What Is Duty Handling on Shopify? Explaining the Difference Between DDU and DDP and How to Set It Up

Among those looking to start cross-border e-commerce on Shopify, many may feel uneasy about duties.

"Who pays the duty?"

"How is the tax amount determined?"

"I want to know how to set up duties on Shopify."

Reading this article will resolve the questions and needs above.

Duties are unavoidable in cross-border e-commerce, but the system is complex, and handling it incorrectly can lead to trouble.

Use the information introduced here as a reference to configure appropriate duty settings on Shopify and proceed with overseas sales with peace of mind.

※The information in this article is based on data as of June 2025

3 Key Points to Keep in Mind for Duty Settings on Shopify

Before diving into the specific setup methods, let's check 3 important points you should know when configuring duty settings on Shopify.

Point 1: What Are Duties? Taxes Incurred When Selling Products Overseas

In a nutshell, a duty (customs tariff) is "a tax levied by the importing country when goods cross a national border for import or export." It's established for purposes such as protecting domestic industries or securing national revenue.

In cross-border e-commerce, when a product is shipped from a Japanese store to an overseas customer, the product is treated as an "import" once it arrives in the customer's country, and duties may be levied by the local customs authority.

Note that, in addition to duties, some countries may also charge additional taxes such as "import consumption tax" or "value-added tax (VAT)."

In principle, the party importing the goods — that is, the overseas customer — is obligated to pay the duty.

Point 2: Who Pays the Duty? The Difference Between "DDU (Buyer Pays)" and "DDP (Store Pays)"

Depending on who pays the duty and when, it's broadly divided into two categories: "DDU (Delivered Duty Unpaid)" and "DDP (Delivered Duty Paid)." This is a very important point when deciding on your cross-border e-commerce operating policy.

Carefully consider whether DDU or DDP is right for you based on your company's situation.

Point 3: How Is the Tax Amount Determined? "HS Codes" and the "De Minimis" Tax Exemption Threshold

The duty amount is basically calculated using the formula "(product price + shipping cost + insurance premium) × duty rate." The "HS code" is important for identifying this "duty rate."

An HS code is a number used to internationally classify all kinds of products, and this number determines the duty rate for a product. When shipping a product, you need to include the accurate HS code on the international mail label or invoice. You can look up HS codes on sites such as the customs website.

Another thing worth knowing is "De Minimis." This refers to a "tax exemption system for low-value imports," where duties are waived if the taxable amount falls below a certain threshold (the de minimis value). For example, the de minimis value is 800 US dollars in the United States and 1,000 Australian dollars in Australia. Knowing this exemption threshold helps you judge which price ranges of products are more likely to be affected by duties. However, note that it may not apply depending on the country or product.

Also, the final total payment amount may include, in addition to duties, preferential tariff treatment under free trade agreements (FTA/EPA), VAT (value-added tax), import consumption tax, liquor tax, environmental tax, and customs clearance handling fees.

How to Set Up Duties on Shopify | Comparing 3 Operating Patterns

Further breaking down the duty payment patterns explained in the previous section results in the following 3 patterns.

• Pattern 1 (DDU): The buyer pays the duty upon receiving the product
• Pattern 2 (DDP-①): The duty is collected at the time of purchase, and the store pays it
• Pattern 3 (DDP-②): The duty is not collected from the buyer at all, and the store bears the cost

Here's an explanation of the operation and setup method for each.

Pattern 1 (DDU): The Buyer Pays the Duty Upon Receiving the Product

This method is the simplest and the one most stores adopt first. No special duty setup is needed on Shopify — you simply set shipping rates as usual and ship the product.

The duty and any other import taxes are billed directly to the buyer by the local customs authority or delivery carrier.

However, if the buyer isn't aware that a duty exists, it can lead to complaints or delivery refusal, so providing advance notice is extremely important.

Detailed countermeasures are explained in the section "[Shopify] Points About Duties You Should Communicate Before Purchase."

Pattern 2 (DDP-①): The Duty Is Collected at the Time of Purchase, and the Store Pays It

DDP, which eliminates the need for the buyer to pay a duty when receiving the product, improves the customer's purchasing experience. Thanks to an update in May 2025, all Shopify plans can now configure duty collection as a standard feature. This lets you collect the duty at the time of purchase and have the store pay the duty when shipping, so the customer no longer needs to pay any duty upon receiving the product.

This pattern requires configuration on Shopify, so here are the steps.

From the admin, go to "Settings" > "Duties and taxes." Under "Duties and import taxes," click "Set up" next to "Collect duties and import taxes at checkout."

Image source: Shopify admin

Check the markets for which you want to collect duties, and click "Done."

Shopify integrates with a duty calculation service called Avalara. This method incurs a 0.5% transaction fee. If you're fine with that, click "Save."

This completes the duty collection setup.

By default, duties and import taxes are displayed as a line item. If you want to hide them, change this in Markets.

Additionally, the following are required to operate under DDP:

• Enable Shopify Payments
• Set the HS code and country of origin for each product
• Use a carrier that supports DDP shipping, such as FedEx, DHL, or UPS

The HS code and country of origin can be set on the product page.

Errors in the HS code registration or the details on the DDP label can lead to trouble. Set these carefully.

Pattern 3 (DDP-②): The Duty Is Not Collected from the Buyer, and the Store Bears the Cost

This method doesn't collect the duty from the customer at all — the store bears the cost instead. It's effective when you want to advertise a "duty-inclusive price" with no additional charges.

However, note that basically, since the duty amount is added on top of the product price, the product price may look more expensive compared to other products.

Like method 1, this method requires no special setup on Shopify.

Clearly stating on the product page or FAQ that the duty is included in the product price will help reassure buyers.

Which Duty Handling Approach Is Best for Shopify?

We've introduced 3 patterns, but many of you may still be wondering, "So which method should my store actually choose?" This section introduces recommended options based on your store's growth stage.

DDU (Buyer Pays) Is Recommended If You're Just Getting Started

If you've only just started cross-border e-commerce, or are still operating on a trial basis, it's best to start with the "DDU (buyer pays)" method.

The reason is simple: it involves less risk and effort for the store, and keeps operating costs down. The DDP method incurs a transaction fee and requires preparing for advance duty calculation and DDP-compatible shipping, which tends to be a heavier burden in the early stages. Also, setup mistakes can become a source of trouble.

A solid way to step up is to start operating with DDU, and once you begin gaining fans overseas, introduce DDP for specific countries or areas.

Once Sales Grow, Prevent Cart Abandonment with DDP (Store Pays)

Once you've gotten used to operating cross-border e-commerce and enter a phase where you want to further grow sales, consider switching to "DDP (store pays)."

With DDU, buyers often feel uneasy, not knowing "how much extra they'll have to pay upon receiving the product," which frequently leads to abandonment right before purchase — so-called "cart abandonment." Introducing DDP fixes the total payment amount at the time of purchase, giving buyers peace of mind, and can be expected to reduce cart abandonment rates and improve conversion rates.

Especially in markets with heavy competition, price clarity and transparency become major differentiating factors. A store where customers can purchase with confidence will also see higher customer satisfaction, growing into a store that's chosen repeatedly.

Points About Duties You Should Communicate Before Purchase

To prevent trouble with buyers who say, "I had no idea a duty would be charged!", it's important to clearly communicate information about duties before the purchase stage. On Shopify, stating this on the following pages is effective.

• Policy pages (shipping policy or return policy)
• Product page description
• Checkout screen

Open "Settings" > "Policies" in the Shopify admin to create and edit each policy page.

Image source: Shopify admin

Setting up these pages will automatically display them as links at the bottom of the checkout screen, allowing buyers to review the content.

Furthermore, using pop-up banners or announcement bars to display duty-related notices more prominently can also help improve trust in your store.

Here's an example of wording you can use.

※Orders from overseas may be subject to additional local duties and import taxes. Please note that these costs are the customer's responsibility.

The most effective way to prevent duty-related trouble on Shopify is "thoughtful advance notice." Be sure to display it clearly in a place where buyers will naturally see it.

Choose the Right Duty Handling Approach for Your Business, and Make Your Cross-Border E-Commerce a Success

This article explained the fundamental knowledge of duties that's important when doing cross-border e-commerce on Shopify, along with the main setup patterns.

Depending on how you handle duties, the customer experience and your store's revenue can be significantly affected. A realistic approach is to take it step by step — start with the low-effort DDU method, and introduce DDP for countries or regions where order volume has grown.

Choose the duty handling approach that's best suited to your business according to your Shopify store's growth stage, and aim for smooth cross-border e-commerce operations.

If you're looking to start cross-border e-commerce on Shopify from here, please also refer to the article below.

A Guide to Cross-Border E-Commerce with Shopify | From Setup to Recommended Apps
This article covers a wide range of information on cross-border e-commerce with Shopify, from basic setup, customer acquisition and support challenges, to practical apps that support your operations.