Thursday, August 24, 2006

Apple #190: Duty-Free Shopping

A friend of mine recently went to Canada and during this trip, he bought some whiskey in a duty-free store. It was very cheap, compared to what it usually costs. In discussing this little venture, my friend and I realized we didn't really understand how duty-free stores work.

We knew it had something to do with not having to pay taxes on the goods in the store, but beyond that, we had many questions. For example, could you go to your nearest local international airport, find the duty-free store, buy a bunch of stuff, and go back home?

Clearly, this was a question for the Apple Lady.

  • Normally, if you buy a product from another country, you pay an extra fee for it. You pay this fee partly because you don't live in that country and pay its taxes and do all the things its citizens do to support its economy. You may also be buying the product from that foreign country because the product is cheaper or somehow better than what you can get in your own country. Your own country doesn't want all its citizens to buy everything from another country and thus send all that money elsewhere, so your own country also wants you to have to pay extra to get that exotic item. The upshot is, you have to pay extra for the privilege of buying an imported item. That extra amount is known as the "duty" or the "tariff."
  • "Duty-free" is supposed to refer to goods that do not have that extra amount tacked on to them. So people assume that "duty-free" stuff is cheaper.

(Photo from Sterling Ticket)

  • But of course there's a little more involved than that.
  • The only people who are really eligible to buy goods without paying that tariff are the stores located in airports or boat ports or railway stations, places that are at the entry and exit points at international borders. These stores are given special exemptions from having to pay the duty on those international goods.
  • The idea is that these stores will then pass along those savings to me and you. Or at least they'll give us a portion of those savings. But there's nothing that requires the stores to pass along any particular percentage, or even to give any discount at all. So technically, a store that calls itself "duty-free" may not be offering its goods for much less than another type of store.
  • Most of the time, you can get some good bargains in duty-free stores. The best savings are in high-luxury, or high-danger items that typically have lots of taxes associated with them: things like jewelry and perfume, or cigarettes and alcohol.

The jewelry counter at Niagara Falls' duty-free store

  • Items that are probably not going to be less expensive are hand-made, crafted items made by the local folks. Say you're traveling in Namibia and you're about to go home and you stop in the Namibian duty-free shop. That wood-carved elephant might look like a nice last-minute souvenir to purchase, but you probably would have gotten it a whole lot cheaper in the Namibian market where you were shopping the day before.
  • Mid-range stuff that can sometimes be pretty pricey in general is a toss-up area. Crystal, china, watches, electronics, and cameras may look like they're cheap in a duty-free shop, but you might actually be able to purchase them at a lower price in a discount store back home. Not necessarily, but that is sometimes the case. So you might want to do some homework on those items before you go traveling.
Now that you're a savvy duty-free shopper, you should also know that it matters in which country's duty-free store you're going to exercise your savvy purchasing power.

Duty-Free store on the Blue Water Bridge between Michigan and Canada

  • If you are coming home from traveling and you stop at the duty-free store in your own country, you can buy whatever you want and not have to pay the duty on it. The duty applies only to the importer, and since the store already took care of the duty for you, you pay nothing.
    • However, it's not so easy to pop into your local airport's duty-free store, do some shopping, and zip back home. In airports, duty-free stores are located beyond the gates where you have to show your boarding pass to enter the area. (The stores pay a huge rent to be located in those choice shopping areas, so you better believe you're going to be paying some of their rent.)
    • Also, once inside the duty-free store, the clerks are supposed to ask you to show your overseas ticket. Whether they actually do or not, I don't know, since I haven't been in a duty-free airport store. But I gather that this is the custom.
    • Stores on the border at highways are set up so there's only one means of entry and one means of exit, on the other side of the border. So you can't run in from the United States and run back out into the United States.

Duty-Free in Strasbourg

  • If you stop at the duty-free store in the country you're visiting and you buy stuff there, once you bring that stuff into your home country, you become the importer, and now you have to pay the duty. Sometimes.
  • Here are the rules governing what you're allowed to bring back to the United States from elsewhere without paying the duty:
    • You have to have been out of the country for longer than 48 hours.
    • You must be able to carry the items with you. If you're going to ship them home, you're going to have to pay to import them.
    • Items have to be for your personal or in-home use.
    • The total value of your purchases has to be less than $400. If you buy goods with a total value over $400, then you have to pay.
    • You can't have used any part of your $400 allowance in the past 30 days.
    • Within your $400 allowance, there are some other exceptions:
      • If you're buying tobacco, you can buy up to 200 cigarettes and up to 100 cigars. Over that amount, and you have to pay.
      • You can bring up to one liter of alcohol into the country, and only if you are 21 or older.
      • None of that alcohol can be absinthe. Importing absinthe into the US is prohibited.
  • Have you got all that?
  • It's important to note that these particular rules about amounts and so on will be different in other home countries.

Australia's rules about how much they can bring home are a little different.
(from the Melbourne Airport)

  • The upshot is, they've made the rules so that duty-free shops might give you a bargain, but only if you're really and truly traveling internationally, and only if you're buying a small amount of stuff.
  • Oh, and there's no such thing as duty-free shopping anywhere in the European Union anymore. So don't expect to go gadding about from Spain to France to Portugal, scooping up bargains as you go.
Sources, "How Customs Works," and "How the U.S. Customs Service Works"
For more specifics on personal exemptions and restricted items, see Howstuffworks, "What Does Duty-Free Mean?"
Jack Adler, "Duty Free Shopping," TravelASSIST Magazine
Betsy Wade, "What's So Free About Duty-Free?"
The New York Times, August 16, 1998
Ask Yahoo, "What's the deal with duty-free shopping?"

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