A customs territory is a territory with uniform customs regulations and there are no internal customs or similar taxes within the territory. Customs territories may fall into several types:

There are also some unregulated lands (usually uninhabited) not part of any customs territory.

As of 2010,^[update] most customs unions rarely operate as a single entity and are represented in relations with other customs territories either jointly by their member state governments and the union institutions or by only the member states. Thus, in practice, they rarely appear as a single customs territory and instead they operate as a multiple separate customs territories that have the same or similar customs tariffs. The European Union (EU) is the only trade bloc in which the union institutions have exclusive competence over the common external tariff and thus sign and ratify agreements with foreign states without direct participation of the EU member states. The EU is also the only trade bloc member of the World Trade Organization, but the EU member states also continue their own separate memberships, as not all of the WTO issues fall within the scope of exclusive EU competences^{[citation needed]}.

The governing organs (government or other responsible administrative entity for the states and territories, secretariat or similar international organization body for the trade blocs) of the customs territories negotiate and sign trade agreements. In some cases the negotiations are conducted by a trade bloc secretariat, but the actual agreement is signed by the member states of the trade bloc. It is also possible for a group of customs territories, that do not form a customs union (regardless if they cooperate as a different type of trade bloc), to negotiate trade agreements together and to sign the resulting agreement individually (for example, the European Free Trade Association).

A customs territory usually has inspection stations at its borders. There can also be border checks between two parts of the same customs territory. For example, there are border checks between the Schengen Area portions of the EU customs territory and those portions in the Common Travel Area formed by the United Kingdom, Crown Dependencies, and Ireland^{[citation needed]}. Another example is the border checks between Israel and the Palestinian Territories, which are in a customs union. The European Union example is particularly complicated, since it also has different boundaries for EU VAT area, the EU excise duty area, the area where EU law applies, and the area considered by the EU statistics agency^{[citation needed]}.

A customs territory is a fundamental concept in international trade law, distinct from political sovereignty. It is authoritatively defined in the General Agreement on Tariffs and Trade (GATT) 1994 as "any territory with respect to which separate tariffs or other regulations of commerce are maintained for a substantial part of the trade of such territory with other territories". This definition establishes two core principles: first, that a customs territory is a defined geographical area capable of conducting its own commercial policy, and second, that this policy autonomy is demonstrated through its own tariff schedules and trade regulations.

Countries which are members of a customs union, which in some cases may be considered a single customs territory:

Countries with external territories variously put them inside or outside the main domestic customs area.