I didn't know any of these terms when I started shipping internationally. The first time a carrier asked me which term I wanted to use I had no idea what they were talking about. I asked different people: the logistics company, foreign business contacts, other founders. Everyone gave me a slightly different answer.
Then the problems started. Customers emailing saying their parcel never arrived. What had actually happened: the customs office in their country never notified them to pay the import tax, so the parcel sat there and eventually got returned. Some customers did receive the notice, paid the tax, and collected the parcel fine. Some didn't need to pay any tax at all and received everything quickly. Some parcels were held by local customs for several days before being released. Some just came straight back to me with no explanation.
Every time something went wrong I adjusted. And over time I found that DDP solves most of the return problem entirely. You charge the duties and tax upfront at checkout, the price is higher but the experience is cleaner. The parcel goes out, it arrives, the customer collects it. No surprise bills, no missed notices, no returns from customs limbo. It costs more to set up but for me the smoother experience is worth it.
Everyone is different and every market behaves differently. This is just what I found works.
These are the terms that actually matter for small e-commerce businesses, explained the way I wish someone had explained them to me.
The two terms I use most
For direct-to-consumer shipping, almost everything comes down to two choices: DDP or DPU.
DDP — Delivered Duty Paid
You, the seller, cover everything. The product, the shipping, and all import taxes and duties. The customer receives the parcel at their door and pays nothing extra. This is the best customer experience.
For the USA, this is the approach I use. Shopify and most major e-commerce platforms can calculate duties automatically at checkout, so the customer pays everything upfront in one transaction.
For the EU it gets more complicated. Local VAT laws including IOSS registration add a layer of compliance that's genuinely complex for a small business to manage. If that's too much to handle right now, use DPU instead and communicate clearly that the customer will handle local taxes on arrival.
DPU — Delivered at Place Unloaded
You pay for the shipping. The customer pays the local import taxes and duties when the parcel arrives. The customs office in their country will contact them directly, either before delivery or alongside the parcel.
This is the current standard Incoterm as of 2020 and the one I use for wholesale and B2B orders. The key is communication. Say it clearly in your shipping policy, on the product page, and again in the delivery confirmation email.
Not every shipment will have duties. Some countries have trade agreements that reduce or eliminate them, and some low-value shipments are exempt. But warn customers anyway so there's no surprise either way.
A note on customs scams. Remind customers to verify that any duties notice they receive is from an official source. Scammers do impersonate customs agencies and charge fake fees. A quick line in your delivery email can save your customer a real headache.
"The problem is never the term itself. It's sellers not warning customers what to expect."
DAP (Delivered at Place) is similar to DPU. The technical difference is that with DPU the seller is responsible for unloading costs, with DAP that falls to the customer.
For small parcel shipping this rarely matters since the carrier handles it anyway. DPU is the more current term so that's what I use.
Quick reference
Scenario |
Term |
Who pays duties |
Customer experience |
|---|---|---|---|
| Direct customers | DDP | Seller pays upfront at checkout | Nothing extra on delivery |
| Wholesale / B2B | DPU | Customer pays on arrival | Customs bill on delivery |
When a customer arranges their own shipping
These terms apply when a larger business customer wants to control the logistics themselves.
FCA — Free Carrier
You hand the goods to the customer's chosen carrier at your location. They handle everything from that point. Use this when a larger customer has their own shipping arrangements and simply needs you to hand the goods over.
EXW — Ex Works
You put the goods at your door. The customer handles everything from there: collection, export paperwork, shipping, all of it. For large experienced retail partners or international distributors who have the infrastructure to manage it.
Sea freight terms (for when orders get large)
These are included because they come up eventually. You probably won't need them yet.
FOB — Free On Board
The most common sea freight term. You load the goods onto the ship at port. The customer takes all cost and risk from that moment. Used for full container loads when the customer has arranged the main ocean booking.
CIF — Cost, Insurance and Freight
You pay shipping and basic insurance to the destination port. Used when the customer wants you to arrange both shipping and insurance for large sea freight orders.
CFR — Cost and Freight
Same as CIF but without the insurance. You pay shipping to the destination port, the customer arranges their own insurance.
FAS — Free Alongside Ship
You get the goods to the side of the ship at port. Only relevant for bulk non-containerised cargo. Not something a small brand is likely to encounter.
Everything here is based on personal experience running a small e-commerce business shipping internationally. It's what I learned and what I use. It's not legal advice and every situation is different. When in doubt, ask your carrier or a customs broker. They've seen it all. They should be the right people to help you.
