Is dropshipping halal? If not how can it be adjusted to make it halal?
In Islam a person is only eligible to sell an item once they themselves have ownership and possession over the item. In the case of drop shipping, an individual (A) purchases an item from a manufacturer (B) and sells it to a third party (C). Instead of having the item delivered to A’s address first, they have it shipped directly to C’s address. Hence, even though A may have ownership over the item they do not take possession of it prior to selling it to C. For this reason, any transaction structured in this manner will not be permissible.
As mentioned above, the key is for A to first take possession of the item. If this can be arranged then the transaction can be made permissible. One method is to appoint an agent to take possession on behalf of A. If that agent takes possession then it will be as though A has taken possession. The agent can then be tasked with shipping the item to C if needed. For example, a seller in the UK orders products from China. After the manufacturer produces the item the sellers agent in China takes the item and has it shipped to the seller’s customers. This would be permissible.
Bare in mind that the manufacturer B cannot take possession for A. The reason being that in a transaction you have two parties. One party is tasked with handing over the item of sale to the counter party. The second party is tasked with taking receipt of the item of sale and making the payment. It is not permissible to have one party acting on behalf of both parties and hand over the item and take receipt of the item at the same time. The reason for this that they will just be handing the item to themselves which is of no benefit whereas the aim of a transaction is to transfer rights and obligations between two parties.
Similarly, in normal circumstances the delivery company cannot be considered an agent for A as they are usually appointed by the manufacturer B. All liability in relation to delivery is between B and the delivery company. If however, A was to actually arrange delivery and take all liability then the delivery company can be considered the agent for A.
Hence, in customary methods of drop shipping, where possession is not taken before selling the item on, the transaction will be impermissible.
بدائع الصنائع في ترتيب الشرائع (5147)
(وَمِنْهَا) أَنْ يَكُونَ مَقْدُورَ التَّسْلِيمِ عِنْدَ الْعَقْدِ، فَإِنْ كَانَ مَعْجُوزَ التَّسْلِيمِ عِنْدَهُ لَا يَنْعَقِدْ، وَإِنْ كَانَ مَمْلُوكًا لَهُ
مجلة الأحكام العدلية (ص: 22)
فلو وكل المشتري البائع في قبض المبيع لا يجوز، أما لو أعطى جولقا للبائع ليكيل ويضع فيه الطعام المبيع ففعل كان ذلك قبضا من المشتري.
Ifta Research Fellow
Checked & Approved by:
Mufti Abdul Rahman Mangera
Mufti Zubair Patel