Sales of Duty-Free Goods in the Far East

U.S. Government employees in foreign countries, including military personnel, may buy American- and foreign-made goods duty-free in accordance with military and foreign affairs agreements. Merchandise control systems at U.S. military activities in Taipei, Taiwan, and the Republic of the Philippines were designed to keep U.S. goods from entering the local economy on a duty-free basis.

Personnel under the Status of Forces Agreement (SOFA) in Taiwan realize profits from sales of personal property after a prescribed period of ownership, thus circumventing the SOFA. In many cases, waivers of the holding periods were granted. The merchandise control system developed at Taiwan, estimated to cost in excess of $100,000 annually, limits patrons of exchanges and commissaries, the dollar amount of monthly purchases, and the sale of items in high demand in local markets. The limits on commissary and high demand items are too high. Exchange sales, which averaged $141 a month for every U.S. individual for February 1976 through February 1977, are not limited in total but should be. In the Philippines, the sale of U.S. duty-free goods in the local market is the most prevalent criminal activity engaged in by U.S. personnel. A system established to control duty-free merchandise sales was estimated to cost in excess of $1 million annually. The system has resulted in a 12% to 13% reduction in exchange and commissary sales. However, local sales of duty-free goods and overpurchasing are continuing, and relatively few "big spenders" are investigated.

Recommendations

Our recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.

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