In the world of cross-border eCommerce, one thing is clear: unexpected VAT and duty charges are among the top reasons European consumers abandon their shopping carts. These surprise fees aren’t just frustrating—they’re costing businesses conversions. Here’s why it’s happening and how you can fix it.

1. The Shift in VAT Exemptions: From €22 to Full VAT Collection

Before July 2021, consumers in the EU were used to receiving low-value goods (under €22) VAT- and duty-free. However, the introduction of the EU VAT e-commerce package removed the VAT exemption, making it mandatory for all goods entering the EU to be taxed, regardless of their value. This change has caught many consumers by surprise, leading to frustration and higher cart abandonment rates.

2. The Complexity of Customs Duties

While VAT is collected at checkout, customs duties are typically assessed upon delivery. This creates confusion for consumers, who may be required to pay duties when the goods arrive, often without prior notice. Lack of clarity around who is charging these duties—whether it's the merchant, courier, or government—further complicates the process, leading to refused deliveries.

3. Consumer Expectations: Transparent, All-Inclusive Pricing

Consumers in the EU expect transparent pricing—the price they see at checkout should be the total price they pay. When additional charges like VAT and customs duties appear unexpectedly, consumers feel deceived. According to a study by Post & Parcel, 69% of shoppers abandon their carts due to unexpected costs. Clear and upfront pricing is essential to avoid these negative outcomes.

4. The Reluctance to Pay at Delivery

The practice of Delivered Duty Unpaid (DDU), where consumers are asked to pay VAT and duties upon delivery, is met with reluctance. Many consumers are unwilling to pay additional fees after they’ve already made a purchase. This results in higher refusal rates and return rates, especially in EU countries, where consumers are highly sensitive to surprise costs.

5. IOSS: A Partial Solution for VAT, But Not Duties

The Import One-Stop Shop (IOSS), designed for low-value goods under €150, simplifies VAT collection at checkout. However, IOSS only addresses VAT and does not handle customs duties, leaving a gap for merchants selling higher-value goods or those shipping outside the EU. The absence of duty handling means that consumers still face potential surprise fees at delivery.

6. The Solution: Hybrid DDP to Address Both VAT and Duties

The most effective way to prevent these surprises is by implementing a Hybrid DDP solution like DutyPlus. By automating the collection of both VAT and duties after checkout but before delivery, businesses can eliminate the risk of unexpected charges. Consumers can pay all fees upfront and in just 2 clicks using their preferred payment method, making the experience smooth, transparent, and efficient.

7. Key Benefits of Hybrid DDP for eCommerce Merchants

• Increased Conversions: By offering transparent pricing, businesses can reduce cart abandonment and increase conversion rates.
  
  

• Improved Customer Satisfaction: Consumers are more likely to trust merchants who offer clear, upfront pricing, leading to improved loyalty and repeat purchases.
  
  

• Global Compliance: Hybrid DDP ensures compliance with both VAT and customs duties regulations, minimizing risk for merchants.
  
  

• Seamless Operations: Automating the tax and duty collection process allows businesses to streamline their cross-border eCommerce operations.
  
  

8. Future-Proofing Your Business

Adopting a solution like DutyPlus Hybrid DDP is not just about solving today’s issues; it’s about preparing for the future of eCommerce. As global shopping continues to grow, transparency and efficiency will become increasingly important. Businesses that adopt these solutions will stay ahead of the curve and build trust with their customers.

To reduce cart abandonment and provide a seamless experience, businesses should adopt DutyPlus Hybrid DDP solutions that automate VAT and duty collection upfront after checkout but before delivery. By doing so, they can meet consumer expectations, boost conversions, and improve customer satisfaction.