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Border trade, in general, refers to the flow of goods and services across the international borders between jurisdictions. In this sense, it is a part of normal legal trade that flows through standard export/import frameworks of nations. However border trade specifically refers to the increase in trade in areas where crossing borders is relatively easy and where products are significantly cheaper in one place than another, often because of significant variations in taxation levels on goods such as alcohol and tobacco.
As well as border trade across land or sea borders, air travel with a low-cost carrier can be worthwhile for a short international trip to the same purpose, although baggage restrictions can limit worthwhile savings to those for small high-value goods.
Typical examples of this are the borders between Ukraine and Russia, between Norway and Denmark/Sweden/Finland/Russia/Estonia and between Denmark/Switzerland and Germany. For instance, the excise tax on alcohol is lower in Estonia than in Finland and much lower than in Sweden, thus it is common to buy large volumes of alcohol when returning from Estonia: there are shops in the Tallinn harbour that cater specifically to tourists.
Border trading exists between Northern Ireland and the Republic of Ireland, with petrol being cheaper in latter and groceries, furniture and clothing cheaper in the former. Between the United Kingdom and France/Belgium, the booze cruise is a trip made specifically, or at least largely, to purchase cheaper alcohol and tobacco, and also goods offering different rates of VAT: laundry detergent, perhaps surprisingly, is a common purchase.
Cross-border shopping between the three countries in North America (Canada, USA, Mexico) is robust. The North American Free Trade Agreement (NAFTA) has reduced barriers and tariffs, facilitating cross-border trade. Each day 2008, $2 billion of cross-border trade was conducted between Canada and USA alone. Consumers take part in cross-border trading in order to broaden their product selection, gain access to a larger market place, or to take advantage of currency volatility. On-line commerce has taken a more prominent role in recent years and gives consumers a convenient platform for cross-border shopping. However, additional border costs such as duties, brokerage and shipping are not always disclosed up front or even known by the retailer, leading to situation where the final cost of the item can greatly exceed expectations. Dedicated cross-border shopping solutions such as Wishabi, and Canada Post’s Borderfree exist to mitigate these problem with varied success. In the end, caution is necessary to determine the final cost of goods before purchase.
Many Singaporeans also travel to Johor Bahru in Malaysia or Batam in Indonesia, to take advantage of price differences and differing product availability. The Singaporean government has a law that requires a car leaving Singapore to have the fuel tank filled by at least 75 percent, to prevent it from being filled with fuel from outside Singapore.
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- Duty Free on Arrival - Global Border Shopping information search site