Shipping invoices: proforma and commercial. Guidelines.

For every export shipment, meaning a transport to a non-EU country, a shipping invoice, or a similar relevant document like an exhibition loan agreement, is a must. Remember that also tranports to some territories, like Vatican, Gibraltar or Faroe Islands also require a customs clearance.

It is the base for any customs declaration and although it may seem not to be a big deal, obtaining a correct shipping invoice from a client is one of the main challenges of my job ...especially when tax-evasion or money laundering tricks are attempted :) Fortunately it occurs very rarely but - just in case - please be aware that a "pimped" invoice is usually disguised by agents and the customs at the first glance!

Due these facts, I created an instruction sheet on "how to prepare a correct shipping invoice"....and when my clients turn out not to be good students and don't observe the guidelines, I charge them extra for amendments :) !!!


There are basically three kinds of export shipments:

PERMANENT: occurs when you sold an art work, received the payment, it doesn't belong to you anymore, so you don't expect or need it to return from abroad. In this case it is crucial that your agent uses the actual commercial invoice (the one that you client received and paid) for the customs declaration. Afterwards you should receive the proof of export (POE, in German: Ausgangsvermerk) containing a description of the art work as given on the invoice, and naming the number of the invoice. You'll need it for your tax declaration! More about that to follow soon in a separate post.
Other cases of permanent export which don't involve selling/purchasing and can be cleared basing on a proforma: donations, samples, gifts, moving.

TEMPORARY: you are sending an art work as a loan to an exhibition or to a gallery for sales on commission, so you expect it to return or hope that it sells abroad :) but if it doesn't, you'll need it to be re-imported free of import tax. In this case it is important that the proforma invoice enables the customs to doubtlessly identify the shipped art work. They have to be sure that the one returning is the same one that left the EU for a temporary stay abroad.

RE-EXPORT: the art work is on temporary admission but is leaving the EU again. In some cases a commercial invoice can be used here but in the remaining >90% you'll need a proforma that corresponds with the TA doc. The value of the shipped work, however, does not have to be the same! The customs, luckily, are aware of the fact that the value of an art work is very speculative and may dramatically change within a year or two.

Below you'll find enumeratoin of information that needs to be included in both types of invoices - hopefully it will help you to create correct documents :)!

Please note: both kinds of shipping invoices are to be issued without VAT!!!


PROFORMA
- Consigner - the one who will be receiving the art work back
- Consignee
- Number, not obligatory but helpful (the customs at Frankfurt airport REALLY love it)
- Date
- Color image of the shipped work, if for a temporary movement
- Description of the work consisting of:

• artist’s name 
• title 
• year of creation (obligatory - otherwise the customs reject a declaration)
• inventory number, if given
• technique /medium
• dimensions, if available
• value and currency 

If instead a loan agreement is used, it still has to contain all above components and additionally it should be signed at least by the lender!


COMMERCIAL INVOICE 

- Seller
- Buyer
- Delivery address, if other than the buyer
- Invoice number (absolutely obligatory, otherwise obviously "pimped")
- Date
- Terms of delivery, if it is supposed to be 100% correct :)
- Description of the sold work consisting of:

• artist’s name 
• title 
• year of creation (obligatory - otherwise the customs reject the declaration)
• inventory number, if given 
• medium / technique
• dimensions, if available 
• value and currency 
• total, after reductions ect.

Now you know everything - good luck in creating beautiful shipping docs :) !

What makes a truck a fine art truck?

An averarge citizen (like me :) sees trucks as large or small, white or not, box truck or flat bed. 

It took quite a while till I could recognise a fine art truck myself!

Demand for fine art trucks is quite low, there are usually only a few companies per country who need such vehicles, thus they are mostly tailor made and as such accordingly expensive. 

Here you can find a nicely illustrated article on this subject by our Scandinavian partner agent MTAB. And below a more detailed list of characteristics that make a fine art truck and how they guarantee security in terms of climate conditions, vibrations and theft:

• It is always a box truck, with proper walls and roof, with no windows or textile elements outside. It is both for isolation and security. There is also usually a separate key for the box and often a tail lift, vertically folded at the truck's back,  that has to be lowered before the box-door becomes accessible at all.
• The inside of a truck-box is air conditioned. You can recognise it by large air conditioners that are placed above the driver's cabin or in the very back on the box inside (see the pics). Not only antique objects, but also contemporary photographs are very fragile to high temperatures.
• The inside of a truck-box is adapted for transports of fragile objects: walls are often clad with carpet-like textile and equipped with many metal eyes , which are used to securely fix crates onboard with transport belts. Besides, there are small holes in the floor and the ceiling for vertical metal poles, with which transported objects can be additionally prevented from moving back and forth, in case binding to the walls is considered insufficient, e.g. if a crate is very large or very heavy. 
• A fine art truck has a tail lift / lifting platform. It is a very important element of equippment, which guarantees that transported objects stay in an upright position while loading/ unloading, with possibly few turbulences. From time to time a client or lender asks us, if the truck we planned for a pick-up has a tail lift. All of our truck of course do, but it means that there are shipping companies, who try to ship art works without. What may surprise you while aquiring estimates for transports of very heavy objects is, that an agent may refuse to do it or send a huge truck for a collection just one small crate. It is due to the fact that standard tail lifts can elevate max 750 kg at a time (smaller trucks only ca. 400 kg) and breaks easily down, if overloaded.

• 
  A fine-truck has an air suspension. This means it is equipped with pneumatic springs, which can be seen behind the wheels, usually in form of black air bags. This comes in handy during transports of glass or ceramic objects or collections/deliveries in hitorical city centres, where streets are often cobbled.  (The image comes from Wikipedia, there is also an article about air suspension, should you be interested in more details)

Apart from the ones above, there are some further typical fine art truck gadgets: 

• Extra courier seat, for couriers who personally accompany transports of loans
• GPS tracking system. All our trucks have built in chips that allow traffic managers to check online in real time, where the truck exactly is and with what speed it is moving. Maybe you happen to have seen the 4^th season of „Ray Donovan”. His partners steal a truck full of precious art works and blackmail a Russian gangster by hiding it. In real life, succesfully hiding a truck with a GPS chip would be pretty difficult :) 

• An ignition interlock device or breath alcohol ignition interlock device (IID and BAIID) – it is basically a built-in breathaliser whose test you have to pass before starting the engine. Meant for bus drivers, in case of fine art trucks it is actually a cherry on top of the cake. Still, it is nice to assure clients and lenders that their art works are SO well taken care of that if a driver has one beer to much in the evening, he will be automatically prevented from moving the truck next morning.  
• Alarm – every truck usually have an alarm.... but we all also know how inefficient alarms are, as far as theft prevention goes.

...and several other things which are generally good to know about trucks :)

• Already mentioned in the post about dimensions: 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.
• It is hopefully obvious: 3,5t, 5,5t, 12t, 18t is the number of tonnes means the maximum allowed gross weight of a truck. Not its payload :) Example: our 12t truck weights empty already 9,5 t. Its maximally allowed payload is thus 2,5t. Consequently, to transport 6t of marbel sculptures, I had to calculate 3 separate rides, even though in terms of volume they would all fit in in one turn. I am sure there are shippers who would quote and execute it as a single ride – please note that it is illegal and dangerous, as such an overloaded truck is more difficult to steer and has a much longer braking distance!

• 
  The maximum speed is often limited by a built-in velocity blocker (e.g. 120 km/h for up to 3,5t; 90 km/h for up to 7,5 t and 80 km/h for all heavier – allowed speed limits differ though). This means that you cannot apply Google maps to calculate driving times! Unfortunately there are some registrars / lenders who eagerly forget laws of physics and the law in general, while planning collection and delivery, and react with fury or accusations of unprofessionalism, when our trucks don't rush through Europe with 150 km/h :)

Hopefully it is now clearer for you, why transports with fine art trucks must be more expensive and why they take much longer than Google maps say :) 

Hidden costs II - how to read a fine art shipment estimate with understanding

In the former post I was giving you advice on how to enquire an estimate, so that your agent can calculate the costs as accurately as possible and what factors can significantly influence the final charges. 

Today we'll be dealing with the second part of this topic: how to correctly read a fine art shipment estimate and understand what actually means what.There are some insider expressions used in estimates that for less experienced clients may be misleading -  the explanations below. 

Good luck with tracing the hidden costs in your estimates - hope it will save you some unpleasant surprises :) 

„all charges net”

• even if it is not explicitly mentioned, assume that the charges you receive are estimated net. To agents and the vast majority of their clients the VAT is irrelevant, as they are either entitled to VAT deduction or based in another country. If you need the VAT and the gross total to be indicated on the requested estimate, let your agent know. Please note that if the invoice's payer is a private person based in an EU country, they will be charged a gross total, according to VAT rates valid in the agent's country! (see also my post about the VAT)

„if nedeed”/ „if requested”

• read the estimate carefully and see, if all services you needed are included AND if there are no services added that you didn't ask for (like supervision, climate controlled crate etc.). Some services are offered „if nedeed”/ „if requested” and their prices have to be added or substracted to the total. Do not be surprised, if your final invoice is suddenly much higher, after you asked „the nice art moving gentlemen”, if they could unpack your new art work and take the crate back, cause you do not need it anymore. Whereas „the nice art movers” are usually nice indeed :) and obliged to deliver parcels to where the client wishes, please note that unless indicated, estimates usually do not include unpacking, installing and crate disposal. It is because most of our clients do it themselves. Besides, environmentally friendly disposal of used crates it not cheap (!) and crates can be re-used, if a work of art travels to a fair or an exhibition anyway.

„if necessary” / „if required”

• there are some services that may turn our necessary after the project has already started. It may e.g. include an extra customs inspection, which is almost never the case, but the customs are entitled to require it anytime they wish. As you can imagine, is quite time consuming to bring a crated art work to the customs office, unpack, let it be inspected, pack and bring back. Therefore, the phrase „if necesary” gives agents, who are obliged to execute this action but have no influence on wheter it occurs or no, the possibility to invoice their extra efforts.

"on hourly basis", "by consumption", "by effort" etc.

• some services, like packing, loading, unloading, warehouse handling etc. are offered on hourly basis, by consumption, by effort etc. If the information you provided while enquiring the estimate was exact and your agent is reliable, there should be not much dicrepancies. It may seem like such open, unspecific expressions leave a lot of room for manipulation or amendments; well...they do. But they have to! It happens frequently that a client, eagerly accepting an estimate, „forgets” to mention that e.g. they live in a street that is not accessible for cars this week, in the second couryard, in the third floor and the elevator has just broken down. Or the painting he/she has just finished yesterday is not dry yet and needs to be packed in a much more sophisticated way than originally planned. In such a cases, the time and effort originally calculated for this client increase rapidly and have to be invoiced, especially if it causes delays by other clients. If you are comparing several estimates, try to find a „common denominator”, like the price for an art mover / hour or for a roll of bubble wrapp. You can also simply ask for their price list of packing materials – it will tell you a lot and make it possible to check, if your invoice is issued honestly and correctly.

„insurance not included”

• this is a phrase which often outrages new clients:„It is brazen of you! Do you know how much this work of art is worth!? (Here comes usually quite a small amount, as owners of really valuable art works are more familiar with the market... :) Who is going to pay, if it gets damaged during the shipment? Are you not insured? Is it legal at all?” Of course, the goods transported by us are insured, as it is legally required. However, the maximum liability according to German law (§ 451e HGB ) is 620,00 EUR / cbm. Not too much, if you claim that this damaged piece of paper with 3 dots in pencil used to be actually worth 2 Million EUR :) As determining the value of an art work is highly subjective and speculative, and its material costs are in most cases objectively lower than these of crates and frames :), our clients are kindly requested to care for a suitable insurance policy themselves or ask us to arrange it for them. Insurance polices' prices are based on the declared values, destination and technique (glass and ceramics are much more expensive) and are usually well affordable.

"Total till JFK" / "delivery Madrid Int." / "delivery sea port Sydney" / "DDU Zurich" etc.

• Make sure that the estimate you receive for a shipment to a non-EU country also includes import customs clearance in the country of destination and, applicable by shipments via sea and air freight, sea/airport handling and final delivery costs. These costs are usually included in a separate quote by a local partner of your agent, are forwarded 1:1 to the client and they may be subject to a prepayment provision (see below). I have experienced many clients who were surprised by the fact that a shipment doesn't end upon landing and has also a „second part” in the country of destination. Even by road, if a shipment involves non-EU countries, goods may be delivered by the same agent who collected them in the EU, but have to be customs cleared, which inevitably requires a foreign agent to be engaged! In German we have a nice word for it: Nachlauf :)

"MPF not included" / "import charges to be determined" / "bond fees based of value" etc.

• Please note that estimates usually do not include the import VAT (nor American MPF) – it has to be paid by the buyer / final consignee and agents have no influence on its amount. The percentage of the declared value or information on how it is going to be accessed, should be though included in an estimate. Please do not assume that the import VAT is already included, if it is not explicitily stated on the estimate → leads to inevitable disappoinments :)

"provision on initial costs" / "provision on prepayment"/ "money transaction costs" etc.

• these costs apply when your agent has to prepay some charges before they can be invoiced to you. For example, when import fees have to be paid immediately or during import shipments. Let's imagine, you commissioned your agent to bring 5 large paintings from Tokyo via air freight. Your agent, if not located in Japan, has to organize this shipment in coordination with their local, Tokyo based partner, who will collect the works, construct a crate, prepare all the paperwork and ship them to the requested airport abroad. Your agent will shortly receive an invoice for these services and, as the commissioner, will be obliged to settle this bill, regardless of when (and if at all) you will pay for the whole shipment. As a reward for this risk and for „lending” you this amount of money for some time, as well as to cover costs of international money transactions and currency exchange charges, a provision of several percent of the transaction's value applies , usually between 3% and 10 %. If you are befriended with your agent, you can ask them to arrange for direct invoicing between you and their foreign partner agent – that will save you the prepayment provision but you'll have to cover money transaction costs yourself. 

Hidden costs I - How to cleverly enquire a fine art shipment estimate

It has already happened to each of us – we enquired an estimate for a certain service, we received an estimate and still the final invoice turned out to be an unpleasant surprise. 

First rule, which is valid for all business branches: always compare the invoice with the estimate! If the total differs, it may not always mean that the vendor is trying to cheat on you. It may just be a miscommunication between the person who prepared the estimate and the one who issued the invoice. Or possibly there have been extra circumstandes. But in many cases the reason is the discrepancy between what each of you meant and what the other party of the transaction understood.

I would like to give you some hints on how to enquire estimates for fine art shipments in order to avoid dissapoinments upon receiving the final invoce. Or at least to have a solid base for a succesful reclamation :) 

• Before sending, think your enquiry over and decide what kind of service do you really need? If you are not sure, what the possible options are, ask your agent for advice.
• Always communicate in writing. Even, if some arrangements have to be talked over on the phone, write a short „to-sum-up” email – for the record. It may save you a lot of money, in case something goes wrong on the agent's side.
• Ask for itemised charges so that you exactly know what services are offered according to the estimate. Please note that there are some charges that cannot be 100 % reliably estimated, but the more exact the information you deliver, the more precise the enquired estimate should be. If it already occured that you were surprised by your agent's final charges, insist on getting the details of your enquiry (like dimensions, package, weights, deadlines etc.) noted directly in the estimate. It leaves less space for manipulation.
• Provide your agent with all the relevant details about art works, conditions and circumstances of the shipment. If anything changes, inform them immerdiately and ask for a revised estimate. Again, it leaves less space for manipulation while invoicing. There are of course unlucky coincidences and unexpected changes, but the lack of proper information, like wrong dimensions (!!!), is the most common reason for extra charges, so be careful and precise - it does matter!

Here examples of some less obvious situations, in which I had to bill extra charges to a client:

• A painting that our art movers came to collect from an artist's studio was still wet. They spent an extra half an hour building a provisory shadow box around it. Then, a transport frame had to be constructed, which significantly increased the volume of this art work and consequently also the air freight charges.
• An art work was to be collected from a backyard but the gate was too low for a truck to drive through. Art movers had to carry the collected art works or roll them on skates for several hundred meters. Extra time, extra effort.
• A client enquired an estimate for an export shipment of several art works not mentioning that some of them were bonded. Bonded items require a separate customs clearance, a transit paper and most often an on-site inspection at a customs office. This means ca. 300-400 EUR extra right away.
• A client enquired an estimate for an export shipment of several art works not mentioning that not all of them are being shipped by the same consignor. For each consignor a separate customs clearance has to be submitted, and thus my charges for customs clearance multiplied.
• A client enquired an estimate for a consolidated transport and then demanded a delivery on a certain day. Consolidaded transports are offered when one or several clients already cover most of the costs for a ride to a certain destination, and the one who pays the most, can determine the delivery date. That means, if you are not the one who pays the most, you have to wait for a suitable opportunity or look for another option.
• Our client was the loaner of an art work and the invoice payer but the lender was the one determining the terms. It turned out upon collection that the art work definitely needed to be packed in a more sophisticated way than enquired and estimated. The object was one of Tomas Saraceno's spider web works – an extremely fragile one: just a spider web span on a branch of a tree. The lender demanded a customised crate, cushioned with dark foam, so that the whitish web could be easily seen while handling. Whereas we found this requirement fully justified, the loaner absolutely refused to pay for the requested crate, accusing our art movers of being „unable to properly do their job” by means of soft-packing materials. It took forever to find a compromise and needless to say, our charges rose.
  This is a very common case among museum shipments. Often these are lenders, who demand expensive, exaggerated and often simply redundant solutions but in the example above it was our client, who neglected checking the details with the lender and then acted unfair towards all parties involved. Again – simply lack of accurate information.

As you see – precise information is crucial for us, agents, to prepare reliable charges, which can be invoiced 1 to 1 when the project is over. The next post will be about reading estimates with understanding and recognising hidden costs! XXX

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!