Sunday, 21 September 2014

When, where, how, why and exactly what is Duty Free?

Duty-Free should mean exactly what it says, free of duty, duty meaning the extra tax paid, especially on Liquors or Tobaccos. But, this is not always the case, especially if you have recently bought liquor on a cruise ship and disembarked in Galveston Texas.

This year, the Texas State Liquor Board started charging local state taxes on some goods bought duty free arriving in the port of Galveston. The media jumped on the cruise passengers' indignation at being sold alleged "duty-free" goods on board, only to find that they then had to pay back this duty free saving, on arrival in port. Apparently, this tax policy will soon be extended to Houston as well.

Buying on your travels can be a hazardous and confusing habit, so, what is "duty free" shopping really? It depends on where you live, where you travel to and how the various players in the market decide how to describe the retail practice.

Real on-board Duty Free shopping from Jersey CI
In reality, the word Duty refers to the traditional British fiscal description of the special tax imposed on goods like alcohol, tobaccos and (in olden times) perfumes, because they also contained alcohol. The phrase Excise Duty was the tax raised on these products, because it was paid to the Customs & Excise department. The term "Duty Free" was derived from these goods being sold for export without this Excise Tax (Duty), because this privilege* was then granted for overseas travellers.

Then, "Tax Free" came along too, which is usually levied all the other products ships, airports and airlines started selling. In most countries, there is no Excise Duty (only Federal or State Sales Tax) on watches, candies, leather goods etc etc. liquors and tobaccos have both Duty and Tax on them. This is why you can hear both phrases used; Tax Free & Duty Free.

But, the confusion doesn't end there. In Europe, or specifically the European Union States, the selling of Duty Free goods was abolished over 10 years ago, to those travellers going to another EU Member Country. But, in UK airports you will still hear the phrase "Tax Free" applied to goods sold in airports for people travelling within the EU. Of course, these goods offered to intra-EU travellers are not really Tax Free in fiscal terms, they are discounted product lines. But, presumably, Tax Free sounds more attractive for consumers and less brutal for some major brand owners.

In the modern times consumers have started to move online to check products, prices and even pre-order before their journey and once there, they are bombarded with "duty free offers", either from official airport, airline or shipping retailers who actually sell without tax under Customs controlled conditions, or from online mail-order sellers who are not really selling under these conditions at all.

Not only in the Gulf of Mexico did the duty free waters get muddied, but also when Europe abolished this official retail practice. Nowadays, it would appear to be in the marketing interest of some parties to use the phrase "duty free shopping" in the context of what they conveniently like to describe as a "catch-all" phrase for shopping on your travels. So, inclusion of the word catch, should be viewed as an immediate indication of the consumer needing to think and check carefully, before they buy!

Brazilian Customs certainly don't tolerate "catch-all" ambiguities.
To be clear, when you travel internally, be it within the same country, like The USA, The United Kingdom, Brazil or from one EU State to another, nothing is actually sold tax free and nothing is sold duty free. (There are some rare exceptions, like Iquique in Chile and Hainan in China, but generally this rule is firm). The fact that someone, somewhere may wish to describe it as such, is a signal to take caution and carefully check your prices and the rules before you buy.**

The other issue to heed and one which is further confused by those who choose to use the "catch-all" description to display goods, is how you may well be buying over your Customs limit for your destination and end up paying tax on the goods, or losing them through confiscation, because you may actually be buying in excess of your Customs Exemption.

And, because the rules and retail descriptions can change, depending on who you are, where you live and where you are going to, make sure you check for these tell-tale signs when you search for shopping guide information and certainly before you buy.

Search the world for the Duty Free rules and regulations
The sister site to this blog, www.dutyfreeonarrival.com allows you to search online, or on an app for every country, destination or travel mode in the world for the official rules and regulations, including your Customs allowances. It also includes store links to official Duty Free or Tax Free Travel Retailers, but not to online sellers who may allegedly describe their goods as Duty Free in an attempt to "catch-all" consumers, whilst piggybacking off the Official Trade.

The best advice we can offer, is to make sure you check before you fly as to what is really duty free and what might not be as free of duty as you first thought.

* In many Countries, the Duty Free allowances granted to travellers is a privilege and not actually encompassed as part of statute law. This means that it can be removed at any time by the relevant Tax or Fiscal Authorities, without the need to change the Law.

** In Brazil, Duty Free shopping and the limits are included in the Law and the inbound land-border limits for what you can buy will soon be reduced to US$ 150, by Statute.

1 comment:

  1. My husband bought me an expensive necklace on Carnival Magic in April 2014. And we were told by the sales clerk that there was no duty on it. On debarkation morning, he was NOT allowed off the ship. Carnival staff would not tell him what it was about. He was then taken up 5 decks to an office and questioned about onboard purchases. When he told them he'd purchased the necklace, Customs escorted him down to their terminal where he was made to pay over $500 CASH for duty on it.

    Lesson learned: When ships return to a U.S. Port at the end of the cruise, U.S. Customs comes onboard and "takes over" the ship. They go over ALL onboard purchases and RED FLAG guests who've made large purchases. Those people are NOT allowed to leave the ship. They are escorted to the U.S. Customs office where they can pay the duty owed by CASH or CHECK.

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