Duty Free Purchases in the U.S.

Published on: Sep 21, 2021, Last Edited: Sep 21, 2021 | Tags: Customs Duties, Travel Restrictions

This article provides information on U.S. Customs Duty payable for travelers entering the United States.

Duty Free Purchases in the U.S.
Duty Free Purchases in the U.S.

What is a Customs Duty?

Customs Duty is the tax paid by importers and exporters for goods transported across the United States borders. Tax duty is crucial in protecting a country's economy, the environment, and jobs by controlling how goods enter and leave the country, especially for the prohibited goods.

What is a dutiable?

A dutiable is an article that is liable to customs duty. Each item has its specific customs duty, which is determined by various factors. These factors include the country or region of origin, where the product was made, and the materials used to make the product. One should also "declare" anything that they come back with, but did not have it when leaving the U.S. For example, you are required to declare alterations that your suit underwent when in a foreign country and any gifts you might have acquired when in a foreign country. People returning to the U.S. don't have to declare the American Goods Returned (AGR), but they should always be prepared to prove that the goods are AGR to the United States Customs and Border Protection. You may end up paying customs duty if you lack sufficient evidence.

How are customs charged?

Customs duty is paid as a percentage. The determiner of the rate is the total purchase value of the item(s) paid in the country of origin. Factors such as the weight, size, and quality of an article do play a part in determining the percentage. You can determine the duty rate for almost every existing item using the Harmonized Tariff System (HTS). Customs and Border Protection (CBP) use the Harmonized Tariff Schedule of the United States Annotated (HTSUS) as a reference manual whenever they want to check an item's duty rate. HTSUS provides the applicable tariff rates and helps in the identification of the statistical categories for all the products imported into the United States.

What about duty-free shop products?

Duty-free shop products purchased at a customs duty-free shop are only free in the country where one made the purchase. This means that if you have the duty-free items that exceed your personal allowance, you will have to pay customs duty for the items when you arrive at your country's entry point. The customs duty is applicable regardless of whether you bought the items abroad or in the United States. You will also pay U.S. Customs duty for any item purchased in an American Customs duty-free shop if you come with them returning to the United States. For example, if you buy alcoholic beverages in a New York-based duty-free shop when on your way to Canada and then come back to the U.S. with the items in your possession when returning from your trip, the drinks will be subject to both the Internal Revenue Service tax (IRT) and customs duty.

How is customs duty calculated?

You will only pay flat duty for dutiable articles, but not for your personal exemption, even if the quantity does not exceed the exemption. For example, if you return from abroad with items worth $200 USD, including two liters of liquor, you will not pay customs duty for one liter as it will be under your personal exemption. For the other liter, you will have to pay customs duty at 3 percent together with any due Internal Revenue Tax (IRT).

A joint declaration refers to a customs declaration by family members who live under one roof and return to the U.S. together. The family members can combine all their foreign purchases to benefit from a combined flat duty rate. It does not matter who owns a particular item. For example, a family of four that combines their merchandise when traveling together will pay a flat duty of $4000 USD if all their merchandise is subject to a flat duty rate. The Purchase totals are rounded to the nearest dollar amount

Are there differences for tobacco products?

United States visitors or residents over the age of 21 or over, who are either visiting or returning from abroad may carry tobacco products in quantities that are no more than the amounts specified in the personal allowance. In the case of tobacco, a traveler qualifies for not more than 200 cigarettes and 100 cigars. For a visitor or resident who declares 400 previously exported cigarettes and proves that they are American Good Returning, he or she can be allowed to enter the U.S. with the AGR without paying Customs duty. Any excess above the allowable personal exemption for the tobacco products is subject to seizure, detention, abandonment, penalties, or destruction. Most U.S. visitors or residents purchase the tobacco products from duty-free stores, on ships operating internationally or in foreign stores. These products bear marks like "Tax Exempt. For Use Outside the United States," or "U.S. Tax Exempt For Use Outside the United States."

For example, each visitor or returning resident is eligible for a duty-free personal exemption up to $800 USD every 31 days. The individual must have spent not less than 48 hours outside the territorial limits of the U.S., with an exemption of the U.S. Virgin Islands. If the visitor or resident is coming from a contiguous state which has a free zone or port, they should have remained beyond the territorial limits of the United States for not more than 24 hours.

Alcoholic Beverages

A non-U.S. visitor or returning U.S. resident carrying alcoholic beverage is eligible for a personal relief for one American liter (33.8fl. oz.). However, the traveler must be 21 years of age or older, the beverage must be for personal use and not for sale, and lastly, the beverage is deemed legal for use in the final destination of the visitor or home state of the resident.

According to federal law, you can bring back a liter of an alcoholic beverage duty-free as long as it is for personal use. For some states, a traveler can bring back more than a liter, but they will have to pay all the applicable taxes, such as IRT and Customs duty.

Federal laws do not specify the limit on the amount you may bring back above the personal exempt amount, but unusual quantities may be taken as an indication that you are importing the product for other purposes like reselling. In such a case, the CBP officers will enforce the Bureau of Alcohol, Tobacco, Firearms, and Explosives laws, rules, and regulations. The officers have the authority to declare that the imported products are for commercial purposes. Such a determination means that you will be required to obtain a permit and file a formal entry to import the beverage if you want to get it back.

State laws may also limit the amount of alcohol that you can return with if you don't have a license.
If you enter the U.S. through such a state, the state's law will be enforced by the CBP, even if it is more restrictive than the federal regulations. It is advisable to first check the state government's limitations on quantities allowed for personal imports before traveling. Also, check for additional state tax that may apply for such products.

In short, alcohol and cigarettes can be part of your $800 or $1600 returning exemption like any other purchase if their quantities are eligible for duty-free treatment. The only difference from other merchandise is that cigarettes and alcohol excesses beyond the duty-free range are taxed, even if they have not met or exceeded your personal exemption. For example, if you have a personal exemption of $800 and you come back from abroad with three liters of wine and no other product, two liters of wine will be dutiable, and I.R. taxed. Also, note that the federal law does not allow business-to-private consumer shipping of alcoholic beverages by mail inside the United States.

Paying Customs Duty

Individuals who owe customs duty should pay the amount by making a payment using U.S. currency. Some U.S. ports of entry accept MasterCard or Visa card payments. Otherwise, the payment can be made using a personal check in the exact amount, drawn on a U.S. based bank, and made payable to U.S. Customs and Border Protection. This method requires you to present your identification documents such as a passport or your U.S. driver's license. Be aware that CBP will not accept any check bearing second-party endorsement. The third payment method is to use a money order, or traveler's check if the amount due to CBP does not exceed $50.

Conclusion

Travelers should familiarize themselves with the United States laws around paying customs duty. This will help ensure they are not surprised with any additional fees or fines that they need to pay at the border when entering the U.S.

References

  1. https://www.cbp.gov/travel/international-visitors/kbyg/customs-duty-info

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