Art logistics post Brexit
The new rules under Brexit are scheduled to take effect by 1 January 2021 regardless of whether there is a trade deal between the UK and the EU. Brexit will inevitably effect the entire art ecosystem and how we work with our consigners, sellers and buyers – many of whom are based in the UK and continental Europe. We invited Tova Ossad, a London-based art management specialist who we’ve worked with in many different capacities in the last decade (notably while she ran Fabrizio Moretti’s operations) to join our gallery manager Randy Reynolds for a five-question Q & A on this very topic.
Randy Reynolds: What do you foresee to be the greatest challenges regarding shipping and customs of artwork after Brexit? How can collectors best prepare themselves to approach these challenges?
Tova Ossad: Brexit is at the end of the month and I am still not certain that there is an efficient course for this to take. I work with many businesses to devise a strategy for Brexit, but there is certainly no “one-size-fits-all” recommendation and I can candidly admit that I have not given the same advice twice.
The most obvious issue, because it is the biggest change, is that all goods will now have to go through Customs and be subject to UK Import VAT. This means that if an item is in EU free circulation, after 31 December, Import VAT will need be paid in the UK in order for it to be free of customs controls. This also applies vice versa: import VAT will need to be paid in an EU member state in order for the work to be in EU free circulation.
The interesting thing about the Import VAT is: the percentage that is charged is determined by the country of entry, but once paid, the work can travel throughout the European Union. For example, if an artwork valued at $100,000 is imported from the United States into Belgium, the importer will pay 6% of the value, or the euro equivalent of $6,000. After that import tax has been paid, the piece can then freely travel throughout the EU and go to Austria without needing to pay another import tax.
The less obvious issue is the hidden cost that will inevitably affect the client. For instance, official have stated that customs queues at the ports and at Dover (where most of the European road transport come through) will be longer; therefore, shippers will need to have more drivers on each truck in order to comply with regulations regarding worker’s hours. Vehicles will also likely need to be further modified in terms of both security and climate control to account for standing idle for longer periods of time. Furthermore, insurance companies will likely increase their costs because more delays mean the more time that the goods are not secured in a storage warehouse or with the consignor/consignee.
RR: We often get viewing requests by UK-based clients – sometimes we send the artwork to storage space in London (martinspeed etc) for a private viewing, other times we send it to clients’ homes for them to try it out. How would Brexit affect the time / cost of such services? How will such time/ cost compare to a viewing, say, in Zurich or Paris where the EU import/export protocols apply?
TO: It all depends on where the work is coming from. If the piece is coming from Nicholas Hall ltd. in New York or from Switzerland then there would be no changes – Brexit doesn’t affect artworks coming from those places. It is more about the works that are coming from, say, Paris. It will take longer for the work to arrive in the UK, so that’s a timing issue, and if the clients wants to view the piece at the shipper’s location or at his/her home, then the cost wouldn’t be any different to something coming from the US. The change in cost is that, instead of the work being in EU free circulation with ease of movement, that will no longer be the case.
RR: Moving onto specific examples – would you mind spelling out what post Brexit rules mean in terms of import duty for an artwork sold in the UK that originates in the EU? Will sellers have to pay 5% import duty to get an artwork from Paris, Madrid or Rome to London (which is currently zero-rate VAT)? If something comes from the United States and it is sold via London (5% import) to Italy (10% import), what will be the new tax situation?
TO: Yes, after 31 December 2020 at 11pm GMT, artworks from a European country such as France, Spain, or Italy, will be subject to an import tax of 5% upon entry to Great Britain. (Note that, at the time of writing, the rules for Northern Ireland are different.) At this point, the pieces will become British and, should they need to enter the EU again, they will be subject to that country’s import VAT. So, if you have an artwork valued at $100,000, you would pay the $5,000 for it to become in GB free circulation. Then the work would need to go to Italy, it would then be subject to the 10% Italian import tax.
The second scenario is extremely complicated and in the simplest case, if the company is based in the United States, then I would recommend that it temporarily import the artwork into the United Kingdom, using a shipper’s Bonded Warehouse or Temporary Admissions Account because then they would not be subject to Import VAT. If the work is then sold to a country in the European Union then it would only need to pay the local import tax of that country. However, keep in mind that this may not apply to every work.
RR: In addition to Brexit, we are still in the midst of a global pandemic. Do you think that certain aspects of the art management business will be forever changed as a result?
TO: Yes, I think that there is one fundamental aspect of the art management business that will change: each sector of the art market will begin to rely more on local expertise and start to trust the people on the ground. Recently, I have been working more with international clients who are purchasing artworks in the UK and want someone who understands the local laws and requirements. Hopefully this will help local businesses flourish after what has, undoubtedly, been a difficult period for everyone.
RR: A lot of shipping companies provide ‘white glove service’, but some clients prefer to DIY and realize that there is a steep learning curve in shipping, especially when it involves import and export. In my experience, clients either accept a shipping quote from whatever shipper we use, or use their own shipper. So if I may be direct: in what situation should we recommend a shipping ‘advisor’ like you? Practically speaking, do you have some good tricks that can actually make a difference to the cost or overall experience?
TO: Of course you can be direct!
Yes, collectors, art advisors and gallerists all have their preferred shippers, but I have a network of different shippers (especially in the US, UK, France, Italy, and Belgium) so it is possible that I might find you a better quote for what you need. I take out the headache of someone needing to shop around and just trust that the shipper will do what you expect. I can read a quote and negotiate prices because I understand what each step entails. For example, you might get charged £250 for a customs declaration when I know that another company does it for £180; or £500 to move something in London when I know that another company can do it for half that price. In addition, because I know what the paperwork is meant to look like, I can be sure that everything is correct and check that there are no mistakes. Because the onus is on the entities named in the paperwork – not on the shippers – to be sure that everything is correct. ❖