Duty-Free: Why Is It Only Available to Overseas Travelers?

Duty-Free: Why Is It Only Available to Overseas Travelers?

by Amanda Howe, December 2009

Duty-free retail is big business. According to the Duty Free World Council, sales of duty-free goods top $20 billion U.S. dollars annually. And it's no wonder. Shopping duty-free can be a welcome relief from airport stress and boredom. There's always a last-minute gift of chocolate or wine to purchase. Bottles of perfumes get stashed in carry-on luggage to prolong the memory of a trip abroad.

But U.S. international travelers should take caution. Keep in mind that what you buy in duty-free shops abroad might not be tax free when you get home.

A common misperception is that "duty-free" applies to the buyer. Not so. It actually applies to the seller. Countries tax imports according to domestic policies and international agreements. The U.S. only gives certain countries a break on import taxes. This tax break allows retailers from these countries to offer lower prices. Of course, lower prices make goods more attractive to American consumers.

Duty-free goods are only duty-free in the country where the shop is located. So you can still be stung with taxes entering U.S. customs. For example, you can buy all the duty-free scotch you can carry in England. But only one liter of liquor can enter the U.S. duty-free. Additional quantities of alcohol, and tobacco, are subject to federal and state import rules.

The personal exemption rules for goods other than tobacco and alcohol are a little more basic. Travelers can claim a personal exemption on goods purchased abroad. Eight hundred dollars is a fairly standard exemption for personal items. So if you're importing sarongs from Bali for commercial sale, you'll be stuck with import taxes. And no sneaking goods into the states to resell on Ebay. Merchandise brought back from Caribbean Basin and Andean countries only enjoys a $600 exemption. But you can really stock up if you go to the Virgin Islands, Guam or Samoa. Goods from these countries qualify for a $1,600 exemption.

Frequent travelers should be aware of the "once every 30 days" rule. This rule reduces your exemption limit to $200 worth of duty-free items if you have left the country more than once in a 30-day period. International road warriors should save their personal exemption until the end of the trip if they know they are going to be in and out of the country and bringing back goods each time.

Duty-free may not be the shopping bonanza some travelers think it is. But the smart tourist can claim some good deals by knowing customs rules. And what better way to kill those last hours, or minutes, at the airport than with a little last minute shopping.