What does the Luxury Goods Ban mean for the art market, including your business?

September 14, 2022
by ArtAML Team

Luxury Goods Bans were introduced by multiple jurisdictions in the wake of the Russian invasion of Ukraine. Major art markets impacted include the US, UK, EU and Switzerland, all of which are covered in this overview.

Important note on the destination of luxury goods:
The bans apply to both Russia and Belarus. Where you see “Russia” named in this article, please assume that Belarus is also included.

Overview:

It is not permissible to send art to Russia or another location if the art’s ultimate destination is Russia. Whereas the US does not specify a value, minimum values apply in the UK (£250), EU (€300) and Switzerland (300 CHF). The UK goes a step further, making it illegal to make luxury goods available to a person “connected with Russia”.

United Kingdom:

On 14th April 2022 at 5pm, the luxury goods ban came into effect (see The Russia (Sanctions) (EU Exit) (Amendment) (No. 8) Regulations 2022). Works of art with a sales tag of £250 (excl. VAT) fall under the ban.

The legislation specifies:

46B.—(1) The export of luxury goods to, or for use in, Russia is prohibited.

(2) A person must not directly or indirectly—
(a)supply or deliver luxury goods from a third country to a place in Russia;
(b)make luxury goods available to a person connected with Russia;
(c)make luxury goods available for use in Russia.

The phrase “connected with” is key for Art Market Participants in the UK. The legislation states:
(2) For the purposes of this Part, a person is to be regarded as “connected with” Russia if the person is—
(a) an individual who is, or an association or combination of individuals who are, ordinarily resident in Russia,
(b) an individual who is, or an association or combination of individuals who are, located in Russia,
(c) a person, other than an individual, which is incorporated or constituted under the law of Russia, or
(d) a person, other than an individual, which is domiciled in Russia.

UK-based AMP businesses might consider “connected with” to mean individuals who spend a certain number of days in Russia and/or to have tax residency (i.e., pay tax) in Russia.

United States:

On March 11, 2022, President Joseph Biden issued Executive Order (EO) 14068. This was implemented via regulations issued by the Department of Commerce’s Bureau of Industry and Security (BIS).

The Executive Order states:

(ii)   the exportation, reexportation, sale, or supply, directly or indirectly, from the United States, or by a United States person, wherever located, of luxury goods, and any other items as may be determined by the Secretary of Commerce, in consultation with the Secretary of State and the Secretary of the Treasury, to any person located in the Russian Federation.

“Person” refers to an individual or entity, with the latter referring to a partnership, association, trust, joint venture, corporation, group, subgroup, or other organisation. Notably, “United States person” refers to a US citizen, lawful permanent resident, entity organised under the laws of the United States or any jurisdiction within the US (including foreign branches), or any person in the US.

European Union:

On 15th March 2022, the luxury goods ban came into effect (see COUNCIL REGULATION (EU) 2022/42, amending Regulation (EU) No 833/2014). Works of art with a sales tag of €300 (excl. VAT) fall under the ban.

The amendment states:

Article 3h

1. It shall be prohibited to sell, supply, transfer or export, directly or indirectly, luxury goods as listed in Annex XVIII, to any natural or legal person, entity or body in Russia or for use in Russia.
2. The prohibition referred to in paragraph 1 shall apply to luxury goods listed in Annex XVIII insofar as their value exceeds EUR 300 per item unless otherwise specified in the Annex.

There is a useful Q&A article on Europa.eu. Questions 6&7 address cultural cooperation between Russia and EU, for example the prompt return of luxury goods that are on loan in the EU.

Switzerland:
On 25th April 2022 at 11pm, the luxury goods ban came into effect (see Ukraine: Implementation of further EU sanctions). Works of art with a sales tag of 300 CHF (excl. VAT) fall under the ban.

The only difference from the EU legislation is that the triggering value is in Swiss Francs instead of Euros.

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