3Import of cultural goods
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Committee’s assessment |
Legally and politically important |
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Not cleared from scrutiny; further information requested; drawn to the attention of the Digital, Culture, Media and Sport Committee and the Home Affairs Committee |
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Document details |
Proposal for a Regulation of the European Parliament and of the Council on the import of cultural goods |
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Legal base |
Article 207 TFEU; ordinary legislative procedure; QMV |
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Department |
Digital, Culture, Media and Sport |
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Document Number |
(38915), 11272/17 + ADDs 1–3, COM(17) 375 |
Summary and Committee’s conclusions
3.1The EU is the second largest market for cultural goods such as art works, antiquities and manuscripts in the world, estimated to be worth $22 billion (£17 billion) annually, of which the UK alone accounts for over sixty per cent.54 While the size of the market of trafficked cultural goods is unknown, UNESCO concluded in 2011 that trafficking in cultural objects generated many billions of dollars annually,55 with indications that some terrorist organisations use the sale of excavated antiquities as a way of funding their activities.56
3.2In 2016, EU Finance Ministers called on the European Commission to propose legislative measures in the “fight against illicit trade in cultural goods”.57 As a result, the Commission has now proposed a new customs regime under which any such goods would be subject to an import licence (for artefacts considered most at risk, such as parts of ancient monuments) or a self-certification system, affirming the legal exportation of the good before they could enter the EU for free circulation. The purpose of the legislation is to protect cultural heritage, and to prevent revenue from illegal trade in cultural goods from being laundered to avoid tax or finance terrorism.
3.3The Parliamentary Under Secretary of State for Arts, Heritage and Tourism at the Department for Digital, Culture, Media and Sport (John Glen) submitted an Explanatory Memorandum on the proposal in August 2017.58 The Minister emphasised the UK’s support for the objectives of the proposal, but expressed concerns about the additional resources it would require from customs and import authorities, as well as the lack of data on the flow of trafficked cultural goods and the connection between illicit trade in antiquities and terrorist financing. He also noted that the UK, as the world’s second-largest market for works of art, would be impacted by the proposal more than any other Member State. The proposal may also have additional implications once it becomes a third country vis-à-vis the EU following Brexit (see paragraphs 3.32 to 3.36 below).
3.4The illicit trade in artworks, artefacts and antiquities is inimical to the protection of the cultural heritage of numerous countries across the globe, and the resulting money flows are untaxed and unchecked. In this context, the Committee is supportive of any coordination of efforts across the EU to prevent the unlawful entry and sale of such goods. However, it is clear that both the size of this particular black market, and the extent to which it provides any significant income stream for terrorist organisations, is unknown.
3.5It is currently difficult to assess how effective the new customs regime (in particular the self-certification regime) will be in preventing trafficked artefacts from entering the EU. In this respect, we look forward to receiving further information from the Minister about the “additional measures aimed at facilitating implementation of the proposed regulation and supporting its objectives”, which the European Commission says will be put in place “in the near future”.
3.6The potential impact of the proposal on terrorist financing is even more unclear, as the Commission has provided little evidence that the revenue generated on the black market for artefacts provides substantial financial support to terrorist groups. However, we note that EU Finance Ministers have explicitly endorsed this initiative in the context of “the fight against the financing of terrorism”, and as such must have concluded that the link between the two was sufficiently clear to necessitate some form of legislative action at EU-level.
3.7The Committee has also taken note of the particular concerns expressed by the Minister with respect to the additional resource requirements the Regulation will impose on the UK’s customs and import licensing authorities, and the impact a more onerous import regime could have on the UK’s substantial market for works of art and other cultural goods. While both are unavoidable consequences of the legislation if adopted, it is unclear whether the Government, on balance, believes the benefits of the proposed customs regime would outweigh its costs.
3.8Given the above, we ask the Minister to provide us with the following information to assist in further scrutiny of the proposal:
- How will the Government seek to obtain “further information on the level of the trade in illicit goods entering the EU” to inform its proportionality assessment of the proposal?
- On what basis did the ECOFIN Council endorse this legislative initiative in February 2016 in the context of the fight against terrorist financing, if there was no substantive evidence that the trade in cultural goods provides terrorist groups with significant income?
- On balance, does the Government believe there is merit in the proposal even if there is only limited evidence that the sale of antiquities is a major source of revenue for terrorist groups?
- What is the Government’s view of the likely effectiveness of the self-certification regime under article 5?
- Is the Government of the view that this new customs regime could lead to a shift in the market for artworks away from the UK to non-EU countries?
- Does the Government support the proposed uses of delegated and implementing acts by the Commission, in particular with respect to varying the age threshold for goods in scope of the Regulation?
- What happens if the customs authorities determine that a good presented at the border for free circulation was not lawfully exported from its source country or a contracting party to the 1970 UNESCO Convention? Would it be returned to the country of export?
Implications of Brexit
3.9We have also considered the proposal in the context of the UK’s withdrawal from the EU. If the Regulation becomes applicable on 1 January 2019 as proposed by the Commission, the Government would have to apply it in full and it would, in principle, be incorporated into UK law on Brexit Day under the EU (Withdrawal) Bill. Moreover, the Government is seeking a temporary “implementation period” after Brexit, during which there would be a continued absence of customs processes while a new “customs partnership” is negotiated.59 We assume that, should the EU agree to such an interim arrangement, the UK would have to apply all EU customs legislation, including this new Regulation, for its duration. We would be grateful if the Minister could confirm this, so we can apply a level of scrutiny to the draft legislation commensurate to its likely impact in the UK.
3.10In the context of Brexit, we must also consider the potential implications of this new customs regime for the UK as a third country vis-à-vis the EU. Once we assume that status, under articles 4 and 5 of the proposed Regulation any goods in scope which are exported from the UK into the EU would need to be accompanied by a licence or self-certified statement that the good was lawfully exported from the UK. As the UK, in conformity with EU law, already requires an export licence to be issued before certain types of cultural goods,60 it seems reasonable to presume that the provision of the necessary documentation by the Government to exporters should be relatively straightforward. However, we would welcome confirmation from the Minister on this point.
3.11Overall, it would be helpful to our analysis of this proposal in the context of Brexit if the Minister could:
- Confirm if, under the “close association” with the EU customs union foreseen by the Government for an interim period following Brexit, the requirements of this Regulation for the Member States’ customs and import licensing authorities are expected to apply to the UK for the duration of that arrangement;
- Share the Government’s assessment of the impact of Brexit on the UK-EU trade in cultural goods;
- Clarify the extent to which the UK’s existing export licensing regime would need to be modified to ensure that EU importers can obtain the necessary documentation to comply with article 4 of this new Regulation if a cultural good is exported from the UK to the EU post-Brexit;
- Confirm whether the current EU-derived export licensing system for cultural goods under Regulation 116/2009 is likely to be maintained in substance, and eventually extended to cover EU countries, under the provisions of the Withdrawal Bill; and
- Confirm if the Government is minded to seek continued access post-Brexit to any EU-wide database established to store and exchange information between customs authorities on importer statements and import licences under article 9.
3.12In anticipation of the Minister’s reply, we retain this proposal under scrutiny and draw it to the attention of the Digital, Culture, Media and Sport and Home Affairs Committees.
Full details of the documents
Proposal for a Regulation of the European Parliament and of the Council on the import of cultural goods: (38915), 11272/17 + ADDs 1–3, COM(17) 375.
Background
3.13The EU is the second largest market for cultural goods such as art works, antiquities and manuscripts in the world, estimated to be worth $22 billion (£17 billion) annually, of which the UK accounts for over sixty per cent.61 The share of this market taken up by cultural goods illicitly removed from their country of origin is unknown. However, UNESCO concluded in 2011 that trafficking in cultural objects was “one of the most persistent illegal trades in the world”, and the financial value of these trade flows is estimated to reach many billions of dollars annually.62 The revenues generated from this trade are by their nature untaxed, and there are indications that terrorist organisations use the sale of excavated antiquities as a way of funding their activities.63
3.14Internationally, the fight against illicit trafficking in cultural goods is regulated by various instruments, the most important of which is the 1970 UNESCO Convention on the Means of Prohibiting and Preventing the Illicit Import, Export and Transfer of Ownership of Cultural Property.64 The Convention contains provisions requiring contracting states to prevent the illicit trade in cultural goods on their territory and, in principle, return looted goods to the country where they originated. Twenty-five out of the EU’s 28 Member States are parties to the Convention.65 In addition, the 1995 UNIDROIT Convention on Stolen or Illegally Exported Cultural Objects lays down more specific rules for the restitution of cultural objects, although it has fewer contracting parties.66
3.15While the EU has legislation in place to prevent the unlawful export of cultural goods from a Member State to a non-EU country,67 there is not currently any EU-level initiative to regulate the import of illicitly-traded antiquities and other works of art into the Union other than specific restrictions on objects from Syria and Iraq entering the EU.68
3.16The European Commission argues that the UNESCO and UNIDROIT Conventions, lacking direct legal effect and not having been ratified by all Member States, have led to “different degrees of protection and varying degrees of effectiveness” in addressing the problem across the EU.69 To address this lacuna, in its 2015 European Agenda on Security70 the Commission announced that it was preparing a legislative proposal to address illicit trade in cultural goods from third countries into the EU.71 This initiative was explicitly endorsed by the EU’s Finance Ministers in February 2016, in the context of wider efforts to deprive terrorist organisation of potential sources of income.72 The Culture Ministers of France, Germany and Italy also wrote to the Commission in support of such a proposal in 2015.
The Commission proposal
3.17The Commission held a public consultation between November 2016 and February 2017,73 and in July it proposed its new legislative framework to prevent cultural goods illegally exported from a third country entering the EU.74 It argues that EU-level action is proportionate, because the absence of a unified approach at all of the Union’s external borders incentivises the development of trafficking routes for cultural goods through those Member States perceived to have the most permissive customs regime. It also sees the legislative proposal, and the broader fight against the illicit trade in cultural goods, as a “key European action” to contribute to 2018 as the “European Year of Cultural Heritage”.75
3.18The draft Regulation is based on Article 207 TFEU, which combined with Article 3 TFEU, gives the EU exclusive competence to enact a common commercial policy.76 Accordingly, the subsidiarity principle does not apply.
3.19The purpose of the legislation is twofold:
- First, to protect the cultural heritage of their country of origin to which they contribute because of their “artistic, historical or archaeological value”; and
- Second, to prevent revenue from illegal trade in cultural goods, in particular antiquities, from being laundered to avoid tax or finance terrorism.
3.20The new Regulation contains the following key provisions:
- Article 2 and the Annex establish a new common definition for “cultural goods” for use by customs authorities, which covers a broad range of objects including archaeological finds, ancient scrolls, the remains of historical monuments, art works, and antiques.77 A good must be at least 250 years old at the moment of importation to be in scope of the Regulation (although the Commission could vary this threshold by delegated act for each category of good);
- Article 4 introduces a new licensing system for the import of cultural goods into the EU which are known to be most at risk, such as archaeological objects, parts of monuments, and ancient manuscripts and incunabula.78 The holder of the good would have to obtain a licence from the competent authorities in the EU country where the goods are imported, before bringing such goods into the Union;
- Article 5 creates a self-certification system for other categories of cultural goods, requiring importers to submit a signed statement or affidavit as proof that the goods have been transferred legally from the exporting country; and
- Article 8 gives customs authorities the power to seize and retain goods when it cannot be demonstrated that the cultural goods in question have been legally exported.
3.21The Regulation does not apply to intra-EU trade in cultural goods, given that customs checks have been abolished between Member States as part of the Single Market. For both the application for an import licence or the self-certified signed statement, the importer must attest that it was exported lawfully either from the country where the good originated, or from a country which is party to the 1970 UNESCO Convention (see paragraph 3.14 above). For goods most at risk, Article 4 additionally requires “supporting documents and information” to substantiate that they have been exported from the source country or a UNESCO Convention signatory in accordance with its domestic laws.
3.22In addition to the proposed legislation, the Commission has also set out a series of non-regulatory measures including the training of enforcement authorities (both in the EU and elsewhere) in cooperation with UNESCO, providing funding for research into trafficking routes and operations and ensuring the involvement of cultural heritage experts in EU and UN post-disaster and peace-building operations.
3.23The impact assessment accompanying the Regulation notes that the improved customs controls are expected to “reduce trafficking in cultural goods, combat terrorism financing and protect cultural heritage, especially in source countries affected by armed conflict”. The Commission also acknowledges that stakeholders were not convinced the proposal would have a substantial impact on organised crime and terrorist financing (a view supported by the UK Government, see below), although there was “strong support” for the EU specific customs rules for cultural goods.79 The Commission’s own Regulatory Scrutiny Board initially issued a negative opinion on the proposal in March.80
3.24An external survey conducted by Deloitte to assist the Commission in producing its proposal, entitled “Fighting illicit trafficking in cultural goods: analysis of customs issues in the EU”, has not yet been published.
The Government’s view
3.25The Parliamentary Under Secretary of State for Arts, Heritage and Tourism at the Department for Digital, Culture, Media and Sport (John Glen) submitted an Explanatory Memorandum on the proposal in August 2017, drawn up in collaboration with the Foreign Office, HM Treasury and the Home Office.81
3.26The Minister’s Memorandum emphasised that the UK is “committed to combating illicit trade in cultural goods and to targeting terrorist financing”. It also noted that, while there is “a measure of political support for the proposal” amongst Member States with respect to both the protection of cultural heritage and restricting a potential source of terrorist financing, there are “reservations about the additional requirements that the import rules would place on the customs authorities and stakeholder opinion is divided on whether import rules would contribute towards disrupting terrorist financing”. While acknowledging that the proposal clearly falls within the EU’s exclusive competence (meaning that no subsidiarity concerns arise), the Minister also notes that “further information on the level of the trade in illicit goods entering the EU is needed in order to inform the proportionality assessment”.
3.27With respect to the UK’s position, the Government’s main reservations on the contents of the proposal are:
- The additional requirements that the legislation will place on HM Revenue and Customs and the Import Licensing Branch, in particular in relation to the necessary modifications to HMRC’s entry declaration processing system; the need for increased physical inspections (and technical expertise) at the border; and the resources required to issue import licences and scrutinise self-certified statements submitted by importers;
- The effect of the proposals on the UK art market, which is the world’s second-largest, meaning the UK would be affected more than any other Member State;
- The evidence base for the connection between illicit trade in antiquities and terrorist financing, with the Minister expressing concerns that the income terrorist groups derive from the sale of antiquities is relatively small compared to other revenue streams, such as oil.
Our assessment
3.28The illicit trade in artworks, artefacts and antiquities is inimical to the protection of the cultural heritage of numerous countries across the globe, and the resulting money flows are untaxed and unchecked. In this context, the Committee is supportive of any coordination of efforts across the EU to prevent the unlawful entry and sale of such goods. However, it is clear from both the European Commission’s own impact assessment and the Minister’s Explanatory Memorandum that both the size of this particular black market, and the extent to which it provides any significant income stream for terrorist organisations, is unknown.
3.29While the new customs processes proposed by the Commission may contribute to larger evidentiary base on the scale of the illicit trade in cultural goods (and contribute to the formulation of future policy initiatives to tackle it in the long term), it is currently difficult to assess how effective the licensing and self-certification systems will be in preventing trafficked artefacts from entering the EU’s customs territory. The potential impact of the proposal on terrorist financing is even more unclear, as the Commission has provided little evidence that the revenue generated on the black market for artefacts provides substantial financial support to terrorist groups. However, we note in this respect that EU Finance Ministers explicitly endorsed this initiative in February 2016 in the context of “the fight against the financing of terrorism”, and as such must have concluded that the link between the two was sufficiently clear to necessitate some form of legislative action at EU-level.
3.30It is also clear that the existence of harmonised rules will not in itself remedy any weaknesses in the EU’s customs border, if the authorities of particular Member States lack the resources or expertise to implement the import licensing system effectively. We also have concerns about the likely effectiveness of the self-certification regime for cultural goods deemed less at risk, considering that the proposed Regulation does not require the handler to provide any supporting documentation about the provenance of such goods. In this respect, we look forward to receiving further information from the Minister about the “additional measures aimed at facilitating implementation of the proposed regulation and supporting its objectives”, which the Commission says will be put in place “in the near future”.
3.31The Committee has also taken note of the particular concerns expressed by the Minister with respect to the additional resource requirements the Regulation will impose on the UK’s customs and import licensing authorities, and the impact a more onerous import regime could have on the UK’s substantial market for works of art and other cultural goods. While both are unavoidable consequences of the legislation if adopted, it is unclear whether the Government, on balance, believes the benefits of the proposed customs regime would outweigh its costs.
Implications of Brexit
3.32We have also considered the proposal in the context of the UK’s withdrawal from the EU. On 29 March, the Government formally notified the European Council of its intention to withdraw from the EU. As a result, the UK’s membership of the EU will cease in March 2019. If the Regulation were to become applicable before that date, the Government would have to apply it in full and it would, in principle, be “incorporated” into UK law on Brexit day under clause 3 of the European Union (Withdrawal) Bill.
3.33Moreover, the Government is seeking a temporary “implementation period” after Brexit, during which the current measures for trade facilitation inherent in the Single Market and the Customs Union would be maintained between the UK and the EU,82 including a continued absence of customs processes while a new “customs partnership” is negotiated.83
3.34We assume that, should the EU agree to such an interim arrangement (and pending further information from the Government about how it would work in practice, especially in view of the need to guarantee reciprocal legal rights and obligations between both sides outside the current Treaty framework), the UK would have to apply all EU customs legislation for its duration. That would include this proposed Regulation once it enters into force. We would be grateful if the Minister could confirm this, so we can apply a level of scrutiny to the draft legislation commensurate to its likely impact in the UK.
3.35In the context of Brexit, we must also consider the potential implications of this new customs regime for the UK as a third country vis-à-vis the EU. As the Government has ruled out remaining in the Single Market, it will assume this status either in March 2019 or, depending on the terms of the withdrawal agreement, at the end of the interim period described above. At that point, under Articles 4 and 5 of the proposed Regulation, any goods in scope which are exported from the UK (as a contracting party to the 1970 UNESCO Convention) into the EU would need to be accompanied by a licence or self-certified statement that the good was lawfully exported from the UK.
3.36The UK, in conformity with EU law, already requires an export licence to be issued before certain types of cultural goods can be removed from the UK to a non-EU country.84 It therefore seems reasonable to presume that the provision of the necessary documentation by the Exports Licensing Unit within DCMS, for those seeking to import cultural goods from the UK into the EU post-Brexit, should be relatively straightforward. However, we have asked the Minister to write to us with further information on the Government’s assessment for the implications of EU withdrawal for trade in cultural goods between the UK and EU, and we will further assess this legislative proposal in light of his reply in due course.
Previous Committee Reports
None.
54 The UK by itself is the second largest art market in the world if the EU’s share is disaggregated by country.
56 The European Commission has noted that the so-called Islamic State makes money in two ways from antiquities: through selling looted artefacts and taxing traffickers moving items through ISIL-held territory.
57 See ECOFIN Council, “Council conclusions on the fight against the financing of terrorism“ (12 February 2016), paragraph 12.
58 Explanatory Memorandum submitted by DCMS (16 August 2017).
59 DExEU, “Future customs arrangements: a future partnership paper“ (15 August 2017), p. 11.
60 DCMS, “Export controls on objects of cultural interest“ (accessed 26 September 2017). See also Council Regulation 116/2009.
61 The UK by itself is the second largest art market in the world if the EU’s share is disaggregated by country.
63 The European Commission has noted that the so-called Islamic State makes money in two ways from antiquities: through selling looted artefacts and taxing traffickers moving items through ISIL-held territory.
65 The UK accepted the UNESCO Convention in 2002. The only EU Member States which have not accepted or ratified the Convention are Ireland, Latvia and Malta.
66 Sixteen Member States have ratified the UNIDROIT Convention. The Commission says this is “mainly attributed to conflicts between the Convention and the legal order of certain Member States”. The UK is not party to the UNIDROIT Convention.
67 Council Regulation 116/2009 established uniform controls at the EU’s external borders by requiring an export licence for cultural goods. Directive 2014/60/EU establishes the arrangements enabling Member States to secure the return from another EU country of any cultural objects removed in breach of their national laws.
68 Council Regulation (EC) No 1210/2003 on Iraq and Council Regulation (EU) No 36/2012 on Syria.
69 See for more information on country-specific measures the Commission’s impact assessment, p. 7.
70 See COM(2015) 185, which was recommended for debate by the previous Committee on 21 July 2015. [It remains under scrutiny as the Government has not yet scheduled the debate.]
71 The initiative was subsequently confirmed in the Commission’s Action Plan against the financing of terrorism, and the EU strategy for international cultural relations.
72 See ECOFIN Council, “Council conclusions on the fight against the financing of terrorism“ (12 February 2016), paragraph 12.
73 https://ec.europa.eu/taxation_customs/consultations-get-involved/customs-consultations/consultation-rules-import-cultural-goods_en.
74 See COM(2017) 375.
75 See the proposed Decision establishing a European Year of Cultural Heritage, which was cleared from scrutiny by the previous Committee on 16 November 2016.
76 See Article 207 TFEU.
77 The Regulation defines a cultural good as “any object which is of importance for archaeology, prehistory, history, literature, art or science”. The types of goods which can qualify as a “cultural good” under this definition are set out in the Annex to the proposed legislation.
78 Incunabula are early printed books, especially those created before 1501 (the traditional end date for the first age of the printed press in Europe).
79 See the Explanatory Memorandum for the Commission proposal, p. 5–6.
80 Regulatory Scrutiny Board, “Impact Assessment / Import of cultural goods in the EU“ (dated 31 March 2017).
81 Explanatory Memorandum submitted by DCMS (16 August 2017).
82 Prime Minister, “A new era of cooperation and partnership between the UK and the EU“ (22 September 2017).
83 DExEU, “Future customs arrangements: a future partnership paper“ (15 August 2017), p. 11.
84 DCMS, “Export controls on objects of cultural interest“ (accessed 26 September 2017). See also Council Regulation 116/2009.
1 December 2017