Duty Free Doody!

[surfgirl]

I''m currently working in the Caribbean region and today, my colleague and I went shopping just to air our brains before our last meeting of the week. I''ve gotta say I''m SHOCKED that anyone actually buys the "Duty Free" jewelry that''s being sold out here all over the region! It makes Jewlerly Network look like Graff! Schlock, the likes of which, I''ve never seen anywhere. Shocking, I tell you, Shock.Ing. I''m totally disgusted. My colleague wants a diamond half eternity band for her wband so we went looking, just for fun. I couldn''t believe the crap we saw. The only "certs" in the Duty Free for larger stones are from IGI, I think. And all the stones were so garbagy looking. I saw a couple who got off a cruise ship, walked into this store and apparently bought an engagement ring that looked like a dead piece of lead. They were given a half split of cheap crappy champagne to "celebrate" throwing away good money on this crappy ring. It was all I could do not to drag them out of there and give them a good talking to. But I guess there must be a LOT of people who buy this garbage otherwise these places wouldn''t be in business, right? It''s so very sad.

 

[JohnQuixote]

Outstanding subject title.

 

[Diamond*Dana]

Date: 9/21/2007 11:35:33 PM
Author: JohnQuixote
Outstanding subject title.

Ditto!

 

[dunndeal]

Kudos for your sharp eye! Thats the feeling I get at some of the jewelry shows we attend!

 

[Lynn B]

I, too, am often shocked and appalled

when we shop in the Caribbean. Those people LINE UP outside of Diamonds International... and almost EVERYONE comes out with something. And EXPENSIVE "somethings", I might add!

I have looked around just "to see" and honestly, have yet to find anything (diamond-wise) that I would even consider buying. I have bought some fun, inexpensive, sterling pieces at various little shops, etc., but that''s the only jewelry I would even consider buying there.

I think most of those e-ring purchases are likely emotional purchases... the sun, the sand, the surf, the romance, the Mai Tai''s

... it''s very intoxicating for young couples in love... and a lot of those rings are probably "impulse" purchases. I hope they aren''t regretted later, although I''m sure they sometimes are. That makes me feel bad, until I remind myself that we here at PS are merely a microcosm of the Real (Diamond) World... most people really don''t care. It''s a "diamond", it''s in a "ring"... and when it''s freshly cleaned and under a jewelry store light (and facing east during a solar eclipse

) it looks "OK" and that''s good enough!

 

[denverappraiser]

I see a lot of clients who buy things at the cruise ports and who later decide they are unhappy with their purchases and this situation seems to be common with lots of appraisers. These locations are among the highest rent spaces in the world, comparable to metropolitan airports and casino lobbies, they employ almost entirely an expatriate workforce and they are selling almost exclusively imported merchandise yet people seem to persist in the belief that this is a discount venue. It makes no sense.

The popularity of low quality goods in these places is an interesting issue to be sure but I would like to address the ‘duty free’ aspect of this because it leads a great deal of confusion.

‘Duty’ means tax. There are several taxes that sometimes come into play with jewelry purchases but the ones that are generally referred to by stores that use the title ‘duty free’ are local import taxes and usually local sales taxes. What this means is that a store in XYZ country that imports an item and then reexports it will not be required to pay the import tariff on that item. The import duty applies to merchandise that is sold for consumption within the country. Most countries have some sort of a system for this and it’s not unusual for exporters to be able to sell things exclusive of the tax if you can demonstrate that it’s bound for export. The rules will vary from country to country and the merchant is often required to get a license, collect certain paperwork from the shopper (like a copy of your passport) and possibly set up shop in particular areas. These shops are common in airports in areas that can only be easily accessed by foreign travelers for this reason. Obviously the merchants pay other sorts of taxes that support the local system that can include property taxes, income taxes, license fees and a list of other creative charges that one way or another will end up on your bill.

The thing to remember is that these are local taxes only. Many countries, including the United States, require you to report foreign purchases when you come back home. Failure to do so is a serious crime and can subject you to some substantial penalties. They will then collect taxes from you based on schedule called the Harmonized Tarrif Schedule. Every item that you might import from tires to toys to diamonds to microchips is laid out in this chart along with the import taxes that relate to it. Some, in fact quite a few, have no tax at all while others are taxed quite heavily. This is prepared by Congress as part of the tax code and is administered by US Customs. Here’s the chart for 2007.

Harmonized Tariff Schedule

Your obligation to pay these taxes has nothing to do with an overseas merchant or even with the overseas government. It’s about US import laws (assuming you’re from the US of course). With most countries, including the US, they have made certain special rules that relate to tourists as opposed to people who are in the business of importing things in order to speed up the border process. Liquor, for example, is taxed and regulated fairly heavily but tourists are permitted to import a small amount without having to file the paperwork, get the licenses or pay the taxes. There is also often an exclusion for up to a few hundred dollars worth of souvenirs and personal gifts. The rules can get complicated based on things like your country of residence, your country of origin, how often you cross the border and similar issues but the border inspection people are well qualified to explain them to you. If you buy an expensive item overseas and import it into the United States, expect to be asked about it at the border and be prepared to pay a tax. For most gold and gemstone jewelry items the US tax is 6.5% and for unmounted diamonds it’s 0%. Countries with a Value Added Tax, like the UK, or that have special import taxes on diamonds, like Singapore, will collect this tax at the time of import regardless of whether the seller described themselves as ‘duty free’.

Sales taxes are a very similar topic. The country where the store is located can impose a sales tax if they want and/or they can and surely do tax the merchant in other ways. You can, of course, decide not to shop there if you don’t like the taxes. In most cases, there is a sales tax for items that are bought by local residents or are otherwise to be consumed locally that is not collected on provable export sales. The standards of proof required are set by the local taxing authorities but usually a foreign passport and a declaration of intent to export is sufficient but like all laws this can vary from country to country. This does NOT absolve you from any taxes you may owe to your home state. Every state that has a sales tax also has a matching has a ‘use’ tax. This is for items that are brought into the state by their residents and is taxed at the same rates as the sales tax. The details on how and how much to pay are on the department of revenue websites for your own state along with the necessary forms. US Customs does have a relationship with the various state revenuers by the way. They can and do cross-reference these records.

So, the duty being saved by shopping at a ‘duty free’ shop oversees are:
1) Import taxes into that country.
2) Possibly sales taxes to the community where the store is located.

Taxes that are NOT saved by shopping in these stores include:
1) Import taxes into your home country if they have them.
2) Sales/Use taxes owed to your own community if they have them.
3) Value Added Tax for residents of countries that has it.

For specific details see the website your local and national tax offices. For the most part they try to make it easy to figure out how much you owe if you look.

Neil Beaty
GG(GIA) ICGA(AGS) NAJA
Professional Appraisals in Denver

 

[marcy]

My MIL has come home with several silver pieces and some topaz and amber jewelry. They are all okay but certainly not top quality and I sure hope I hid my reaction to sticker shock when they told me what they paid for them. They did not get a bargain! They are always talking about picking up my MIL a nice tanzanite ring - I sure hope they don''t ever decide to buy one because I am sure they''ll pay gem quality prices for less than gem quality stones.

 

[surfgirl]

Date: 9/23/2007 8:36:54 AM
Author: Lynn B
I, too, am often shocked and appalled

when we shop in the Caribbean. Those people LINE UP outside of Diamonds International... and almost EVERYONE comes out with something. And EXPENSIVE ''somethings'', I might add!

I have looked around just ''to see'' and honestly, have yet to find anything (diamond-wise) that I would even consider buying. I have bought some fun, inexpensive, sterling pieces at various little shops, etc., but that''s the only jewelry I would even consider buying there.

I think most of those e-ring purchases are likely emotional purchases... the sun, the sand, the surf, the romance, the Mai Tai''s

... it''s very intoxicating for young couples in love... and a lot of those rings are probably ''impulse'' purchases. I hope they aren''t regretted later, although I''m sure they sometimes are. That makes me feel bad, until I remind myself that we here at PS are merely a microcosm of the Real (Diamond) World... most people really don''t care. It''s a ''diamond'', it''s in a ''ring''... and when it''s freshly cleaned and under a jewelry store light (and facing east during a solar eclipse

) it looks ''OK'' and that''s good enough!

Yeah, you''re totally right! The shops we went into were in Antigua and a big cruise ship had come in overnight and we got swept into that shopping crowd. It was facsinating to see all the frenzy over crap that wasn''t even fit for a mall chain! The only thing I found that was remotely okay was a small display of "HoF" pieces and to be honest, even those didn''t look quite right, though I cant imagine they can scam something like that. Can they? Maybe it was the close proximity of schlock that made even HoF look like a hot steaming pile of meh. I think we were in Diamonds International, and we went into the infamous "Columbian Emeralds International", where you can get "instant credit" and where they supposedly have "US service centers"...I wonder how many buyers want to return their purchases after they sober up and get home? What a weird phenomenon...

Neil, thanks for highlighting that "duty free" doesn''t mean you can bring it into the US without paying taxes on it...

 

[denverappraiser]

Date: 9/23/2007 2:09:05 PM
Author: surfgirl

Neil, thanks for highlighting that ''duty free'' doesn''t mean you can bring it into the US without paying taxes on it...

And that it doesn’t make it cheaper to buy overseas. The primary tax that is being avoided, import duty on diamonds, is 0% in the US anyway. Every jeweler and every website in the USA is ‘duty free’ when it comes to selling loose diamonds!

Neil Beaty
GG(GIA) ICGA(AGS) NAJA
Professional Appraisals in Denver