And this is where all this "free shipping" runs into major problems.
1) We sell items with an average value of around AU$20. If we offer "free shipping", we have NO margin left at all. Which means that prices will have to be raised (by at least 25%), which annoys customers.
2) Free shipping can only be for the basic shipping method (or the cost of goods have to be raised even more). But uninsured/unregistered goods give us no proof of shipping, thus we fall foul of PayPal rules. So, should we offer "free shipping" and then insist on customers paying for registration? That's a recipe for customer complaints and negative feedback as buyers feel conned.
3) To avoid customer dissatisfaction, we'd have to ship uninregistered/uninsured, in which case we basically underwrite the insurance free of charge (as already said, if a claim is made, the seller loses automatically). So, the options are to charge an insurance fee and annoy buyers (= time to deal with complaints, loss of business due to negative feedback), or don't charge insurance fees and privately insure our shipments without getting paid for that insurance. Again, prices would have to rise to take that into consideration.
4) Not only is there a greater risk of loss/damage with uninsured/unregistered articles, there is also a much greater opportunity for dishonesty. It doesn't matter whether the buyer receives the goods or not, all he/she needs to do is *claim* that the article didn't arrive to get a full refund. That provides a great incentive for dishonesty amongst buyers. Got a bit carried away and bid too much in an auction? Claim you never received the goods, keep the goods and get a full refund as well...
5) It is easy to say (as a PayPal person told me) that it's cheap to get proof of shipment - they seem to go out from a US-centric viewpoint. But it isn't that cheap in many other parts of the world, and trying to make universal rules based on US conditions can only harm the community.
I can only hope this nonsense falls flat (like the attempted "PayPal only" payment scheme), so that things can continue on a proper fee-for-shipping basis.