What is DDU Shipping? How DDU Works | Airhouse Glossary (2024)

DDU shipping is an agreement between the buyer and seller that the buyer will be responsible for paying the customs duties and taxes levied on an imported package, and will assume the liability of customs clearance at the package’s destination. Delivered Duties Unpaid is an alternative to Delivered Duties Paid shipping, or DDP shipping, in which the seller is responsible for all the fees associated with shipping a package internationally.

When a package shipped DDU arrives in its destination country, the buyer will be notified by customs officials to settle the outstanding taxes and fees. In some cases, this means the buyer has to pick up their package from a local post office.

Shipping DDU helps reduce shipping costs for businesses and may be easier for companies that are unfamiliar with foreign compliance and regulation. DDU and DDP are International

Commercial Terms (incoterms), internationally recognized rules that define the responsibilities of buyers and sellers engaged in international trade.

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While DDP shipping is growing in popularity for ecommerce brands, DDU shipping offers a more affordable way for businesses to break into international consumer markets. These are some of the reasons businesses may choose to use DDU shipping:

Introduce a product to international markets

Especially for direct-to-consumer brands that haven’t fulfilled international orders before, DDP shipping can come with sticker shock. The cost of sending even small packages across borders can add up quickly when you take into account customs duties, VAT (value-added tax), and other fees.

Some DTC brands may choose to use DDU shipping as they begin fulfilling internationally, either until they’ve gotten comfortable with the complexities of DDP shipping or until they’ve generated demand in another country or region.

Some companies may opt to keep shipping DDU indefinitely—it all depends on that company’s goals, financial circ*mstances, and consumer base.

Lower landed cost

The most obvious benefit of DDU shipping is that the company saves itself the expense of international shipping fees. With the customer footing the bill, the company’s landed cost shrinks significantly, making more room for profit.

Lower prices

Businesses that use DDP shipping often bake the bulk of the cost of international shipping fees into the shipping fee they charge the customer or into their prices. Without this responsibility, the company may be able to lower its prices, which could help the business to undercut their competition or encourage international consumers to buy.

Less liability and complexity

Delivered Duty Unpaid shipping puts the liability of the delivery on the customer. That means the company isn’t liable for import clearance, and eases the burden of configuring the most secure shipping routes.

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DDU shipping means the seller is responsible for transportation expenses and all risks during transport, but the buyer is responsible for import duties, taxes, and customs clearance. DDU shipping differs from DDP shipping in that the buyer assumes responsibility for the shipment earlier.

With Delivered Duties Unpaid shipping, the seller must obtain necessary licenses to export goods, organize transportation through a reliable carrier, and pay for all transportation expenses. Once the shipment arrives in its destination country, the responsibility is shifted to the buyer, who must secure customs clearance, satisfy all customs and inspections requirements, and pay for all costs associated with duties and taxes.

Now let’s break down the steps of DDU shipping, including fees and liability for both the seller and the buyer.

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, then hand the package over to a carrier. At this point, the seller is liable for the shipment. Fees: Cost of shipping, carrier surcharges, optional shipping insurance

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

Depending on its origin and destination, the order may travel by land, sea, or air. Since international shipments usually change hands quite a few times, sellers should use trusted carriers. The seller still holds all liability for the package during transit, so they’ll want to minimize the risk of the order being damaged or lost. Fees: Applicable export fees and damage fees

Step 3: The package arrives in its destination country.

Once the package arrives in its destination country, the liability is transferred to the buyer. At this point, the package is cleared by customs and incurs duty fees and VAT, or value-added tax. Both the VAT and duties will be charged to the buyer.

‍Step 4: The customer accepts the package.

When the package arrives in its destination country, the buyer will be notified by customs and must pay the duties and taxes on the shipment to receive it. Sometimes this means the customer has to go to their local post office to pick up the package. Fees: Import fees, customs duties, VAT, applicable storage and demurrage fees

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If there are delays at customs, the buyer may be charged storage and demurrage fees while the package is held by the authority.

DDU is primarily an advantage for the seller. As we described earlier, DDU shipping can allow businesses to branch into international markets for the first time, lower their own landed cost, lower prices for consumers, and ultimately avoid some of the responsibility and complexity that comes with DDP shipping.

Buyers may benefit from the company’s savings if the company opts to lower its prices, or if the import fees on their individual order are less than what they’d pay in aggregate if the company baked their expenses into their shipping costs. That said, this would only happen in rare circ*mstances; for the most part, DDU benefits the seller in DTC order fulfillment.

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The biggest risk that companies using DDU shipping face is alienating their customers.

Nobody likes surprise charges. So if the merchant doesn’t communicate that additional fees and taxes will be due on arrival, the buyer could back out and refuse delivery. Even if the buyer does begrudgingly accept the charges, the company is running the risk of losing repeat business and damaging their reputation with consumers.

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Delivery Duty Unpaid, or DDU, offers cost savings for ecommerce companies fulfilling international orders. When clearly communicated to consumers, it’s a way for brands to reach new audiences without taking on the entire expense of shipping those orders.

But high shipping costs can often alienate consumers and lead to high rates of cart abandonment. DDP shipping is gaining popularity as a more buyer-friendly way of reaching new consumer markets.

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If your ecommerce business can benefit from access to a vast shipping and warehouse network accompanied by advanced technology and tools, Airhouse can help make it a reality. Contact our fulfillment experts to learn how we can help your company go the extra mile.