Duty-free privileges are a key government incentive allowing eligible sectors to import goods tax-free upon meeting set requirements. This research paper was conducted to make an appraisal on the legal and institutional frameworks governing customs duty free privilege at Bahir Dar customs branch office. In doing so, a mixed method design was employed combining doctrinal and empirical research methods towards creating a clear foundation of the legal and institutional framework on one hand and assessing the real-world application of the laws and its practical challenges and gaps on the other hand. The findings show that the current legal framework establishes a basic structure for duty-free operations despite the gaps and challenges that restrict its efficacy. It is found out that misuse duty-free privileges such as mis-declaring goods or misusing exemptions either personal or commercial use in contradiction to intended purposes is abundantly available. The study indicate that there is inconsistent enforcement of laws concerning customs duty free privilege by different customs offices which may interpret and enforce regulations differently, leading to inconsistencies in the application of duty-free privileges. This conclusion encapsulates key findings, explores implications, recognizes limitations, and proposes directions for future research, specifically aligned with the context of customs duty-free operations. Furthermore, the research paper has forwarded key recommendations on this area which could help in modernizing the administration of customs duty-privilege