My mum just came back from a trip overseas and, as usual, I’m now staring at a carton of cigarettes bought at the airport, because it’s so much cheaper there on account of no local taxes. Which gets me thinking about duty free zones.
Now, correct me if I’m wrong, but here’s how I understand these things : as you enter the airport, you’re still on your national soil. Then you go through customs, show you have the right to leave the country and whatnot, and you enter DFZ, which is a kind of no man’s land : you’re not in a foreign country yet, but you’re not “home” anymore. Hence, “home” taxes don’t apply, and shops bloom like it’s springtime year round. But what is the exact legal status of the DFZ ? Does anyone have jurisdiction over there ?
Say I murder someone outside of customs, will I get tried ? If so, by whom, my home country or my destination country ?
What if I decide to setup kip there, like that guy who used to live in Charles de Gaulle airport as a consequence of a surrealist visa situation, does anyone have legal authority to evict me ?
The duty-free shop is not an extra-legal territory, or some such foo. It’s simply an extension, of the supplies stored on an airplane or ship, for consumption there, that is duty-free – just because nations want their travelers to be in a good mood, while traveling. Or just a holdover from nautical traditions, where you don’t tax every item on a ship, calling a captain’s hip flask importation of liquor, for example. I’m sure it has other benefits, like, attracting consumers to items they might want to buy later, when they have to pay tax. Yeah I know, you buy a couplea cartons of cigarettes, you’re not going to consume them all, but technically, above a certain, arbitrary, fairly high amount – you are responsible for taxes, just beacuse the vendor didn’t tack it on, doesn’t absove you. You can read the basics on wilipedia.
IANAL, but it seems obvious to me that these areas of airports (and similar areas of sea ports, when people are arriving & departing by sea) are only extraterritorial for customs and immigration purposes. All other national and state laws apply, including special security laws relating to airports and sea ports.
There’s a more interesting question, of what laws apply when you are actually travelling on a plane or a ship between countries. I suspect that if you killed another passenger there, you could be tried under the laws of:
(1) the country you just left;
(2) the country you are travelling to; or
(3) the country of registration or ownership of the plane or ship.
And the captain of the plane or ship, and crew under his/her delegation, would have the authority to arrest and detain you until you could be handed over to the appropriate authorities.
I see no reason to view the DFZ as somehow outside the country in which it’s located.
The stuff you buy there is free of certain taxes only if it immediately leaves the country. It’s thus a requirement that it not be given directly to you, but rather delivered to the boarding area of the vessel that will carry you away.
And there’s no guarantee that you won’t pay duty on it: The country to which you’re headed may exempt a limited amount of certain things from the duty that normally applies. But there is no requirement that they do so, and in most cases it wouldn’t be difficult to carry with you enough stuff that you’d be over the limit and would thus have to pay duty.
The arrangements differ by country. In the case of Australia, there are duty-free stores outside the duty-free zone, and they have to deliver it to your departing aircraft. However, there are also duty-free stores past immigration and customs as you leave the country, and there are duty-free stores before immigration and customs when you arrive. Those duty-free stores give the goods directly to you, either to carry onto your departing plane, or to take past customs as you enter the country.
The last time that I visited New Zealand, I was in transit, and didn’t enter the country at all. However, while I was waiting for my second plane, I spent time in various duty-free stores (and bought some CDs with a credit card, so I didn’t even need NZ money).
In my experience, airports in the US do not have duty-free stores outside the customs zone like that.
Actually, they do have duty-free shops outside the customs zone. For example, I was flying out of Terminal 5 (the JetBlue terminal) in JFK last week, where there was a duty-free shop in the main part of the terminal. But I assume that they would only sell stuff to those with international air tickets and deliver the stuff directly to the gate.
I’d describe that as a duty-free store inside the customs zone, i.e., inside the zone where people who are not international travellers can go, and where people usually pay customs duties and sales taxes. (In the US, the customs zone is the whole country, excluding the arrivals area before you go through immigration and customs, and a few other places like bonded warehouses). For people leaving the US by air, there is nowhere that they go through that’s outside the customs zone until they actually board the aircraft. It’s different in many other countries, where you have shops, etc., outside the customs zone.
This confuses me a bit. If you buy something in a duty free shop while leaving a country, what specific duty is it free from? I don’t recall ever being hassled when leaving a country about the stuff I had with me, only when arriving at a country with stuff. Is it simply an international agreement where the destination country won’t charge you any duties if you have a “duty free” receipt? Or is there some origin country duty I am not aware of?
It’s free from the customs duties, sales taxes and/or value-added taxes that you would normally pay when buying something in a shop in that country. It’s up the the destination country what to allow in duty-free, and it generally doesn’t have much to do with whether you paid taxes on it previously.
I’ve always wondered about this as well. Why does it matter that you are immediately taking, say two cartons of cigarettes out of the country? I thought the whole idea of the tariffs on products like cigarettes was to build the coffers of the treasury; not from some desire to rid the country of cigarettes.
I suspect a lot of this originated before air travel was common. For example, if you travelled between the UK and the US by ship, you would spend three or so days outside both countries. You would buy alcohol and tobacco duty-free on the ship, to consume while on the ship. If you had a small amount left over at the end, it wasn’t worth the trouble to tax that small amount. However, since ideas of a “small amount” varied, it had to be legislated as x litres of alcohol, or y grams of tobacco. Once the limit was set, then every drinker ande smoker made sure they had close to the limit to take through customs.
At the journey origin, rather than let the shipping company or airline get all the duty-free business, it made sense to allow some shops to sell duty-free to departing travellers. The originating country would get the taxes anyway, but it would benefit from a profitable business selling duty-free (via company income taxes, etc.)
And, since it’s a well-established perk of international travel, it might be too much trouble to abolish it.
Fair enough, but I still don’t understand why this is so. Most other laws still apply. I guarantee you that I couldn’t commit murder while the ship was in transit under the guise that I was in some sort of legal no-man’s land.
So why are things like duties and gambling laws not in force, but laws against piracy and murder are.
Also, there are these duty free shops on the U.S.-Canadian border. Even if you were walking, you wouldn’t consume these items in transit. I don’t see the advantage to either government to forego taxes in order to set up these shops…
Do these duty-free shops actually save you any money? It doesn’t seem that the liquor and what not are any cheaper than what you can find anywhere else. Ordinary liquor stores have the added benefit of not hitting you with a wall of perfume when you walk in.
I’m also wondering about this. From what I’ve seen, the DF booze doesn’t seem to be significantly cheaper than the ones in the liquor store. I figure whatever you’ve saved in taxes are offset by the fact that everything is more expensive at the airport.
I’m not the voice of authority on this but once asked a manager of a duty free store “what’s the deal here?”. She told me that a sizable portion of the price of imported goods and liquors is caused by commercial tariffs and US use taxes.
So the duty free shop could offer goods stripped of these tariffs to individuals who were EXPORTING items for their own use. A shop I use quite often is located next to a bridge between the US and Mexico. You can buy liquor, perfumes, Cigarettes and some other goods in the store. They gave you a numbered receipt and then a runner would take the goods to a US customs agent station on the bridge where you could pick it up on your way INTO Mexico.
If you wanted you could cross the border, turn around and then bring the same goods back over and IMPORT them into the US FOR YOUR PERSONAL USE.
As a personal use import/export person you had limits on the amount you could move through customs. Usually 1 gallon per person of liquor and some XX carton limit on cigs (I don’t smoke). Texas usually hit me up for an import liquor tax (usually somewhere around $1.25) bottle. I don’t know if that included any Fed tax.
I used the duty free store because their prices where cheaper (Tequila and Rum) or they carried product that wasn’t usually found in Mexico (Some Gins and Whiskeys)
Not everything was a great bargain. Lots of times both the duty free and Mexico buying didn’t amount to much savings. But other times I could find great bargains. Like a bottle of Bombay Sapphire that cost me $15.00 including liquor tax compared to $27.00 for the same thing back home.
I’m still confused, because I’ve never been to a place that charged you duty on stuff you were taking out of the country. I’ve only experienced this bringing stuff into a country. Does this sort of duty exist, and I’ve just never ran into it?
In the United States does duty free just mean sales tax free then? I know in South Africa visitors can be reimbursed for the VAT they paid on items they are taking home with them, but you don’t need to buy it at a specific duty free store for that. I’m not sure I understand the purpose of a duty free store in South Africa (and they definitely do exist), outside of not wanting to bother with the VAT refund forms.
It depends entirely on the taxes and duties in your area. Spirits are significantly cheaper Duty Free in Australia than they are in Australian liquor stores, so I always buy some on the way in. Wine is not.
If I were staying in California (for example) I would not bother taking Duty Free spirits with me from Oz because the saving is either non-existent or negligible, and definitely not worth the effort of lugging the stuff around on the trip.
Let’s use the United States as an example. Here in Michigan, cigars from the Dominican Republic are imported. They’re subject to a duty (import tax), federal, state, and local taxes, which can be considerable. However if I buy them in Duty Free, then they’ve never really entered the United States’ taxing jurisdiction. I must leave the country with them, so that they won’t enter the taxing jurisdiction. I cross the bridge, and then I’m in Canada. I declare my Dominican cigars, but their value is below the threshold for the Canadians to tax me, because I only have a limited amount. No duty.
I think the duty that it is “free” of is the duty that the importer would normally have to pay and pass onto you in the retail price if you buy it at a normal store. The government allows them to not pay the duty and therefore sell it to you at a cheaper price and still make a profit on the condition that it is sold in such a way and place that it can’t be consumed within the country.
I think what others have said is true. What happens at your destination is up to the other country. The destination country doesn’t recognize that fact that it was bought duty free. It’s just like any other import. In practice the quantity is probably below that country’s duty free limit for importing stuff so you won’t have to pay anything.
I think New Zealand GST is like that. I think “duty free” mostly means free of GST.