Border trade

A gas station in Estcourt Station, Maine, caters to border shoppers from across the border with Canada, where gasoline is significantly more expensive.

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.

Where border trade is done for tax evasion it forms part of the underground economy of both jurisdictions.

By region

Europe

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. In Finland, the best-selling Alko shops in proportion to local population is on the border to Norway, since even if the alcohol tax is high in Finland, it is lower than the one in Norway.

Border trading exists between Northern Ireland and the Republic of Ireland; during the Global Financial Crisis, when the Euro rose against the British pound, so many from the Republic visited Newry—with lines of traffic four miles long—that the phenomenon became known as the "Newry effect". One in four households in the Republic in counties as far as Galway, four hours away from the border, shopped for groceries in Northern Ireland. Petrol is cheaper in the Republic, and groceries, furniture and clothing are cheaper in Northern Ireland.

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. Similarly, there is an important amount of French purchasers buying tobacco and alcohol in Spanish border towns such as Le Perthus. In Spain, these products are a third cheaper than in France. During summer, around 70,000 visitors cross the Spanish border daily to buy such products, occasioning severe traffic jams. Nearby Andorra, with a low VAT (4%), is also extremely popular with French customers residing in the area.

There is a significant amount of border trade in marijuana between the Netherlands, where cannabis is essentially legal, and surrounding countries such as Belgium, Germany, and France.

North America

Cross-border shopping between three countries in Canada, Mexico, and the United States 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 the United States alone. Consumers take part in cross-border trading to broaden their product selection, gain access to a larger market place, or take advantage of currency volatility. Online commerce has taken on 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 to the retailer, leading to a situation where the final cost of an item can greatly exceed expectations. Dedicated cross-border shopping solutions such as Wishabi, and Canada Post’s Borderfree exist to mitigate these problems with varied success. In the end, caution is necessary to determine the final cost of goods before purchase.

Asia

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.

Shenzhen, on the border of "mainland China" with the special region of Hong Kong, also benefits from border trade.

See also

• Tax avoidance and tax evasion
• Border checkpoint
• Border control
• Cross-Border Arbitrage

External links

• Duty Free on Arrival - Global Border Shopping information search site