(Budget Travel) -- For many travelers, duty-free is a luxurious enigma wrapped up in discounted Swiss chocolate and soaked in tax-free vodka. Duty-free goods are mostly sold inside international airport terminals, ferry stations, cruise ports, and border stops.





Duty-free shops sell products without local import tax.





As the name implies, duty-free shops sell products without duty (a.k.a. local import tax). For example, by buying goods in a duty-free shop at Paris's Charles de Gaulle, you avoid paying the duty that France slaps on imported goods (like Swedish vodka) and that French stores ordinarily include as part of a product's list price.





In Europe, there's a bonus perk: Duty-free shops in airports and ports are "tax-free shops," too, which means you are spared the value added tax (or V.A.T., a type of sales tax) that would otherwise be included in the price of goods sold elsewhere in the European Union. That means a savings of between 5 and 25 percent, depending on the country.





But there's a catch for duty-free products bought in Europe and elsewhere. If you bring into the U.S. more than $800 worth of items purchased abroad -- duty-free or not -- you'll have to pay the U.S. duty. As a rule of thumb, Americans returning from overseas trips must pay 3 percent on the first $1,000 worth of merchandise over the $800 allowance. Import products worth even more than that and you may be taxed at a higher percentage.





In short, duty-free is hit-or-miss for Americans. The best deals are on items labeled "tax free" and otherwise taxed heavily -- such as alcohol and cigarettes. You may also find it worthwhile to shop in duty-free stores if you have some local currency left and would rather put it to use than redeem it for dollars (and get hit with the high conversion fee of a bank or currency exchange bureau).





Not every duty-free item is a true bargain. Yngve Bia, president of the duty-free research company Generation Research, says price differences depend on two things: geography and currency exchange rates. "Right now, Heathrow and Gatwick in London offer good deals, especially for liquor, because of the weak British pound," he says. For example, a one-liter bottle of Absolut vodka has a typical non-duty-free price of about $30 at retail U.S. shops. But travelers can buy it for just $15 (£10) at duty free shops at London's Heathrow and Gatwick airports. That's a significant savings.





We found impressive discounts on booze elsewhere, too. One liter of Absolut sells for $17.50 (€13.50) at duty-free shops at Rome's and Brussels's main international airports, and for a bit more elsewhere, such as in Prague ($18.50, or 399 Czech koruna) and Munich ($21, or €16). Those prices offer substantial savings off the $30 benchmark price at a typical U.S. retail store. But be aware that American states may restrict how much alcohol you may import duty-free. There's a typical one-liter limit for all types of alcohol per person, though the rule depends on your state of residence and the country you've visited. (One exception: You can return from a visit to a Caribbean country with up to two liters of alcohol duty-free.)





Cigarettes offer similar savings. Gatwick's duty-free shop sells a carton of Marlboro Reds for $36 (£24). The same carton goes for $27 (€20) at the airport in Rome. In New York -- the state with the highest cigarette tax in the nation -- a carton of Marlboro Reds goes for about $80. In a state with more-typical cigarette taxes, Minnesota, the price of a carton is $44 -- still higher than in duty-free shops. (Note: U.S. customs law allows you to import only up
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