The way a duty-free airport store functions remains an enduring mystery for some travelers. What sort of savings, if any, can be achieved and what merchandise is most likely to be a bargain?
One lingering misconception stems from the fact that duty-free doesn't actually apply to the buyer but rather to importers of merchandise who will sell it in ports, border cities, airports, cruise ships and airplanes for immediate export from the country. Duty-free, then, signifies that the importers can bring in certain items for resale to travelers who then take these goods out of the country, without being required, by the host country, to pay taxes and duties (or paying less tax and duty than importers selling the merchandise domestically).
Merchants, taking advantage of this regulation, can charge less for their products. However, there is no guarantee that these duty-free stores or outlets will pass their savings -- or any portion thereof -- on to customers, and there is often no requirement that they do. Keep in mind that items sold in duty-free stores at airports tend to be pricier objects and luxury goods are often the primary offering.
Since duty-free stores at airports occupy valuable space, their high rents are doubtless a pricing factor. One little-known aspect of duty-free operations comes from the possibility that some products are being market-tested at these outlets before being generally introduced to local stores. In this fashion, foreign manufacturers can garner a fairly swift multi-country response to their new products, without committing too much revenue to advertising and promotional costs.
Generally, goods that are subject to large duties and high luxury taxes are the better buys at a duty -free store. Depending on the country, the best bargains are on perfumes, liquor and tobacco products. If you know the price of these items at home, the duty-free savings will be clear to you. Usually, there is a limit placed on the amount of such merchandise you are allowed to import when crossing a border.
To look at United States and Canada as an example, liquor is very highly taxed in Canada while at an "American side" duty-free store, most American taxes are waved. When you purchase a bottle of fine Cognac, the price will be delightfully low, but Canadian customs law allows only one bottle at a time to be brought into the country by a tourist, duty-free. To prevent people stocking-up by running back and forth across the border, this rule applies to periods lasting several months, depending on the country, and you will be required to fill out a customs form describing your purchase. The same type of limitations apply to other items.
After you have made your purchase at the airport duty-free store, you may not see the item again until you are boarding the aircraft at which time your purchases will be delivered to you by an employee. This is to prevent usage of the merchandise before it is out of the country.
If you are traveling by land and crossing into another country by car, there is often a duty free shop near the border point. Your purchase will be sealed and the customs official at the border will ask you to declare the purchase when you cross. If you have purchased more than the law allows, duty will be charged on the overage or the item could be confiscated. If you are suspected of smuggling, you could be in for a long delay!
Handicrafts, when available, are not very good purchases. Such goods are locally made, so they have no duty placed on them -- with no possible savings to be passed on. Moreover, you can often buy these same handicrafts for less money at local markets in the relevant city, where store rentals are likely to be less. Frequently, travelers buy handicrafts at duty-free stores because the airport is their last opportunity to pick up a souvenir, or to get rid of some remaining foreign currency.
Some countries sell crystal, china and silverware at attractively discounted rates but making a wise purchase requires considerable savvy on the part of the traveler. The same applies to watches, designer accessories and items in these categories, that appear to be bargains; the designer bag could even be a counterfeit knock-off! Be wary, too, of heavily-advertised discounted items such as cameras and electronic goods. Many of these may be available for a lower price at ordinary discount stores back home.
It's wise not to simply assume that a duty-free sign means what it says, no matter how prominently it may be displayed at a store. Some businesses have been known to use this label very loosely. And, of course, remember that you still may have to pay duty on any "duty-free" purchases that exceed the import ceiling upon return to your own country. For Americans the U.S. allowance is $400 per person.