Documents considered by the Committee on 28 February 2018 Contents

4Import of cultural goods

Committee’s assessment

Politically important

Committee’s decision

Not cleared from scrutiny; further information requested; drawn to the attention of the Digital, Culture, Media and Sport Committee

Document details

Proposal for a Regulation of the European Parliament and of the Council on the import of cultural goods

Legal base

Article 207 TFEU; ordinary legislative procedure; QMV

Department

Digital, Culture, Media and Sport

Document Number

(38915), 11272/17 + ADDs 1–3, COM(17) 375

Summary and Committee’s conclusions

4.1In July 2017 the European Commission proposed a new customs regime under which cultural goods older than 250 years coming into the European Union 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 goods before they could enter the EU for free circulation.20 It is driven primarily by the perception that illicit trade of archaeological artefacts is a significant source of revenue for organised crime and terrorist groups, including Da’esh in Syria and Iraq.21

4.2The then-Parliamentary Under Secretary of State for Cultural Heritage (John Glen) submitted an Explanatory Memorandum on the proposed Cultural Goods Regulation in August 2017.22 The Minister expressed concerns about the effectiveness of the new regime in preventing illicit trade in cultural goods, as well as the lack of data provided by the Commission to link trafficked artefacts to 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 EU country.

4.3We first considered the proposed Regulation in November 2017.23 We concluded that the Government could be under an obligation to implement the new legislation if it took effect during the post-Brexit transitional period.24 Moreover, the proposal could impact on future trade between the UK and the EU, as exports of cultural goods to an EU country would be subject to its provisions once the UK effectively leaves the Customs Union. Given the questions around the effectiveness of the new customs regime and the disproportionate impact it would have for the UK, we retained the proposal under scrutiny and requested some additional information from the Minister.

4.4In February 2018 the new Minister for Cultural Heritage (Michael Ellis) responded to the questions we raised in our November 2017 Report.25 As we have set out in more detail in paragraphs 4.22 to 4.26 below, the letter indicates that the Government:

4.5As result, the Minister says:

“As it currently stands this proposal potentially introduces significant administrative burdens without demonstrating a significant contribution to addressing its stated objectives. We are engaging with the Commission and Member States to further develop the proposal to ensure that it is as efficient and effective as possible in preventing any potential use of cultural goods to finance terrorism, for example by focusing on cultural goods that are deemed to be most at risk of use for terrorist financing.”

4.6With 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 reiterates the Government’s ambition to negotiate a new “customs arrangement” with the EU which makes trade as frictionless as possible; avoids a ‘hard border’ between Ireland and Northern Ireland; and allow the UK to establish an independent international trade policy.

4.7The Bulgarian Presidency of the Council has not scheduled the proposal for consideration by the Council in the first half of 2018, and the European Parliament’s International Trade Committee is expected to establish its position on the proposed Regulation in July. As such, it is currently unclear when the new customs regime for cultural goods would become operational.

4.8We have taken note of the concerns expressed by both the Minister and the BAMF about the ramifications of the proposal as it stands for the UK’s art market, and will keep the negotiations on the new customs regime under close review.

4.9In this respect, we are concerned that, if the proposed Regulation takes effect before or during the transitional period, the UK will have to apply it despite the clear concerns about the effectiveness of the new regime and the new burden on both customs authorities and art dealers. Moreover, if the Regulation is already in effect before the end of the transition, the UK may find it more difficult to abolish the system while negotiations with the EU on a new customs agreement—which are likely to rely to a large extent on continued regulatory convergence to maintain trust—were underway. Any efforts to revoke or repeal substantive EU customs legislation during this period could complicate efforts to agree streamlined customs processes with the European Commission.

4.10After EU law ceases to apply to the UK, and if it has not voluntarily agreed to stay aligned with the substance of EU customs law, the UK will still be affected by the Regulation insofar as trade with the EU-27 is concerned. The Minister has clarified that the Government’s existing export licensing regime for cultural goods would not need modification to supply UK traders with the necessary documentation if they wish to acquire an EU import licence for a cultural good covered by the new Regulation. However, the need for exporters to apply for such documentation before they can sell cultural goods to EU-based customers will still represent a significant non-tariff barrier to trade that is currently absent.

4.11Moreover, while the Minister reiterated the objective of avoiding any physical infrastructure on the border between Ireland and Northern Ireland, he has provided no detail on how this would work in practice.

4.12In the context of the Cultural Goods Regulation specifically, Irish customs authorities would be required to “check whether the import licence corresponds to the goods presented” for any art works subject to the import licensing regime under the new legislation. If it did not check goods entering the EU via Northern Ireland, importers could circumvent the entire system with relative ease by importing a cultural good into the UK and then transport it into Ireland without any additional controls. If the UK does not apply the same regime at its borders, it is unclear how Ireland—or any other EU country—could legally rely on the assurances given by the UK’s export licensing authorities that the checks on the provenance of a cultural good met the requirements of the new Regulation.

4.13Given the potential implications of the proposed customs regime for the UK art market, both before and after EU law ceases to apply in the UK, we retain the proposal under scrutiny. As the Minister has not clarified the substance or scope of the “additional measures” aimed at tackling illicit trade in cultural goods, which the Commission said would be “put in place in the near future” back in July 2017, we ask him to provide this information without delay.

4.14We also draw the Minister’s letter to the attention of the Digital, Culture, Media & Sport Committee.

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

4.15The 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. The 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.26 Intra-EU trade is significant for the UK market, accounting for some 15 to 20 per cent of UK art sales.27

4.16In 2016, EU Finance Ministers called on the European Commission to propose legislative measures in the “fight against illicit trade in cultural goods”, based on the perception that sales of art and archaeological artefacts were significant sources of revenue for organised crime and terrorist groups, including Da’esh. As a result, the Commission in July 2017 proposed a new customs regime under which cultural 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 goods before they could enter the EU for free circulation.

4.17The Commission noted that the proposed Regulation would complement other EU initiatives to address trafficking of cultural goods, including an EU-UNESCO pilot project to design training modules for national authorities; funding a comprehensive study on illicit trade in cultural goods; and capacity-building for law enforcement authorities in non-EU countries through the Commission’s Technical Assistance and Information Exchange instrument (TAIEX).28 It also announced that “additional measures aimed at facilitating implementation of the proposed Regulation and supporting its objectives” were to be put in place “in the near future”.29

Our consideration of the proposal

4.18The then-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 2017.30 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.

4.19When we first considered the proposal, in November 2017, we expressed our support for initiatives to improve coordination of efforts across the EU to prevent the unlawful entry and sale of cultural goods.31 However, we expressed concern about:

4.20We also considered the proposal in the context of the UK’s withdrawal from the EU:

4.21As a result, the Committee considered the proposal politically important, and retained it under scrutiny. We asked the Minister to provide us with the following information to assist in assessing the implications of the Regulation:

The Minister’s letter of 1 February 2018

4.22In February, the new Minister for Cultural Heritage (Michael Ellis) responded to the questions we raised in our earlier Report.37 This makes clear that:

4.23With respect to the potential impact of the Regulation on the UK while it remains bound by EU law, the Minister explains that the British Art Market Federation (BAMF) has expressed “strong concern” that the proposal would affect the UK more than any other EU Member State because of the size of its art market and our dependence on cross-border trade, and “create an unfortunate perception that the UK is a more complicated place for art sales and potentially hinder our global competitiveness”.39

4.24As a result of the above, the Government is clearly unconvinced of the effectiveness of what the Commission has proposed. The Minister says in his letter:

“As it currently stands this proposal potentially introduces significant administrative burdens without demonstrating a significant contribution to addressing its stated objectives. We are engaging with the Commission and Member States to further develop the proposal to ensure that it is as efficient and effective as possible in preventing any potential use of cultural goods to finance terrorism, for example by focusing on cultural goods that are deemed to be most at risk of use for terrorist financing.”

4.25With respect to the implications of Brexit for UK-EU trade in artworks after the UK leaves the Customs Union and the Single Market (at the end of the transitional period, or in March 2019 if no transition is agreed), the Minister clarifies that the UK’s current export licensing regime for cultural goods would “require no modification in order for importers of cultural goods from the UK to the EU to obtain documentation necessary” to comply with the proposed certification regime for the most at-risk cultural goods post-exit. He also reiterates the Government’s hopes to negate any barriers to trade arising from Brexit by negotiating a new “customs arrangement” with the EU which makes trade as frictionless as possible; avoids a ‘hard border’ between Ireland and Northern Ireland; and allows the UK to establish an independent international trade policy.

4.26The Bulgarian Presidency of the Council has not scheduled the proposal for consideration by the Council in the first half of 2018. The European Parliament is expected to establish its position on the proposed Regulation in July. As such, it is unlikely the new Regulation would be agreed in time for entry into force by January 2019, as envisaged by the European Commission.

Previous Committee Reports

Second Report HC 301–iii (2017–19), chapter 3 (29 November 2017).


20 See Commission document COM(2017) 375.

21 See ECOFIN Council, “Council conclusions on the fight against the financing of terrorism“ (12 February 2016), paragraph 12.

22 Explanatory Memorandum submitted by the Department for Digital, Culture, Media & Sport (16 August 2017).

24 During the transitional period, the UK would effectively stay in the Customs Union and be under an obligation to implement EU customs law (including new legislation which takes effect during this period).

25 Letter from Michael Ellis to Sir William Cash (1 February 2018).

26 The British Art Market Federation (BAMF), “The British Art Market 2017“ (September 2017).

27 The BAMF has said: “While the US was the most important trading partner by value, for some of the major auction houses, consignments from EU member states accounted for up to 25% of their UK sales on average, while up to 20% of their exports were destined to EU buyers. In the dealer sector also, the main dealer associations reported that on average between 10% and 22% of dealers’ purchases for subsequent sale were made in the EU, and EU purchasers accounted for 15%—20% of all their sales.”

29 See Commission document COM(2017) 375, p. 4.

30 Explanatory Memorandum submitted by the Department for Digital, Culture, Media & Sport (16 August 2017).

32 See ECOFIN Council, “Council conclusions on the fight against the financing of terrorism“ (12 February 2016), paragraph 12.

33 If the Regulation becomes applicable on 1 January 2019 as proposed by the Commission, the Government would have to apply it in full as well and it would, in principle, be incorporated into UK law on Brexit Day under the EU (Withdrawal) Bill.

34 However, as we noted in our previous Report, the UK, in conformity with EU law, already requires an export licence to be issued before certain types of cultural goods. We concluded it was reasonable to presume that the provision of the necessary documentation by the Government to exporters should be relatively straightforward.

35 The Government’s paper on the future UK-EU customs partnership envisages continuing some (unspecified) “existing arrangements between the UK and the EU”, or even “mirroring the EU’s requirements for imports from the rest of the world where their final destination is the EU”.

37 Letter from Michael Ellis to Sir William Cash (1 February 2018).

39 The BAMF has also identified a number of opportunities for the UK art market arising from Brexit, notably the ability for the UK to negotiate more streamlined customs processes with non-EU countries directly (although it also notes that “satisfactory arrangements for trade with the EU will (…) be paramount”); the “removal of unnecessary red tape and regulation”; and the abolition of import VAT on artworks. See also BAMF, “The British Art Market: Opportunities for the Future“ (September 2017).




5 March 2018