On Friday 18 October 2019, while the UK House of Commons was preparing to hold the next day’s ‘Super Saturday’ sitting to decide whether to accept the revised UK/EU withdrawal agreement and political declaration that had been endorsed by the European Council the previous day, little or no attention was paid to the US’s far-reaching and unilateral imposition of new stringent tariffs on the importation of artwork into the US from the UK.

These events are related. They fundamentally concern the UK’s trade with the EU and the US. Both events concern laws requiring taxes/duties/tariffs to be paid when art is relocated from the UK into the EU or the US. Examination of these two art-trading laws first requires considering the rationale for a state’s imposition of any tariffs on imported goods.

Trade tariffs have featured in civilisation for millennia. Around 360 BCE Plato’s Laws propounded that ‘In our state no duties will have to be paid by anyone on imports … but no one must import materials from abroad for inessential purposes.’ Evidently this proposition was aimed at protecting the economy inside a state, especially against importation of luxury goods. In today’s trading jargon, art is widely considered a luxury good acquired only by those who have sufficient disposable income or capital.

As civilisation developed into states that established external borders and absolute sovereign power to create law and order within their own territories, most states also enacted laws taxing import of foreign goods. But as global trade developed in recent centuries, many states recognised the value of having ‘free-trade agreements’ with foreign states, by which low or no tariffs applied on trade between them.

The EU’s origins lie in a free-trade agreement for coal and steel signed in 1950 by six countries which had recently been ravaged by the Second World War – France, Germany, Netherlands, Belgium, Luxembourg and Italy – which was aimed at preventing any future such war involving them. In 1957 the six signed the Treaty of Rome to create the European Economic Community (EEC), which expanded in 1973 to add Denmark, Ireland and the UK (which in 1975 voted by referendum – the country’s first – to remain part of the EEC). In 1993, EEC members signed the Maastricht Treaty to create the EU, which by 2018 comprised 28 member states covering 513 million citizens.

The EU is the second largest economy in the world after the US, and has purchasing power parity second only to China. The EU’s GDP was $18.8tn in 2018, representing around 22% of the global economy: it is not only a world-leading trading and economic power able to achieve external free trade agreements with other trading states and blocks, but also an internal trade territory for its 28 member states whose goods, capital and citizens (including art, art businesses, artists and collectors) can trade and move freely.

From 1999 the EU harmonised its rules for import tax: a minimum tax of 5% of the market value is payable for art imported into the EU from a so-called ‘third country’ (say, from the Americas, Asia or Africa). Each member state must collect at least 5% import tax, but can impose higher rates if they wish. Most member states do charge higher rates: France 5.5%, Germany 7%, Spain 10%, Denmark 25%. A minority of member states impose the minimum 5% import tax, including the UK, which is invariably the first port of entry of art imported into the EU for onward transmission to other member states. For example: a work located in the US destined for transport to Denmark is likely to be shipped first to London (with 5% UK import tax), then re-shipped to Denmark where it enters import tax-free. The EU import tax regime also has special arrangements for art imported into the EU for ‘temporary not-for-sale exhibition’: no import tax is payable for loans of such works.

The UK’s withdrawal from EU membership would ideally require a unique ‘divorce settlement’ treaty dealing with transitional trading arrangements for several years until a new treaty is agreed for permanent provisions. In other words, any withdrawal treaty would mark the beginning of negotiations about the future permanent trading relationship between the EU and UK. Thus, the future for the UK’s art trade with the EU and the rest of world is currently uncertain and may remain so for years to come. A key future option would be for the UK to lower its art import tax from 5% or completely remove it, but doing so would probably result in the EU imposing tariffs on the import of art from the UK to the EU, and is likely to make France the entrepôt – global entry point – to the European art market.

US federal lawmakers have long had a turbulent love-hate, on-off approach to tariff-free import of art. A 1789 tariff law that imposed 5% tax on all imported articles, including art, was raised the next year to 10% on ‘pictures and prints’ and ‘painters’ colors’. An 1841 law exempted from import tax ‘all painting and statuary produced by American artists residing abroad’ plus ‘items ordered from abroad for use by any college, academy, school or seminary of learning in the United States … busts of marble, bronze, alabaster, or plaster of Paris, casts, paintings, drawings, engravings’.
The National Free Art League campaigned in the 1880s to exempt ‘all works of art’ from import tax because ‘the current 10 percent duty discouraged foreign artists from exhibiting their work in the United Sates, denying American artists the chance of proving to sceptical American collectors that home-grown talent was comparable to the best contemporary productions abroad … and that art tariffs also inhibited the importation of engravings of the old and modern masters that US artists required as examples to stimulate their own professional growth’. A 1913 law allowed ‘original’ (not mass-produced reproductions of) art to be imported tax-free.

US law has enacted variations in subsequent decades, but has essentially continued to allow art tariff-free entry into the country. Until 18 October 2019, from which date US law requires 25% tax to be paid for the import from the UK and Germany of ‘printed books, brochures, leaflets, printed matter in single sheets, lithographs on paper or paperboard created in the last 20 years, and pictures, designs, and photographs printed in the last 20 years’. Such tariffs may continue indefinitely, and the rate may be increased from 25% in the future.
Will a powerful trading block such as the EU step in to protect the hitherto tariff-free art trade status of its members?

© Henry Lydiate 2019

This article is from the Artlaw Archive of Henry Lydiate's columns published in Art Monthly since 1976, and may contain out of date material. The article is for information only, and not for the purpose of providing legal advice. Readers should consult a solicitor for legal advice on specific matters. Artists can get free online legal information from Artquest.