Cleared from scrutiny; drawn to the attention of the Digital, Culture, Media & Sport Committee and Northern Ireland Affairs Committee
Proposal for a Regulation of the European Parliament and of the Council on the import of cultural goods
Article 207 TFEU; ordinary legislative procedure; QMV
Culture, Media and Sport
(38915), 11272/17 + ADDs 1–3, COM(17) 375
10.1While the EU has legislation in place to prevent the unlawful export of cultural goods from a Member State to a non-EU country, 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. In July 2017 the European Commission therefore proposed a comprehensive for cultural goods coming into the EU’s Customs Union, to tackle trafficking of artefacts and artworks and—by extension—limit the revenue criminal and terrorist organisations could secure from illicit sales.
10.2Under the proposal, a range of different categories of cultural goods would be subject to one of two types of additional customs controls on entry into the EU:
10.3Following the publication of the European Commission’s original proposal in summer 2017, the Government expressed concerns about the effectiveness of the proposed regime in preventing illicit trade in cultural goods. It also noted there was a lack of data to link trafficked artefacts to terrorist financing, which was one of the main reasons put forward to support new EU legislation. The then-Minister of Culture (John Glen MP) 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 EU country (should it take effect while the UK is still required to apply EU law, as discussed further below).
10.4In February 2018 the new Minister for Cultural Heritage (Michael Ellis MP) provided a on the negotiations on the Regulation between the EU’s Member States. The Minister’s letter indicated that the Government still believed the proposal as drafted could introduce “significant administrative burdens without demonstrating a significant contribution to addressing its stated objectives”, especially in relation to the “importer statement” regime for the majority of goods in scope of the Regulation. With respect to the implications of Brexit for UK-EU trade in artworks after the UK leaves the Customs Union and the Single Market, the Minister simply reiterated the Government’s ambition of negotiating a complex new “customs arrangement” with the EU which made trade as frictionless as possible; avoided a “hard border” between Ireland and Northern Ireland; and allowed the UK to establish an independent international trade policy. How those three objectives were to be reconciled, and how the requirement for Ireland to carry out—in due course—the new customs checks on cultural goods entering across the border with the UK without requiring physical infrastructure, was unclear.
10.5In November 2018, the EU Member States’ Ministers for Culture adopted a on the proposal that sought to make a number of significant amendments for negotiation with the European Parliament. These included a significant reduction in the range of cultural goods for which either an import licence or an importer statements would be necessary, limit the powers of the European Commission to amend the scope of the Regulation at a later stage by means of Delegated Acts, and reinforce the ‘country of origin’ principle to establish lawful export from a third country into the EU. The Council of Ministers also insisted on the establishment of a centralised EU-wide IT system that could be used to store and exchange information on cultural goods presented for import in any Member State.
10.6A majority of Member States also argued for an amendment containing a general prohibition on bringing cultural goods of any age or value into the EU’s Customs Union if they have been unlawfully exported from the country where they were created or discovered. According to from the Government at the time, this would be a “statement of the principle”—requiring customs authorities to act if there is any indication that a cultural good is being trafficked—and that it will not in itself “require any new procedures for border and customs authorities or for importers”.
10.7The Minister also that the Council’s revised legal text constituted a “significant improvement on the original proposal” and “addresses many of the concerns [the UK] have been articulating to our EU partners over the last year”. However, it was clear that the UK remained sceptical about the need for the new Regulation—also taking into account its potential effects on trade in works of cultural goods between the UK, as a major country of sale for artworks, and other countries.
10.9MEPs wanted a wider scope for the new customs requiring (i.e. covering more types of goods than thought prudent by the Member States), as well as more flexibility for the European Commission to amend the scope of the Regulation in the future by means of Delegated Acts. In particular, they had argued for amendments allowing the Commission to identify goods from ‘source countries’ of particular concern as requiring an import licence. The Parliament also wanted the new legislation to apply to goods in customs transit (i.e. those destined for a non-EU country but being transported through the EU) where there are “reasonable grounds” that they are being trafficked. Moreover, MEPs wanted to enable national customs authorities to refuse an import licence for a cultural good if a similar request, without additional evidence, had already been rejected by another Member State.
10.10Negotiations between the Member States, represented by Austria, and the European Parliament on the final text of the Regulation began in late 2018 to resolve these areas of disagreement. A provisional deal on the final substance of the Cultural Goods Regulation was just before the Christmas recess, of which the Minister informed us in January 2019.
10.11Under the finalised legislation, which must still be formally adopted, an import licence would required to bring the following cultural goods into the EU if they are over 250 years old:
10.12The aforementioned proposal by the European Parliament to expand the potential scope of the import licence requirement to other types of cultural goods and to artefacts from particular “source” countries was not accepted by the Member States. The less-onerous importer statement—which would allow an importer to self-certify to the lawful export of the good from the country of origin—would still be required for many other types of cultural goods, including rare flora and fauna, antiquities like coins and statues, paintings over 200 years old and ancient books (the UK’s opposition to the wide scope of this requirement notwithstanding).
10.13The finalised Regulation would normally require the application for an import licence or importer statement to attest to the lawful export from the country of origin of the cultural artefact. However, the legislation will allow such a licence to be issued, or importer statement to be made, on the basis of lawful export from the last country where the good was located, if it was kept there for five years or more (and provided the country of origin cannot be reliably established or the good left that country before 24 April 1972, the date the 1970 UNESCO took effect). Individual EU countries may require goods covered by the Regulation have to be presented to specific customs offices only, for example to ensure they are assessed at offices where experts are available to inspect the goods or assess the accompanying documentation.
10.14There are also certain exemptions from the new customs procedures for cultural goods, for example where they imported temporarily for exhibition or commercial art fairs, or where the good is in possession of a public authority for safekeeping until their eventual return to the country of origin. Goods created or discovered within what is now the customs territory of the European Union, even if they are now located outside of it, are also exempt from the Regulation. The agreement reached between the Council and the Parliament maintains a convoluted regime for cultural goods that are imported for display at a commercial art fairs. If they would normally require an import licence, these would instead require an importer statement. However, if they are then sold to a buyer within the Customs Union, they would need to retrospectively be issued with a licence anyway. The Government still believes this approach “does not meet the policy intention and may be unworkable”.
10.15In practical terms, the implementation of the Cultural Goods Regulation will be supported by a new centralised IT system in which all import licence requests and decisions, as well as importer statements, are stored and exchanged between the EU’s Member States. Rather than the six years asked for by the Council, the European Commission will be given four years from the date the legislation is published in the Official Journal to have this system up and running (i.e. by 2023). The import licence and importer statement requirements will only take effect when the IT database is operational. The new legislation applies exclusively to goods being brought into the EU from outside it: given the complete absence of intra-EU customs controls, the new requirements would not apply to cultural goods being moved between Member States.
10.16The Minister’s letter informing us of the final deal on the Regulation makes clear the Government continues to question the usefulness of the new customs procedures to reduce trafficking of cultural goods. He describes it as “the best outcome that can be achieved in the circumstances”, which we take to mean the UK’s impending withdrawal from the EU and therefore its representation in its legislative processes. The Minister also refers to the position of many MEPs who “support greater regulation of the art market and the trade in cultural goods”, but whose proposals have not been included in the final Regulation (see paragraph 10.9 above). Because of this, the Government intends to vote in favour of the legislation to avoid “sustain[ing] the mistaken and unfair view in some quarters that the UK is more interested in protecting the art market than in tackling the illicit trade in cultural objects”.
10.17The European Scrutiny Committee considered the proposed import regime for cultural goods in three times between November 2017 and November 2018. We shared the Government’s concerns about the need for the new customs procedures being discussed, and the potential impact on the UK’s art market both in- and outside the European Union.
10.18In the context of the wider Brexit negotiations, we also noted in November 2018 that the draft Withdrawal Agreement would establish a post-Brexit transitional period lasting until December 2020. If the Agreement were ratified by Parliament, the UK would during this period have to continue applying EU law (including, should it have taken effect, the new Cultural Goods Regulation). It is now clear that the new legislation will not take effect until 2023 at the earliest, which is beyond even the possible extended transitional period until December 2022 that the revised Withdrawal Agreement published in November 2018 foresees.
10.19However, the fact that the Regulation will not apply until after any post-Brexit transitional period would have ended does not mean it will not have an effect on the UK. When it leaves the Customs Union and Single Market, customs controls will be re-introduced on goods being moved between the UK and the EU. That includes the new import system for cultural goods when it takes effect in a number of years. It is likely to act as a further barrier to trade between the two, especially given the UK’s pre-eminent position as Europe’s largest art market.
10.20The UK imported between £2.8 billion and £4.1 billion worth of art in the last three years, while exports during that same period ranged between £4.7 billion and £6 billion. Trade with the EU-27 is significant for the UK market, accounting for some 15 to 20 per cent of art sales. It is unclear what proportion of these would fall within the scope of the new Cultural Goods Regulation, and in particular the import licence requirement for the most at-risk goods. The eventual impact of the legislation on the overall flow of trade in art works between the UK and the EU might be difficult to isolate, as such trade will also be affected by other factors that are absent while we are an EU Member State, like the imposition of tariffs and import VAT.
10.21The new Regulation may also have a more direct impact in Northern Ireland. Under the Withdrawal Agreement, should it be ratified, the Irish Protocol (the ‘backstop’) would see Northern Ireland continuing to apply a wide range of European customs and regulatory legislation beyond the end of the transition period. The purported aim is be to remove the need for any goods controls on the land border. Northern Ireland would cease to be bound by this EU legislation only when new legal arrangement between the EU and the UK as a whole superseded them by removing the need for border controls by other means.
10.22The Cultural Goods Regulation, not having been formally adopted yet, is not included in the list of EU laws that would continue to apply in Northern Ireland the backstop. However, once it takes effect, Ireland—as an EU Member State—will be legally required to impose the necessary customs controls on cultural goods entering from outside the EU. That would include across the land border with the UK. If it did not check goods entering the EU via Northern Ireland, importers could hypothetically circumvent the system by importing a cultural good into the UK and then transporting it into Ireland without any additional border controls.
10.23The Irish Protocol can be amended to include “a new [EU] act that […] neither amends nor replaces” EU legislation that already applies to Northern Ireland but nonetheless “falls within the scope of [the] Protocol”. Given the backstop effectively keeps Northern Ireland in the Customs Union, this is likely to be the case for the Cultural Goods Regulation (since it supplements the application of customs controls at the external border of the Customs Union for specific types of goods). However, under the Withdrawal Agreement, the inclusion of new EU legislation in the Protocol must be approved by the UK. In December 2018, the Government said it would “seek the agreement of the Northern Ireland Assembly” before approving any such decision. It is unclear if ‘seek’ in this context equates to ‘require’ or not, but we can only presume the Government’s ambiguous wording is deliberate.
10.24If the backstop were to take effect, we consider it likely the EU would seek the UK’s approval to add the Cultural Goods Regulation to the Irish ‘backstop’. This means it would have to be applied to cultural goods entering Northern Ireland from non-EU territories, creating an additional customs barrier between Northern Ireland and Great Britain. If the UK were to refuse its inclusion in the Protocol, the EU would be entitled to take “appropriate remedial measures”. It is not clear what those could be in this context.
10.25Overall therefore, while the legislative process on the Cultural Goods Regulation is nearing its end in Brussels, the full impact of the legislation on the UK after Brexit is still far from clear. However, in light of the imminent adoption of the Regulation by the Council and the European Parliament, we now clear the proposal from scrutiny while noting the Government’s lukewarm support for the new legislation.
10.26We draw these developments to the attention of the Digital, Culture, Media & Sport Committee and, in the context of the Regulation’s possible inclusion in the Irish backstop, the Northern Ireland Affairs Committee.
See (38915), 11272/17 + ADDs 1–3, COM(17) 375: Second Report HC 301–iii (2017–19), chapter 3 (29 November 2017); Sixteenth Report HC 301–xvi (2017–19), chapter 4 (28 February 2018); and Forty-fourth Report HC 301–xliii (2017–19),(14 November 2018).
142 The 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. 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 each year.
143 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.
144 Incunabula are early printed books, especially those created before 1501 (the traditional end date for the first age of the printed press in Europe).
145 In particular, at that stage in the negotiations (February 2018) the Government was concerned that there was no “empirical data” to link the sale of archaeological artefacts to terrorist groups; that the self-certification regime for cultural goods deemed at lower risk of trafficking could facilitate rather than hinder illicit trade in such goods; and that the British Art Market Federation (BAMF) had expressed “strong concern” that the proposal could “create an unfortunate perception that the UK is a more complicated place for art sales and potentially hinder our global competitiveness”.
146 . The proposal is subject to the ordinary legislative procedure and as such the Regulation must be approved jointly by the Council and the European Parliament.
147 For goods subject to the import licence requirement (broadly speaking, archaeological items and ancient books), the Member States want to waive that requirement for artefacts originally created or discovered within a territory which is now part of the EU’s Customs Union; rare books and incunabula if they have an estimated value of less than €10,000; and cultural goods originating in the EU which were temporarily exported for “conservation, exhibition, digitisation and public performance purposes”, or goods which are being temporarily imported into the EU such purposes. With respect to the self-certification system for other cultural goods (the importer statement), the Member States want to exclude goods valued at less than €10,000, and remove the requirement altogether for old postage stamps, archival material not otherwise covered, articles of furniture and musical instruments.
148 Under the original Commission proposal, an import licence or importer statement would be valid on the basis that the good was exported lawfully from a country other than the “source” country, provided the former is party to the 1970 UNESCO Convention on Cultural Property. Under the amended Council version, lawful export from the country of origin must always underpin an import licence or importer statement, unless the country of origin cannot reliably be determined; the goods left that country before April 1972, when the UNESCO Convention took effect; or the country of origin itself is not a signatory to the UNESCO Convention. In those cases, lawful export can be proven on the basis of an export licence from another country, but only if the cultural good had been located therefore at least the last five years.
149 from Michael Ellis to Sir William Cash (1 November 2018).
150 The Department for Culture also had two specific areas of concern: a proposal for a “potentially unworkable” system where a self-certified importer statement might need to be converted ex-post to an import licence for goods sold at art fair remained in the Customs Union, and the wide scope of the importer statement requirement in terms of goods covered.
151 European Parliament document .
152 Letter from Michael Ellis to Sir William Cash (24 January 2019) (not yet available online).
153 The goods to which the import licence requirement will apply, including applicable age thresholds for the goods, is set out in Part B of the Annex to the Regulation. The customs authorities of the EU Member State of import would have to decide whether to issue an import licence within 90 days.
154 Under the rejected proposal, such a listing would be made by the European Commission by means of Delegated Acts. It would identify that particular type of cultural good, or any such goods originating in a particular source country, are at “particular risk” of being trafficked and therefore require an import licence.
155 Ancient books and incunabula were subject to an import licence requirement in the original Commission proposal.
156 The goods to which the importer statement requirement will apply, including applicable age thresholds for the goods, is set out in Part C of the Annex.
157 The UK accepted the UNESCO Convention in 2002. The only EU Member States which have not the Convention are Ireland, Latvia and Malta.
158 The agreement reached between the Council and the Parliament maintains a convoluted system for goods which are imported for display at a commercial affair. If they would normally require an import licence, they would require an importer statement. If, following their sale, they remain in the Customs Union, they would need an import licence. The Government still believes this approach “does not meet the policy intention and may be unworkable”.
Published: 5 February 2019