IOSS, DTP, DDP, DAP…SOS?

Still confused by EU shipping rules? Here’s what you need to know.

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Since the removal of the EU VAT de minimis and introduction of IOSS (Import One Stop Shop), many businesses have been left feeling totally confused by which delivery services they should be using to stop them from falling foul of their new VAT obligations. And do those services also cover them (or not) for addressing their other obligations, such as import duties, if the goods have been sold and fulfilled from outside of the EU?

Yes, one of the benefits of shipping under IOSS is that parcels are VAT exempt at border. This means you can avoid significant clearance fees from carriers, and parcels can be sent swiftly on their way to your happy customer without them receiving an unexpected VAT bill. However, with the launch of the VAT changes and implementation of IOSS on 1st July, the reality is that some businesses were simply not quite ready to be able to benefit from these changes.

It’s therefore understandable that many businesses are nervous about shipping to the EU. In fact, when we speak to retailers, we’ve found that some have considered halting sales to the EU for fear of unknowingly making the wrong decisions and sending parcels that are non-compliant. But the EU is our single biggest trading partner making up 43% of the UK’s exports (UKandEU.ac.uk, 2021). So, it’s a market that can’t be ignored especially if you have ambitions to grow sales.

Of course, great effort is being made by all to have everything in place. But this is of little consolation to the 1000s of UK-based sellers who are still getting to grips with post-Brexit shipping requirements, disruption to service levels and higher delivery costs.

In the meantime, the world of cross-border delivery can be a minefield! There are some subtle inconsistencies between carriers in terms of terminology and services – Is it DAP, DTP or DDP? Which carriers offer IOSS services? And what about ROW?

So, what delivery services should you be looking for to overcome compliance hurdles?

The good news is there are options!

1. IOSS

Of course, IOSS is the most simple and cost-effective way to manage your EU VAT compliancy. This electronic portal will give you a single IOSS number for VAT registration in all 27 EU Member States, making it easy to collect, declare and account for VAT in the EU, and pay via a single monthly payment. You will need to provide your IOSS number to your carrier, and parcels will then be VAT exempt at the border for faster Customs clearance. The end customer will also not have to pay anything when they receive their parcel and you, the sender, will not be liable for clearance fees.

What’s the catch?

IOSS can only be used for B2C orders not exceeding €150 and it requires you to appoint an EU-based intermediary so you may need to seek professional tax advice if you don’t know where to start.

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2. DTP – Duties & Taxes Paid

DTP (Duties & Taxes Paid) means that any Duties & Taxes revert to the sender. Typically, they’re paid for by the carrier at Customs and then you will be invoiced by the carrier for payment. Like IOSS, parcels sent under DTP are cleared at Customs and, because the seller is responsible for paying Duties & Taxes, there will not be any further costs incurred by the customer. This is a good option if you send goods valued above the €150 IOSS threshold, or if you haven’t yet got yourself set up with IOSS and want to deliver a friction-free customer experience.

What’s the catch?

Not all carriers offer a DTP option and some only offer it to a few countries, so there is no one-size-fits-all service. You will likely need to use multiple carriers and determine the best service for each parcel on a case-by-case basis.

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3. DDP – Delivered Duty Paid

Similar to DTP, DDP means Duties & Taxes are paid by the sender and not the receiver. However, there is a significant difference – DDP requires the sender to be the Importer of Record, which is the person officially responsible for making sure delivery is compliant with all legal regulations in the destination country. However, the Importer of Record also often needs to be tax-registered in the destination country. Some carriers have created their own services whereby the receiver can be the Importer of Record, however this is not a standardised service offered by all carriers.

What’s the catch?

If you do not have an intermediary in the destination country, your parcels may be rejected at the border. Germany, for example, is especially strict in enforcing this and will not clear any DDP parcels if the sender is not tax-registered in Germany. Often, sellers make the mistake of thinking they can send parcels DDP to pay for Duties & Taxes so customers don’t have to, but find parcels aren’t cleared at Customs because their company is not tax-registered in the country.

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4. DAP – Delivered At Place (Formerly DDU – Delivered Duty Unpaid)

This is usually the default shipping term and means that the end receiver is responsible for any Duties & Taxes, so your customer will be expected to pay any applicable charges before they can have their parcel delivered.

What’s the catch?

Although perhaps the easiest option, it can have a negative impact on the customer experience and cause a stumbling block for customers who may be concerned about what they’ll be expected to pay. So you may find some customers choose not to buy in the first place, or if they do buy and receive a bill for unexpected costs, may not buy from you again.

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Although eCommerce continues to grow at an extremely fast rate, it’s been a tough 18 months for online retailers who have had to navigate the complexities of Covid, Brexit and now the new EU VAT reform. And it’s not easy to keep on top of changing rules and regulations while managing carrier services and costs with variable demand and customer expectations.

One Stop Shop Delivery that’s one of a kind…

In response to this, we’ve updated our GFS International eCommerce Services to cover every possible scenario. GFS International supports delivery worldwide to 220+ countries and territories under ALL shipping terms – IOSS, DTP, DDP and DAP. With 3 service options – Express, Plus and Economy – we can build a tailored international delivery solution that meets the exact needs of your business, whether you have registered for IOSS or not.

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GFS International Express

GFS van illustration

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GFS International Plus

3 GFS boxes illustrative style

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GFS International Economy

With a global network of carrier partners and a team of international delivery experts, GFS can help you decide what to do next.

Talk to us to make sure your EU delivery is compliant and protected.

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