Shopify Duties at Checkout Explained: DDP, DAP, and the Refused Parcel

The refused parcel is the expensive one

A customer in Paris buys a bag from a UK store. The parcel ships, a customs bill arrives at the door, and the customer either refuses delivery or leaves a one-star review. The store has now paid outbound shipping, return shipping, and the cost of a customer who will not come back, all because the duty was not collected at checkout. Duties are the single biggest cause of refused cross-border parcels, and the fix is not better shipping. It is showing the full landed cost before the customer pays.

That is the whole argument for duties at checkout. A buyer who sees the duty as a line at checkout can decide with the full price in front of them. A buyer who discovers it at the door feels tricked, and a tricked buyer does not become a repeat buyer. The store that collects duties at checkout is not being generous. It is being honest about the price.

DDP versus DAP, in one paragraph

Delivered duty paid, DDP, means the store collects the duty and tax at checkout and the parcel clears customs with nothing more to pay. Delivered at place, DAP, means the customer pays the duty on delivery. DDP converts better and refuses less, because the price at checkout is the final price. DAP is cheaper for the store to offer, because the store carries no duty risk, but it pushes the surprise onto the customer, and the surprise is what kills the order.

Shopify calculates duties at checkout from the product's HS code and the destination country, and adds them as a line the buyer sees before paying. That calculation only works if every product has an HS code and a country of origin. Without them, Shopify estimates, and the customer can still be charged on delivery. The data entry is the feature.

The codes and thresholds that decide the duty

Every product needs an HS code, the ten-digit classification that decides the duty rate, and a country of origin, which decides which trade rules apply. A store that has not set these is not selling internationally. It is guessing internationally, and the guess lands on the customer.

The thresholds that catch merchants out are specific. Selling into the EU, VAT applies from the first sale for a seller outside the EU, and the IOSS scheme covers parcels up to 150 euros, letting the store collect VAT at checkout instead of leaving it to customs. The 10,000 euro threshold only covers EU-based sellers. For the UK, overseas sellers must register for UK VAT and charge it on parcels of 135 pounds or less, while the 90,000 pound threshold only applies to UK-based businesses. Australia requires GST registration once sales into Australia cross its threshold. A store that does not know which side of each threshold it sits on is not ready to sell into that market.

Managed Markets, and when it is worth the fee

Shopify Markets itself is free on every plan, and it handles currency, language, domains, and duty calculation. Managed Markets, formerly Markets Pro, adds Global-e as the merchant of record: it registers for and remits taxes, handles customs paperwork, and guarantees the duties the customer sees at checkout. The cost is 3.5 percent per international order, 3.25 percent on Plus, plus currency conversion and normal card processing.

The fee is worth it when the store's international volume is large enough that a refused parcel or a tax mistake costs more than the percentage, and when the store does not want to own tax registration in a dozen countries. It is not worth it for a store with a handful of international orders a month, where the free Markets tools and a careful HS code pass do the same job. The decision is arithmetic, not ideology.

Frequently asked questions

What is the difference between DDP and DAP on Shopify?

DDP, delivered duty paid, means the store collects duty and tax at checkout and the parcel clears customs with nothing more to pay. DAP, delivered at place, means the customer pays the duty on delivery. DDP converts better and refuses less, because the checkout price is the final price.

Why do I need HS codes on my Shopify products?

Shopify calculates duties at checkout from the product's HS code and destination country. Without an HS code and a country of origin on every product, Shopify estimates, and the customer can still be charged on delivery.

What is IOSS for Shopify sellers?

IOSS is the EU scheme that lets a seller outside the EU collect VAT at checkout on parcels up to 150 euros. Without it, the customer pays VAT at import. The 10,000 euro threshold only covers EU-based sellers.

What does Managed Markets cost?

Managed Markets makes Global-e the merchant of record for a 3.5 percent fee per international order, 3.25 percent on Plus, plus currency conversion and normal card processing. It handles tax registration, remittance, duties, and customs paperwork.