Delivered Duty Paid (DDP)
Learn why DDP may be beneficial for your international shipments.
Delivered Duty Paid (DDP) is a method for shipping goods internationally and is often used by businesses wanting to improve the recipient’s experience and provide them with transparency.
DDP is the equivalent of a billing option that allows the shipper to send a package internationally and have the associated duties, taxes, and any clearance fees billed back to themselves from the carrier after the package has been delivered.
International trade is complicated with many regulations and customs protocols that vary by country, making it hard to know what the true landed cost of a package will be. By shipping DDP, the duties, taxes, and clearance fees are billed back to the shipper. However, there are different procedures that businesses can take to cover these costs. Some businesses choose to absorb these fees for their receivers, while others allow the receiver to pre-pay, collecting the full amount at checkout.
When shipping DDP, the shipper is responsible for paying the duties, taxes, and fees, but that doesn’t mean they have to absorb those costs. In an ecommerce scenario, all the necessary fees can be collected from the customer at the time of checkout. This improves their experience in a few ways.
The pre-calculation and collection of duties, taxes, and fees gives shoppers complete visibility of the total landed cost of their order, which builds trust and eliminates the possibility of a second bill when their package is delivered. With DDP shipments, because everything is paid for upfront, shippers are often able to bypass complications at customs, resulting in a quicker and smooth delivery.
DDP and pre-calculating/collecting the landed cost can help businesses in the following ways:
- Improved customer experience: Presenting customers with full cost transparency creates confidence at checkout and decreases refused or returned packages.
- Eliminates confusion related to the total landed cost amount: Shipping DDP covers the duties, taxes, and all other fees required to get the shipment from the shipper to the recipient.
- Quick and smooth delivery: Shipping DDP allows for quicker clearance (because custom fees have already been paid) and smooth delivery to consumers without them worrying about an additional bill.
|Interchangeable terms with DDP (Delivered Duty Paid)||Interchangeable terms with DAP (Delivered at Place)|
|Free domicile||DDU (Delivered Duty Unpaid)|
|DTP (Duties and Taxes Paid by shipper)||DTU (Duty and Taxes Unpaid)|
|Bill sender for duty and tax|
Delivered at Place (DAP) is an Incoterm which means that the receiver is responsible for paying all associated duties, taxes, and clearance fees before receiving the package. DAP has been known in the past as "Delivered Duty Unpaid" (DDU), so don’t be confused by these terms being used interchangeably. When shipping DAP, the shipper sends the package, and then the carrier covers duties and taxes at customs and collects what they paid to customs from the recipient of the package upon delivery.
If the receiver is surprised by the additional bill, they may reject the parcel. If the parcel is rejected, the shipper can choose to have it shipped back to them, which would mean they pay for the duties and taxes that the carrier already paid, plus the shipping cost to return the package. The shipper may ultimately decide to abandon the package if the cost to return the package is more than the package is worth. However, some countries will not allow packages to be abandoned, so they force the return. This ends up being very costly for shippers and online retailers.
When DAP shipping is recommended
DAP is recommended for business-to-business (B2B) shipments when the receiving business is eligible to reclaim or refund duties and/or taxes. There must be a clear paper trail showing the receiving business paid the import duty and taxes. Submission for reclaim or refund is usually completed at the time of corporate-tax filing.
DDP is the best option for business-to-consumer (B2C) shipments because it provides a better international shipping experience whether the business covers the duties, taxes, and fees associated with the shipment or they are collected at the time of purchase. Transparency results in a more positive customer experience, increased probability of repeat customers, and trust built between the business and consumer.
Rules and regulations differ by country; some countries do not even allow packages to be shipped DDP. Understanding the different rules for different countries can be confusing, so it is important to consult an international shipping expert.