Shoppers chasing the cheap dollar risk smuggling charges

Nov 5 2007 by David Williamson, Western Mail

SHOPPERS who flock to the United States in search of Christmas bargains risk being accused of smuggling on their return, experts warned last night.

With seven shopping weeks left until Christmas, the temptation has rarely been greater to shop in dollars. The pound is riding at a 26-year high against the dollar and US shopping malls are preparing for a British invasion.

But any traveller who returns to the UK with goods worth more than £145 and who does not declare them to a Customs officer, is breaking the law and is in danger of prosecution.

A spokesman for HM Customs and Excise said last night, “If you have any more than these allowances you must declare the goods in the red channel or use the red point phone. If you do not, you are breaking the law and we may prosecute you.”

Nevertheless, an exchange rate of about $2.08 for £1 will embolden tourists to swap sightseeing for shopping. And web-surfers in search of a deal will be encouraged to experiment with transatlantic purchasing.

A pair of Levi’s 501 jeans will retail in the UK for around £49.95 but can be bought from US retail giant Sears for the equivalent of £16.27. A PlayStation 3 (40GB) sells on Amazon.co.uk for £279, while its US counterpart sells the games console for about £190.

Sophie Hughes, co-founder of Cardiff accountancy practice Mazuma, said, “A friend of mine is going to New York so I’ve sent her off with a shopping list for my Christmas presents.”

American retailers – alarmed by the US economy’s stuttering noises – are also excited by the potential surge in the number of British customers. Some shopping malls are offering champagne and limousine rides to bargain-hunters who have crossed the Atlantic.

But the advice is to keep your head. UK consumers may be feeling suddenly affluent, but the falling value of the dollar will have consequences of far greater significance than increasing the number of US-sourced presents this Christmas.

Most oil is traded in dollars. In the short term this could mean that British energy suppliers will enjoy greater purchasing power, but an inflation threat may be on the horizon.

David Brooksbank, an economist at the University of Glamorgan, said, “Presumably some of the Middle East [suppliers] are looking at the value of the dollar and saying, ‘I’m receiving all these dollars but they don’t go as far; I might as well put my prices up again’.”

David Phillips, chief executive of the Wales Quality Centre, also sounded a sober note.

“On first impressions the low value of the US dollar compared with the pound may seem like a good thing but it isn’t necessarily an ideal situation,” he said. “Many countries around the world trade in US dollars as opposed to their own currency.

“This means the price of UK goods and services are now more expensive for them, and it could negatively impact on the British export market.”

American businesses enjoyed a quarter-point cut in interest rates to 4.5% last week.

David Myrddin-Evans, a Cardiff-based senior director at Brewin Dolphin Securities, expects many US businesses to greet the downward slide of the dollar with optimism.

He said, “If you’re an American company exporting to the rest of the world, clearly it’s easier to sell your goods overseas.”

Traditionally, a slow-down in the US economy has been bad news for the rest of the world. When the most affluent customer base feels cash-strapped, exporters in almost every other country will struggle.

The slowdown in the US housing market will have dented confidence, and many of the powerful influential financial institutions have been hit by the sub-prime mortgage crisis.

However, a new factor may cushion the effects of an American downturn.

“We have an additional engine for global growth in China and the emerging markets that’s taking up the slack,” said Mr Myrddin-Evans.

But he noted that at least one major Chinese bank has admitted being affected by the sub-prime scandal created by lenders giving money to people with poor credit history.

He said, “When they’ve got it, who else has got it? Where will all of this end?”