, potentially deterring some customers from making purchases. It is essential for sellers to carefully evaluate and manage these cost factors to maintain competitiveness in the market while ensuring profitability. Implementing cost-effective strategies and negotiating favorable terms with suppliers can help mitigate the risk of higher costs and enhance overall business sustainability.

“DDP shipping can be challenging for inexperienced sellers due to intricate customs regulations. Seven Senders leverages its strong expertise to guide customers through all necessary prerequisites and offers a robust DDP-based customs solution that ensures seamless customs clearance.” - Julian Meichsner, Senior Business Development Manager - Customs Services.

Less control over customs clearance: Less control over the customs process can lead to delays or complications that affect delivery speed. Any issues during this process, such as missing documentation or restricted items, can also result in potential additional fees. Working with a reliable customs clearance partner can help streamline the clearance procedure and avoid potential setbacks.

Why DDP matters for e-commerce businesses

Adopting a DDP approach to international shipping offers many benefits for online shops. Firstly, it provides transparency, as customers know what they're paying upfront, increasing trust and satisfaction. Additionally, DDP reduces shipping costs for both businesses and customers, making products more accessible globally. Ultimately, it leads to an enhanced customer experience, fostering loyalty and repeat business.

By adopting DDP, e-commerce businesses can reap several benefits:

Reduced card abandonment: When customers know there won't be any surprise charges upon delivery, they're more likely to complete their purchases. DDP minimizes card abandonment rates. 

Improved customer satisfaction: Transparency regarding costs enhances the overall customer experience. Happy customers are more likely to return and recommend your business. 

Timely delivery of goods: With DDP, customers receive their orders promptly without any unexpected delays due to customs issues.

“Implementing DDP in e-commerce enhances customer experience by providing transparency and avoiding surprise fees, thus building trust and increasing customer loyalty.” - Julian Meichsner, Senior Business Development Manager - Customs Services.

Customs clearance with Seven Senders 

By working with Seven Senders as a customs clearance partner, your e-commerce business can unlock new growth opportunities and stay ahead of the competition. Our solution offers an easy, worry-free way to manage outbound and inbound cross-border shipments to European countries with customs borders. And best of all, your customers won't experience any extra costs or hassle. 

“Seven Senders can explain and consult companies about DDP, where the challenges lie in using it, and how you can implement it into your daily business.” - Daniel Kuhn, Head of  Customs Services. 

Ready to streamline your international shipping with DDP? Learn more about customs clearance with Seven Senders here.

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