A major hurdle for e-commerce businesses is how to cost effectively ship products internationally. This includes both shipping and handling costs, but often how customs and duties are treated is overlooked. Handling customs and duties correctly is essential in ensuring that international shipments arrive to the end recipient and that there are no additional surprise fees. This can be difficult, especially if orders are coming in from all across the world.
There are a two main options for treating customs for shipments of international orders Delivery Duty Paid and Delivery Duty Unpaid. Selecting which option to use will depend on the customer experience you are looking to create as well as how much you would like to spend.
The main difference is that the shipper is responsible for duties and customs fee with Delivery Duty Paid and the customer or recipient is responsible when shipped Delivery Duty Unpaid
Deliver Duty Paid:
Delivery Duty Paid is where the shipper pays for all duties. The shipping rates will be a bit higher and once products arrive in country duties will be assessed on all products. The shipper pays for the duties, but this can be setup in so that duties are paid by recipients when they purchase the goods.
Pros: Consistency. The duties will be the same every shipment and the customs process is very clear and transparent. If done correctly shipments should not be held up in customs. The recipient will have a very consistent experience and not be surprised by additional fees.
Cons: All shipments will be assessed duties not just randomly selected shipments.
Delivery Duty Unpaid:
Delivery Duty Unpaid is where the recipient is responsible for all duties. Duties are assessed on randomly selected packages by customs officials. If the package needs duties to be paid there will also be a duty collection fee added. The results are that sometimes a recipient will be charged duties plus a collection fee and other times there will be no duties due. Many times recipients will not claim items with duties in the hope that the shipment will be resent and not be assessed duties.
Pros: Not all packages are inspected by customs so there is a chance that no duties will need to be paid. Shipments can also be sent at a slightly lower rate. This results in lower costs to customers.
Cons: There is an additional fee to collect duties if duties are due. The inconsistency of whether duties are needed can also make the customer experience unpredictable and can lead to confused and unhappy customers. Customers can also refuse to pay duties and the item will be sent back, which may result in a refund or additional shipping costs of sending a new product.
The best way to ship international orders will be dependent on your brand, the cost and type of the items you are shipping, as well as the customer experience you would like. International shipping and customs can be very daunting but there is a lot of opportunity to increase the distribution of your products.