Whether you’re at a store that facilitates “duty-free” or “tax-free” shopping, or the departure area of an international airport, the following applies: What you buy is not subject to local excise tax or value-added tax (VAT). But “duty-free” does not mean that what you buy there is exempt from U.S. customs limits; this is important.
U.S. Customs folks may penalize travelers for failure to declare items bought at duty-free stores. This probably doesn’t surprise many SmarterTravel regulars. But it’s important to remember the rules.
So, why buy duty-free? The main reason is to cut the cost of items that are subject to high U.S. taxes or duties. These include tobacco products and alcoholic beverages, which carry high excise taxes. You are allowed to bring in a maximum of one liter of alcoholic beverage, and 200 cigarettes and 100 cigars without paying U.S. duty. (Other high-tax items, including airline tickets, fuel, and tires, are not amenable to duty-free purchase overseas.) Many other items carry high import duties in the U.S.—a diverse and inconsistent list ranging from paper clips and brooms to a handful of clothing and food items. Even where U.S. import duties are low, some items purchased overseas may typically carry high retail markups in the U.S., including some fashion items.
Regardless of duty, you can bring in up to the personal allowance of either $800 or $1,600, depending on origin, but you must declare all purchases even when carrying less than the allowance.
Overall, however, U.S. import duty is either zero or very low on most consumer items. That means overseas duty-free or tax-free stores usually can’t undersell U.S. stores, where retail markups are generally lower than overseas. This leads to the first rule of overseas shopping: Know U.S. prices before you buy, and don’t buy anything you can’t get cheaper at Costco or Macy’s.
For more information, consult the U.S. Customs and Border Protection Agency’s Know Before You Go publication.
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