Antiques Trade Gazette 63 back page A VIEW FROM HONG KONG A LAWYER WRITES


Art in transit? Make sure every angle is covered


■ MILTON SILVERMAN explains how things can get complicated if dealers fail to appreciate the challenges shipping can bring


GALLERY owners and dealers may wish to take careful note of the following: A very important painting from a London gallery’s most


eminent artist was sold to one of their most substantial clients. Joy all round. Shipping arrangements were made and the painting was


duly moved out to Hong Kong where the clients resided. The clients were regular purchasers of the artist’s work, and were delighted to have one of his most important paintings. The picture finally arrived and was unwrapped. To the


horror of all concerned, parts were soaking wet. There was extensive mould damage discovered upon unpacking. All this was urgently reported to the English gallery. The picture remained with the fine art storage company and did not end up hanging on the wall of the eager purchasers. The gallery owners had taken out insurance and


contacted their brokers. They pressed continually, but weeks, and then months, went by without any progress. Meanwhile the distraught purchasers commissioned a number of conservators’ reports, assessing the extent of the damage and the painting’s capability for restoration. Opinions varied. Eventually a claims adjuster in Hong Kong was


appointed on behalf of the insurers. Visits were made to the fine art warehouse. The transport to Hong Kong had involved a combination of well-known shippers and couriers and extensive correspondence commenced with each. Emails and exchange of documentation continued, but progress was painfully slow. Time dragged on and more complications arose. The


insurers raised the question as to whether the mould damage which was now there had arisen as a result of the painting not being kept in the best conditions as the weeks rolled by, and alleged that not enough was being done to preserve the picture pending resolution of the problem; or, to put it into legal phraseology: the loss was not being mitigated. Correspondence from Hong Kong became hostile.


Eventually, the threat of legal proceedings emailed its way to my gallery clients. I attempted to placate all parties, seeking to make clear


that litigation here was lunacy, since it would just ramp up the complexities and costs of all concerned. My focus was the insurers on whom I placed as much pressure as possible, as often as possible. Despite my best efforts making clear to insurers that if any proceedings winged their way from Hong Kong we would instantly join them into the action, things still moved in very slow motion,


although I did feel some limited encouragement when the insurers’ file was passed upwards, twice. Eventually I found myself dealing with the man at the


insurers who indicated that he was actually going to be the decision maker. He was a hard nut to crack and raised a number of points en route which dealers and galleries may wish to heed: 1. The fine art storage company in the USA had signed


the receipt for the painting in the usual way but it was a ‘clean receipt’, and this seemed to raise his suspicions. Why, if this painting was, as alleged, soaking wet on arrival, did the receipt from the warehouse not have this written all over it? It could, he pointed out, be that there was a flood at the warehouse in Hong Kong, or that the painting was left outside there and this may have been the cause of the water damage. 2. He had a problem with the time it had taken to notify


the insurers, about six days after arrival at the warehouse. He would have expected virtually instant notification of this apparent catastrophe, although he did mention that those involved with fine art are not commercial people and some allowance could be made. 3. A technical discussion arose as to whether the


purchasers in fact had an ‘insurable interest’. The English gallery had taken out the insurance, but the purchasers in Hong Kong, who had already paid, were the aggrieved party effectively making the claim. Was the insurance ‘Cost Insurance and Freight (CIF)’ or ‘Free on Board (FOB)’? With CIF the seller’s obligations are extended so that “the seller has to procure marine insurance against the buyer’s risks of loss of or damage to the goods during carriage“, but with FOB the seller has fulfilled his obligations “when the goods have passed over the ship’s rail at the named port of shipment”. This means that the buyer has to bear all costs and risks of loss or damage to the goods from that point. The insurance man lobbed the following question at


me: what evidence was there that the purchasers had effectively asked the English gallery to take out insurance on their behalf? Fortunately, I discovered adequate email correspondence to satisfy him on this one. It all started to look rather grim. However, eventually,


and somewhat to the surprise of us all, full compensation was obtained, the Hong Kong lawyers got off our backs and we had a happy purchaser, gallery, and even artist. The gallery learned some important lessons for the


future: the precise ambit of the insurance cover needs clarifying right at the beginning, in particular where the purchasers are abroad; any damage on arrival should be proclaimed on the receipt; any damage discovered should be notified instantly to the insurers.


Milton Silverman is Senior Commercial Dispute Resolution partner at Streathers Solicitors LLP, Wigmore St, London (0207 034 4200) with more than 20 years’ legal experience.


He had a problem with the time it had taken to notify the insurers, about six days after arrival at the warehouse


Fine Art Asia fair director and dealer Andy Hei explains why Hong Kong is a better first stop than mainland China


IN Hong Kong, we have a saying that translates from the Chinese as “with time and patience the mulberry leaf becomes a silk gown”, which aptly sums up the rewards, but a “look before you leap” approach should be taken when starting to sell fine art and antiques in China. Unlike the business-friendly climate of which Hong


Kong is justifiably proud, working your way through the myriad of mainland China’s regulatory, taxation and custom issues requires expert advice, experience and time, and in some cases can still end in tears! The biggest hurdle faced by an international


company wanting to do business in China, whether by participating in a fair or setting up an office or gallery, is to comply effectively with the complicated and often opaque tax and customs regulations that govern the import/export of artworks in China. Imported artworks are in the same category as


luxury goods in China and can attract tariffs ranging anywhere from 17% to, in some cases, 33% if sold at art fairs in the Chinese mainland. The routine and risky tax evasion practice of declaring lower valuations when importing artworks into China as a method to avoid overpaying of duty to Customs has been widespread among Chinese collectors and was recently publicly highlighted by the arrest of two staff from a China-based art shipping firm. While the taxes in China on artworks are the


highest in the world, which many dealers, including myself, consider could hinder development of the Chinese art and antiques marketplace in the Chinese mainland, interest from mainland collectors is still growing. Hong Kong, on the other hand, has no import or


sales tax on imported or exported works of art or antiques, and art fairs are not subject to any form of tariffs. This is one of the main reasons why Asian collectors are very visible and major buyers at the fairs in Hong Kong. From May 17-20, over 67,000 visitors attended


the contemporary art fair, ART HK, with 266 Asian and international galleries represented, and this week Christie’s have reported strong sales from their May Spring auctions. The level of informed interest in the art and antiques markets is continuing to grow and consolidating Hong Kong’s position as the key entry point into the Asian marketplace. The rewards of working with the expanding base


of collectors in the East are significantly improving and my advice is to use Hong Kong to get to know Asia.


Fine Art Asia (www.fineartasia.com) runs from October 4-7


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