New Year's post about the importance of making music by ceramic angels

While shepherds watched their flock by night,
They saw a bright new shining star
They hear a choir sing
The music seemed to come from afar.

Hark, now hear the angels sing,
A king was born today,
And man will live for evermore,

Because of Christmas Day.

Wishing you a succesful and happy New Year, I would like to shortly recall an anecdote from the times before my current job in fine art shipments. Those who know me have most probably already heard it.
Back then I used to work for a world leading manufacturer of seasonal decorations and we were exporting a great deal of goods to Switzerland. Among our products, we had a wide range of ceramic angels for all possible occasions - baptism, first communion, wedding, Christmas, Easter, falling in love, baby shower etc.etc. which for long years used to be declared as the HS Code

69139093 Statuettes and other ornamental articles of earthware or fine pottery.

Everyone was happy about that until one day, when the Swiss customs suddenly doubted this classification. We had to send samples of our angels to the Main Customs Office in Bern, where as you suspect, Swiss guys are even worse than the Germans, as far as accuracy and the customs go :)

Our classification was considered quite correct with one exception: from now on, angels making music have to be declared as:

95051090 Christmas articles (excl. of glass, candles and electric lighting sets, natural Christmas trees and Christmas tree stands)

The notion of angels singing is present in many Christmas carrols, but not really to be explicitely found in the Bible itself. But the Swiss customs just seem to know better than the Bible, what angels were doing during the Nativity :)

Art fair aqusitions and VAT

As usual, with Art Basel Miami Beach going to its end, many clients ask, if and how much import tax for their aquisitions will apply, if bringing them back to Europe. Some of them were promised by the selling gallery that no import tax will be due at all, as the purchased art work "originally comes from the EU and can be reimported free of any import charges". 
Unfortunately,  I very often have to disappoint them with my answer.

Let me shortly explain how it works and why doesn't it work the way clients expect it.

Here some general rules for invoicing the VAT between the EU countries (applies to VAT payers of course):

1) a sale within the EU is in customs' terms not an export. It is subject to VAT!

2) if the buyer is another EU-VAT payer, like another gallery, the invoice may be issued net and the transaction has to be declared in the so called quarterly recapitulative statement. Sounds terrible, I know :) but means just that the finance authorities in the buyer's country are informed about this purchase and that this purchase will be taxed in the buyer's country of tax residence, with the local VAT rate.

3) if the buyer is a private person, like an art collector, the ivoice should be issued with VAT, according to the rate valid in the seller' country.

4) regardless of the purchaser being a private person or a company, if a sale between an EU seller and an EU buyer takes place at a fair held outside the EU (like all editions of Art Basel), the acquired art works are seen by the customs as third-country goods and are as such subject to import VAT upon return. Taxation cannot be legally avoided that way! 

The advantage of  fair aquisitions is the import VAT rate that is usually much lower than of the regular sales VAT. In Germany it is 19% and 7%, so the difference may be considerable. Still, please note, that faking fair sales to lower the VAT amount payable by your client is encouragement / contribution to tax evasion and as such not quite legal :)

As for the famous "tax-free reimportation", it is commonly practised indeed but possible mostly for the actual owner/exporter of the art works or in cases, in which a non-commercial character of such imports is proven and comprehensible for authorities (like a temporary travelling exhibition).

Of course there are may cases in which a tax free reimport by the buyer "somehow" worked, mostly due to negligence of individual customs officers...but still - it was definitely not correct :) Generally, the customs check reimport docs much much more thorough than all other ones, as they are well aware of tax fraud practises.

Wish you luck with your return shipments and I'm warming up for all the "charming" Miami imports and reimports awaiting me very soon :)

About customs, love, pizza, the new Union Customs Code and Kafka

„We have a saying in our office: He, who is lucky at customs, is unlucky in love. So jugding by you recent 'luck' with import entries, you must be having the time of your love life now, hm?”, said a customs officer to me yesterday on the phone... :) 

Very frustrating indeed but I do have an impression that to deal with the EU customs one needs more luck than knowledge or experience. If having a customs issue, you ask three agents for a solution and receive three different answers – they are probably all three true and right! It suffies that every agent talked to a different customs officer – and here we are!

Please remember that the law is not made by agents or customs brokers. If an agent emails you for the 10^th time to ask for the 20^th document, needed for a clearance, they are not doing it for fun or to annoy you. They are just conveying messages and requirements from the customs and are just as sick & tired with authorities' whims as you are.

However incredible it sounds, EVERY customs office, at least in Germany, works in a bit different way and officers have some freedom in interpretation of the law. In the meantime, I more or less know what is forbidden and what is allowed in the five customs offices with whom I work most often. Unfortunately, I have no guarantee that these ways of proceeding are going to work with a sixth one. And every other EU country has its own specialities and variations anyway.

On May 1^st 2016, a new Union Customs Code was introduced, as an attempt to unify and standardize customs procedures in the EU. So far, it has led to even more chaos and confusion, as every office introduces new regulations gradually and in its own pace and thus you can never know, if already the new or still the old ones are valid.

Below some authentic quotes from customs officers, which made me pray for luck, more than learn the new customs law:)

„No, you cannot declare it this way and I don't care that all other customs offices do accept it!”

Me: Could I order a customs inspection in the ethnographic museum? The objects are very fragile and really shouldn't be unpacked anywhere else.
Customs: You cannot just call here and order a customs officer, an officer is not a pizza!

„Yes, my other colleague allowed such a procedure several times but he was simply wrong.
I wouldn't have and he shouldn't have.”

„Aha, I see. Our colleagues from the other customs office told you to declare this way?
They have always been known for being lazy and having no idea.”

„Yes, this procedure was still possible last week; however, it actually should have been forbidden since May, the new Union Customs Code, you know, but we just haven't introduced this prohibition till yesterday.”

Customs: „I need to inform you that tax-free temporary imports for restoration purposes are no longer approved by our customs office and the consevator has to deposit 20.000 EUR, otherwise the artwork won't be released to him. It may be that our colleagues in Freiburg and Dresden allow it but we don't. Since last month not anymore. You see: the new Union Customs Code.”
Me (in shock): ….????
Customs: „We are actually about to fully waive temporary imports for commercial consignees. All such importes will be taxed in the future.”
Me (still in shock): But when?
Customs: „We don't know. We're still discussing. We're actually not entirely convinced that it is a good idea. But this new Union Customs Code....we'll see and let you know.” 

4 months later – no news – apparently still discussing :)

Kafka should have written a novel titled "A Customs Clearance" :) It'd surely be just as good as "The Trial".

Luckily, there are SOME helpful and competent customs officers, and SOME rules that are valid in the whole EU. A post about customs basics to follow soon!

U.S. Customs MPF user fees & bond fees

Organising any transport to the US, you'll come across mysterious "MPF user and bond fees", which will apear on the shipping estimate probably without value, with notice "to be determined", next to some complicated looking formula. They are import charges for shipments entering US: quite  a boring subject :) but as they usually constitute a significant part of total shipping costs, I guess they're woth paying a bit attention, especially while reading and comparing estimates.

As the US Customs system is quite different from the European one and user friendly information on that topic not really common, I'll try to explain both terms below.

What is a MPF US Customs USER FEE?

Artworks, per Unesco Florence Agreement of 1950, are duty free, so a user fee can be seen more as a kind of import tax: MPF means Merchandise Processing Fee. It applies always*, when an artwork enters the US, also if it had been exported temporarily, for example as a loan for an exhibiton. It is collected per AWB, so if
possible, try to consolidate your shipments.

Officially**, the only two cases in which this rule is not valid are:
1) the imported work has been created by an American artist;
2) the imported work was exported accompanied by Carnet ATA
(a state waranty for the return of temporarily exported goods).


How to calculate a USER FEE?

The formula is slightly terrifying at a first glance. But at a second not that much anymore: 0.3464 % ($25min - $485max)

This simply means that if your artwork's value on the shipping invoice is ca. $7.070,00 or less - the minimum fee of $25 applies;

If its declared value is ca. $140.000,00 or more - the maximum fee of $485 applies;

For values in between, please use the formula. The declared value of the artwork simply needs to be multiplied by 0.003464.


What are BOND FEES and why aren't they unified?

A customs bond is an amount of money that the importer has to deposit at the US Customs as a guarantee of payment of any increase in duties or penalty on the entry, if for some reason the importer does not pay. It is required for every formal import entry. For companies like shipping agents, who receive and clear numerous imports during a year, it is much more beneficial to obtain a so called continuous bond (flat rate principle), under which any number of customs entries can be made without extra costs. Such a continuous bond, though, means for a shipping agent that between ca. $50.000 - ca. $400.000 of their assets are "frozen" on a custom's bank account. Bond fees are charges for using an agent's continuous bond, which is still more advetageous for clients than obtaining an own, single entry bond.

As you see, bond fees are just price for a service offered, so they can differ from agent to agent a good deal. Here an example:
________________________________________________________________________________

I regularely work with one US shipping agent who is generally cheaper but offers bond services at
$5.5/$1000 of value, min $100 - max $500

and another one, who is generally more expensive but charges
$1 per $1000 of value, min $75 - max $550

Assuming the value of an imported artwork is $100.000, the former agent would charge their client with
max fee of $500, and the latter only with $100.
_________________________________________________________________________________

That is why, while comparing estimates from different US agents, it may pay off for you to calculate the estimated bond fees, as in some cases the difference can be really significant!


*Formal entries are required for imports of commercial goods valued at $2,500 or more.

**Inofficially, there have been precedences of other cases...so  it is always worth asking your US agent, if the user fee is necessary in your case. It is quite rare, I admit, but sometimes possible :)

*** For further information, you may find the official website of US Customs and Border Protection worth visiting

Art Basel Miami Beach

Keep calm! Calmness is the cradle of power :)

Like every year, agents' and galleries' November is dominated by preparations for Art Basel in Miami Beach. Even though the fair is officially open to the public 4 days long, it actually lasts app. 10 days, including unpacking, installing, VIP viewing, deinstallation and packing for the return transport. For agents and galleries involved, the project "ABMB" lasts app. a month.

Every shipment coming to the show from abroad requires cooperation of agents on both sides. Foreign agents, in charge of exporting and re-importing of the art works, who serve many galleries at once, often send a representative to support their clients on site. Receiving agents on the US end, like e.g. Masterpiece, Dietl or Atelier 4, usually open their temporary offices directly at the fair and coordinate incoming shipments together with the exhibitors. 

They also set the deadlines for arrival, which due to a high congestion risk at MIA airport and Miami sea port, are up to 3 weeks (!) in advance of the official opening. Foreign agents are obliged to observe these deadlines; consequently, all preparations involved in an outgoing shipment need to be planned accordingly earlier. That is why, already at the end of October we, European agents, have to stress our clients to take final decisions on the to-be-shipped volumes. Our apologies :)

After it has been decided which works are going to be exhibited, their packing has to be checked and, if necessary, extra crates have to be fabricated. When final dimensions of packages (so called colli) are known, it is time to book sufficient freight hold by a chosen airline. As, not quite surprisingly, all freighters going to Miami at the end of November are pretty full of art, it is advisable to book the priority option, especially, if the volume is large. Otherwise, an offload and - as a result - a delay may occur. This year the situation is exceptionally unfavourable: due to the threat of Lufthansa cargo staff's strike, the demand on freight hold by other airlines grew suddenly a great deal – and so did the rates.

The next step are packing lists and shipping invoices for customs purposes. To make your customs broker's life easier, works listed on a fair proforma should be sorted by technique, have net values given in one currency and if available, images or at least inventory numbers. Works which are not in free circulation in the EU or have already been sold, should to be documentated on separate proformas or commercial invoices. Still, if possible, all the works travelling ot the fair, should be sent on one AWB only – then the US bond and user fees, that are usually maximal anyway, apply only once.

As it is not known, which of the works will be sold and which will return, a temporary export seems to be the most favourable option. If it is done correctly, unsold works can be re-imported smoothly and tax free after the fair. On the other hand, the POE (proof of export), even if temporary, is usually respected by tax authorities as long as the value on the commercial invoice (issued afterwards) matches the one declared on the fair proforma.

Please note that tools, like drills, nails or hammers, and booth equippment, like a carpet or stool, have to be declared on the shipping invoice as well! 

A very useful hint: don't ever pack your electric screwdriver into a wooden crate, for which you need a screwdriver to open :) ! Pack you tools in a flight case or any box that can be opened by hand! You wouldn't believe, how often and to how much renowned galleries this mistake happens :) 

After all is set and done, the volume is delivered to the airport. The usual practice is to consolidate services for diverse clients (transports to the airport, handling, booking of freight hold) to keep the costs possibly low.

Now you, as the representant of your gallery, have to board your plane, land safely and conctact the US agent on the other end to receive your shipment at the fair and start arranging your booth. 

I wish you fun and success in Miami Beach, so that in the best case you bring only the tools and chairs back :)

Art handling and dimensions: facts and figures

Numbers rule the world - and so do they the logistics. While organising a fine art transport it is absolutely crucial that you deliver you agent exact and correct figures. Only then you can receive a reliable estimate and expect a smooth course of action.

Here a couple of hints and facts that may sound obvious - still, from my practice I know, unfortunately they are not :)

- when starting a job as registrar, take measurements of the doors and the elevator in your new working place. No matter how professional your art handling agent is - if an art work is too large,
it simply won't fit through!

- remember that even really large fine art trucks have limited capacities, as their maximal dimensions are strictly regulated by the law. Consequently, objects higher than ca. 2,80 m usually have to be transported in a jumbo trailer with a lowered suspension and objects both wider and longer than 1,22 m cannot be placed one along another in a truck (max width 2,45 m), which as you can imagine, multiplies the shipping costs.

- when asking for an estimate, indicate which of the listed dimensions is the height. Museums prefer the HxLxB format, whereas for example airlines - LxBxH. Especially air freight rates are strongly affected by the crates' shape. Whereas flat crates generally travel at a higher expense, tall crates may be sometimes too large for x-raying and have to be opened at the airport by art handlers.

- if enquiring from a foreign agent, make sure you're using the correct unit - cm /inches are not always clear (1 inch = 2,54 cm). And of course, don't mix mm with m :) ! The same rule is valid for currencies, while preparing proforma invoices, especially, when using non-US dollars!

- if you have a closer look on an AWB, there are both gross weight and chargeable weight given. For calculation of the chargeable weight of a shipment, its gross weight and volume weight are taken into consideration and charges are applied to the higher one.

The volume weight is calculated as follows: H x B x L [cm] / 6000.
Example: a crate in form of one cubic meter has a volume weight of 166,67 kg:
100 x 100 x 100 / 6000 = 1.000.000 / 6000 = 166,67 kg.

Knowing this formula, you can check, if you have been charged correctly. *Still, please note, that in some rare cases, like an untypical shape, a not stackable package or a very busy period (e.g. before Christmas), an airline may impose a higher chargeable weight.

Why are fine art transports so expensive? The basic question

I can imagine that when a freshly employed registrar sees an estimate by a professional art handling agent for the first time, he or she is just heavily shocked. Why is it so crazy expensive? The agent surely wants to rip us off! It just can't be! 

 In many cases a professional fine art transport with all its extras is simply unnecessary and far too expensive indeed. Here an illustrative, slightly exaggerated example: A small, inexpensive framed drawing or sculpture will be travelling through a city almost equally safe  wrapped in a towel and carried in a rucksack on a bike courier's back, as it would on board of an air-conditioned, alarm-secured fine art truck with an extra spring system and two trained art handlers as drivers.

On the other hand, the transported volume affects often only the time of handling (pick-up, loading / unloading, warehouse handling) whereas the costs of the tranport itself, like leasing rates (or usage and insurance) of such a specially equipped truck, 
two art handlers per hour or petrol consumption stay the same, irrespective of the transported volume.

Consequently, it is crucial to recognise what kind of transport and packing is actually needed: A consolidated city ride and a bubble foil wrapping? A dedicated fine art transport and a T-frame? Or maybe a shipping via airfreight, with a courier assistance, supervision at the airport and a climate controlled crate?

As you suppose, the price for the transport of one and the same art work may span from several tens up to several thousands EUR, depending on how precious it is to its owner. It is good to remember that expensive services of the high-ranking art forwarding agents are meant for the most fragile and valuable art works and might just not be necessary in all cases.

And here an example of how you definitely shouldn't transport your art works - spotted accidently on a bus today :)

experimental art handling :)