An Incoterms Primer for E-commerce
What are they? Incoterms are standardized global trade terms that define who is responsible for what during a shipment (who pays for shipping, insurance, and customs duties). For e-commerce, you really only need to know two: DAP and DDP.
Why is it important? These terms define your promise to the customer. Choosing the wrong one (or not knowing which one you're using) leads to surprise fees for your customer, which is the #1 cause of international customer complaints and chargebacks.
The Two Terms You MUST Know
| Term | What It Means | Who Pays Customs/Duties |
|---|---|---|
| DAP (Delivered at Place) | You (the seller) pay for shipping to the customer's country. The customer is 100% responsible for paying all import duties and taxes to their local customs office before they can receive their package. | The Customer 📦 |
| DDP (Delivered Duty Paid) | You (the seller) pay for everything. You pay for shipping, and you also pre-pay all the customer's import duties and taxes for them. The package arrives at their door with no extra fees. | You (The Seller) 🚚 |
Beginner's Best Practice
Almost all new e-commerce stores should use DAP. It is the simplest and safest model. You are only responsible for the shipping, and your website policy must be extremely clear that the customer is responsible for any local import fees. DDP is a more advanced (and expensive) strategy used by large brands to create a frictionless experience, often by using services like Shopify Markets Pro.
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