The Basics of B2B Shipping
Manufacturers and general wholesale providers have typically used the Delivered Duty Unpaid (DDU) approach due to the nature of the products’ classification and the actual value of the products being shipped. Express providers have streamlined this process by creating specific localized relationships with their customers (buyers). This is ideal and possible because there are regular shipments sent to and received by a consistent consignee, helping import clearance.
The Typical Business to Consumer Shipper
For businesses selling directly to consumers, there will be a larger and more diverse customer set who buy a larger assortment of products. These purchases do not follow a regular pattern in the way that a manufacturer/supplier and customer will. Because the shipments are unique and in larger volumes, customs clearance will not be as simple as for B2B.
The Amazon Effect
US consumers have come to expect their shipments to be delivered quickly at low or no cost. This is largely due to the effects of Amazon Prime and the Amazon customer experience.
This same level of service has also become the norm for products that are being shipped internationally. This puts more pressure on the seller, as the buyer could be anywhere in the world, presenting the additional challenge of cross-border shipping.
Each country has its own unique set of requirements and restrictions that affect the value of the product, the quantity of what is being shipped, and so on. These requirements constantly change, which can have an impact on the customer experience.
Understanding Delivery Duty Unpaid
DDU is the most common method of shipping orders to customers and remains the obvious choice for B2C businesses with a few pros and cons. Firstly, the responsibility for any duties and taxes is that of the buyer. The customer wants their order to be delivered as fast as possible, at the cheapest cost. DDU shipments can be slower as they will typically run through a longer customs receiving period, plus the buyer could also pay the costs of any extra duties or taxes.
Understanding Delivery Duty Paid
Delivered Duty Paid (DDP) means that the seller fulfills the obligation to deliver when the goods have been made available at the named place in the country of importation. The seller has to bear the risks and costs, including duties, taxes, and other charges of delivering the goods that are cleared for importation.
To meet the expectations of customers, sellers typically use DDP when shipping across borders. The customer will have a better, more seamless experience (faster, no customs). However, the burden of duties and taxes is now the responsibility of the seller. Typically, these costs need to be paid upfront. For typical e-commerce businesses that sell a limited number of products, this can be optimized as the associated duties of products can be more effectively managed.
It becomes more of a challenge to manage larger sets of products mainly as a result of countries frequently changing rules and regulations.
Because the various rules and restrictions of each country can vary, it's recommended that as the seller, you understand the local value rules for the countries you ship to. As a general rule of thumb, DDU is generally the better approach for high-value shipments.
Using DDP when shipping is the best approach to have a great customer experience, however, it can be more expensive for a seller when dealing with the duties and taxes due to the nature of international shipping.
How to Set Your Incoterms in ShipHero
Incoterms are set by default as DDU (the client pays duties). In case you want to have different incoterms depending on the order, you will need to have different profiles created per carrier depending on whether you want to use DDP or DDU for certain orders.
Follow the steps on this help article to create a new Profile, you can name it for example “FedEx_DDP”.
Once you created this profile:
- Go to app.shiphero.com and select Shipping > Carriers.
- Select the carrier you want to set up from the drop-down menu.
- On the Connect your carrier account pop-up, choose the profile you created and complete the info with your carrier account details.
Once the new carrier profile is created you will need to click on the Settings button and on the pop-up menu choose the option you prefer. Depending on the carrier you will need to either:
- Check the Shipper Pays Duties option.
- Select Account or Shipper on the Duty Payment dropdown.
In case you don’t see this option, please contact our support team.
Once the profile and carrier are created, you can set up an Automation rule to make sure all orders you want to have DDP have that profile. You can select them by amount, country, state, SKUs, etc.
For more information about incoterms, see this article on How to Set Incoterms in ShipHero.