Fritz Dietl speaks with the Financial Times for their article: London art market braced for no-deal Brexit tax hikes; by James Pickford
“International collectors and galleries had until recently expected a Brexit withdrawal deal to be struck between the UK and Brussels, giving some continuity over rules in a transitional period. But they admit that looks increasingly shaky as the political rhetoric increasingly points towards a no-deal exit.
Fritz Dietl, president of art shipping company Dietl International, said: ‘Before, everyone assumed this was going to be worked out. Now there’s a lot more concern.’ ”
U.S. Tariffs confirmed on artwork of Chinese Origin
The United States Trade Representative (USTR) today announced The next steps in the process of imposing a tariff of 10 percent on approximately $300 billion of Chinese imports.
Any artwork of Chinese origin will be subject to a 10% tariff when imported into the United States starting on September 1st. We suggest you take immediate steps to import these works into the United States before that date if you wish to avoid the tariff. Please contact your local Dietl representative to assist in organizing these shipments.
* An artwork of Chinese origin is determined by its production location. If fabricated within mainland China, it will be subject to these tariffs regardless of its current location when imported into the United States.
Update on US and Chinese Trade Negotiations
On August 1, 2019, President Trump announced in a tweet that additional 10% duties will be imposed on September 1, 2019 on $300 billion in China goods. Although not specifically referenced in President Trump’s tweet, the $300 billion amount is consistent with the China Section 301 List 4 previously proposed by the United States Trade Representative (USTR).
On May 17, 2019, USTR announced the proposed China Section 301 List 4. The list includes 3,805 full or partial HTSUS Subheadings, which cover essentially all China products not subject to prior China Section 301 lists. Included in this is Chapter 97; WORKS OF ART, COLLECTORS' PIECES AND ANTIQUEs. it is possible some HTS provisions will be removed or limited based on public comments and the public hearings that were held in mid-June on the proposed China Section 301 List 4.
USTR has not yet provided formal notice through publication in the Federal register of the 10% additional duties on List 4 goods described in the President’s tweet, so the precise implementation of the 10% duty is still not defined. As a result, no final List 4 is available at this time. The U.S. is scheduled to continue trade talks with China in early September, so circumstances could still change.
Fritz Dietl speaks with Bloomberg News for their article: Ultra-Rich Shop in Secret Showrooms at Super Bowl of Art World; By Katya Kazakina
“Fritz Dietl, whose logistics company shipped enough art to Basel this year to fill three jumbo-jets, recalled the days when dealers visited storage rooms with clients, took an artwork from the crate and showed it leaning against the wall.
“It didn’t cost anything,” he said. “Then the fair got smarter.”…”
Client questions answered regarding US and Chinese Trade Negotiations
In response to the news of potential duties on the import of artwork of Chinese origin into the US, we've received requests for clarification from clients in the form of specific scenarios. These will not cover every concern but will address some major issues that may arise if the proposed import duties go into effect.
Some of these scenarios are sure to sound familiar, we've compiled them here with replies for quick reference.
Question 1- Can you confirm that the tariffs in both directions only apply to mainland China? Hong Kong is exempt in both directions, correct?
Answer 1- Shipments into Hong Kong will be unaffected, however, shipments of artworks of Chinese origin into the US – either from HK or from any other 3rd party country – would be subject to duties on entry into the US.
Question 2- Can you confirm that the tariffs only apply to artwork created in mainland China, or the US, and shipping specifically from one of those countries to the other?
Answer 2-Tariffs in the US will only apply to artworks of Chinese origin. Regardless of where they ship from.
Question 3- Shipping an American made artwork from HK to mainland China (As an example, shipping a work that was made in the US and currently in storage in HK.) Will tariffs apply on the import shipment into China?
Answer 3-Yes, because the work is of US origin, it will be subject to a higher rate of duty upon entry into China. Even if it comes through HK or any other country.
Question 4- Shipping a non-American made artwork from the US to mainland China, i.e. a return of a Chinese artwork from the U.S. to mainland China, or a shipment of a foreign made work from the U.S. to mainland China, will tariffs apply?
Answer 4-Whether or not a work of Chinese origin is subject to import duties upon entry into China depends largely on how it was originally exported. If it’s a return of a temporary export it would, in theory, not be liable for import duties. If it’s a new sale, it would be subject to import duties at the standard rate – not the higher rate to be imposed on US goods. Likewise, imports of art manufactured in other countries would be subject to standard rates of duty.
Question 5- Shipping an American made or foreign (non-Chinese) made artwork from mainland China to the US will tariffs apply?
Answer 5-US made goods will still be able to return to the US duty free with a proper declaration (form 3311). Works manufactured in countries other than China would still be subject to the MPF but not to additional duties yet to be imposed by the US.
Question 6- Shipping a mainland China made artwork from the US to anywhere else in the world will tariffs apply?
Answer 6-These shipments will be subject to import duties and taxes in whichever country they are shipped to.
Question 7- Would return shipments to the US of works of Chinese origin be subject to duties even if they return from third party countries?
Answer 7-We are not sure if they will allow any duty-free importation for works returning from "Public Exhibitions". This still needs to be determined.
Question 8- Shipping a mainland China artist’s work from a non-mainland China location to the US. As an example, from London or Zurich to US will tariffs apply?
Answer 8-Because the works were produced in China, they will still be subject to the import duties for Chinese made goods upon entry into the US.
Question 9- If so, could we potentially use another intermediary step to avoid tariffs?
Answer 9-Absolutely NOT!!
Question 10- Will there be permanent vs. temporary imports and exports and how would they work for both countries?
Answer 10-No other changes are foreseen with permanent vs. temporary imports into China.
In the US, when working with galleries and collections, we generally import all shipments permanently (consumption entry) on your behalf, which gives you the most flexibility for your inventory - so going forward you will have to pay the import duties on Chinese made goods.
You will be able to file for duty drawbacks (refunds) for anything you are re-exporting. There are fees involved to file for a duty drawback and the refund process can take as long as 6 months.
Alternatively, you will be able to import Chinese made art work on TIB's (Temporary Import Bond) BUT please keep in mind that ALL works will must be re-exported!
Question 11- How will the tariffs be collected in both countries? How would values be vetted?
Answer 11-As is already the case in China, duties will be assessed as part of the customs import clearance. Likewise, here in the US, duties would be assessed as part of our import clearance process.
You will see an additional line item on your invoices, separate from the MPF, noting the amount of duty on goods of Chinese origin. The exact rate of that duty is not yet published or known. We suspect it will be at least 10 % - but could possibly be as high as 25 %.
For valuation you must consider that all values are generally public knowledge. A lot of information about the value of artwork can quickly be found - even by US Customs inspectors - at the stroke of a fingertip. Thus - it is our recommendation to declare the full purchase value in all customs declarations.
Updated! - US and Chinese Trade negotiations
In the new round of U.S. and Chinese trade negotiations, additional tariffs have been placed on U.S. goods, including artworks, imported into China at a rate of 25% duty + 13% tax, for a total of 38%. This new rate of duty and taxation will take place starting June 1st, 2019.
Additionally, the U.S. government is in the process of enacting the fourth Tranche in their own process of increasing Duties on Chinese goods. While the previous three Tranches put in place by the U.S. have not included artworks, it is anticipated that the fourth Tranche will include all forms of artwork. An announcement for when this forth Tranche will take effect is forthcoming. We will stay on top of these developments and keep you informed as more information is provided.
From the OFFICE OF THE UNITED STATES TRADE REPRESENTATIVE;
“On August 18, 2017, USTR initiated an investigation into certain acts, policies, and practices of the Government of China related to technology transfer, intellectual property, and innovation (82 FR 40213). During the investigation, the Trade Representative determined that the acts, policies, and practices of China under investigation are unreasonable or discriminatory and burden or restrict U.S. commerce, and are thus actionable under Section 301(b) of the Trade Act of 1974, as amended (Trade Act). At the direction of the President, the Trade Representative determined to take actions resulting in the imposition of an additional 25 percent duty on products of China with an annual trade value of approximately $250 billion. The additional duties were imposed in three tranches. Tranche 1 covered 818 tariff subheadings, with an approximate annual trade value of $34 billion. See 83 FR 28710 (June 20, 2018). Tranche 2 covered 279 tariff subheadings, with an approximate annual trade value of $16 billion. See 83 FR 40823 (August 16, 2018). Tranche 3 covered 5733 tariff subheadings, with an approximate annual trade value of $200 billion. See 83 FR 47974 (September 21, 2018); 83 FR 49153 (September 28, 2018); and 84 FR 20459 (May 9, 2019).”
“…at the direction of the President, the Trade Representative proposes to modify the action being taken in this investigation. In particular, in accordance with the direction of the President, the Trade Representative is proposing to modify the action being taken in this investigation by taking further action in the form of an additional ad valorem duty of up to 25 percent on products of China covered in the list of 3,805 full and partial tariff subheadings set out in the Annex to this notice. The proposed product list has an approximate annual trade value of $300 billion. The proposed product list covers essentially all products not currently covered by action in this investigation.”
These include but are not limited to:
HTS Code: 9701.10.00 Paintings, drawings (o/than of 4906) and pastels, executed entirely by hand, whether or not framed
HTS Code: 9701.90.00 Collages and similar decorative plaques, executed entirely by hand, whether or not framed
HTS Code: 9702.00.00 Original engravings, prints and lithographs, whether or not framed
HTS Code: 9703.00.00 Original sculptures and statuary, in any material
HTS Code: 4906.00.00 Hand-drawn original plans and drawings; hand-written texts; photo reproductions on sensitized paper and carbon copies of the foregoing
HTS Code: 4911.91.10 Pictures, designs and photographs, printed over 20 years at time of importation
HTS Code: 4911.91.15 Pictures, designs and photographs printed not over 20 years at time of importation, used in production of articles of heading
HTS Code: 4911.91.40 Pictures, designs and photographs, excluding lithographs on paper or paperboard, printed not over 20 years at time of importation
Updated! - Import duties on art work of Chinese origin
The third phase of punitive import duties being imposed upon goods of Chinese origin – published last night - does NOT include original works of art, collectables, antiques, or photographs (HTSUS Chapters 97 and 49). This is good news for our industry and will allow most within the artworld to continue business as normal.
Please note that some contemporary works of art may fall into other categories not specified above.
Many articles of furniture covered under Chapter 69 and 94 of the HTSUS commodities code are on the list of regulated items. Those items include ceramics, lamps, seats, couches, mattresses, chandeliers, etc. In addition to current duty rates you can expect an immediate additional duty of 10 % on such items, possibly jumping to 25 % at the beginning of 2019.
It is important to contact your Dietl International Representative early to discuss and confirm the duty/tax implications of all your imports – especially if goods of Chinese origin are included in your shipments.
Potential 25% import duties on art work of Chinese origin
Dear Valued Partners,
The new additional import duty of 25% on artwork made in China has been in the news. Following please find some current facts for your information:
1) The punitive import duties are being implemented in 3 stages (Tranches).
The 1st tranche (effective July 6th) - and the 2nd tranche - (effective August 23rd) - do NOT include original works of art, antiques and photographs.
The final list of commodities for Tranche 2 is listed here:
There are no Chapter 49 (photographs), 94 (furniture) or 97 (original art & collectibles & antiques) commodities listed under this Tranche.
2) While Chapter 97 commodities are currently on the list for consideration, we do not know what commodities will end up on the final list or when third Tranche will go into effect.
At the direction of President Trump, the USTR is also reviewing a third list (or tranche) of products imported from China to the U.S. worth an additional $200B. The USTR is considering whether to impose tariffs of 10% or possibly 25% on that list of products. The comment period on that list ends September 6th. There is no indication in any public record of how soon after the end of comment period the final list will be determined and published, and when the additional tariffs will go into effect. At present, importation of art of Chinese origin will not be subject to the 25% tariff until mid to late September.
Proposed Modification of the action pursuant to section 301:
3) If Chapter 97 remains in the final list of published commodities for the 3rd tranche it will affect ALL works of Chinese Origin, regardless of where they are shipped from. If you decide to move inventory of Chinese origin from Europe to the US, you will still have to pay the 25 % import duty. Thus, you may want to consider returning any inventory you own to the US within the next month.
4) As part of the proposed tariff, the use of a foreign trade zone will not defer the additional 25% tariff on commodities.
"To ensure the effectiveness of the action, any merchandise subject to the increased tariffs admitted into a U.S. foreign trade zone on or after the effective date of the increased tariffs, except those eligible for admission under “domestic status” as defined in 19 CFR 146.43, would have to be admitted as “privileged foreign status” as defined in 19 CFR 146.41, and would be subject upon entry for consumption to the additional duty."
Potential solutions if chapter 97 is included in the 3rd Tranche:
Please note the following information is based on current import regulations and dependent upon your individual shipping requirements, all information is subject to change. Please contact Dietl with any questions.
a) TIB - Import under a "Temporary Import Bond". The TIB is good for a period of 1 year and can be renewed in yearly increments up to 3 years.
Anything imported under TIB "MUST" be re-exported. If you fail to re-export any goods covered under TIB, you will pay a penalty of 2x (2 times) the duty amount - which in this case would be 75 % of the value!!!
b) Temporary import using a Carnet ATA. All works have to leave after the exhibition. Carnets are generally good for a period of 1 year - with some exceptions. China allows only 6 months.
c) Pay the import duties upon arrival and apply for a "duty drawback" upon re-export. It will tie up some cash, but you will be able to sell work off the wall. Of course, the 25 % import duty will probably make it difficult to sell any Chinese works to serious collectors going forward.
The drawback is a lengthy process and it can take up to 1 year to receive the refund for 99 % of the duties you paid for the returned property from the date of export.
For detailed costs pertaining to "duty drawback" upon re-export, please contact your Dietl representative.
We will continue to monitor the situation and of course keep you informed the moment we obtain additional relevant information.
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