8/04/2015

French Authorities Sieze a Picasso


Yahoo News is reporting French customs authorities have seized a Picasso painting, Head of a Youn Woman, which is considered a national treasure of Spain.  The painting was seized from a boat near Corsica. Spain considers the painting which is privately owned to be a national treasure as there are no similar works by Picasso from the time period in Spain.

Yahoo News reports on the seizure
Ajaccio (France) (AFP) - A Picasso worth 25 million euros and considered a national treasure by Spain -- which had barred the painting's export -- has been seized from a boat in Corsica, French authorities said Tuesday.

An attempt to export the painting, "Head of a Young Woman", to Switzerland last Thursday "drew the attention of French officials", the country's customs authorities said, with officers on the French Mediterranean island boarding the vessel the next day.

The ship's captain could only present two documents regarding the painting, one of which was a May 2015 Spanish court judgement labelling it a work of art and ordering that it not be taken out of the country, French officials said in a statement.

The painting, which French customs said was valued at more than 25 million euros ($27 million), is owned by Jaime Botin, a well-known Spanish banker whose family founded the Santander banking group.

The 79-year-old, who was formerly the banking giant's vice chairman, was not aboard the vessel, which is owned by the bank and flying a British flag, a customs authority spokesman said.

According to the spokesman, the export request was also not in Botin's name.

An export request was filed for the painting in December 2012 to move it to London, but was opposed by Spain's culture minister because there was "no similar work on Spanish territory" from the same period in Picasso's life.

This year, a Spanish court sided with the authorities and declared the work of art "unexportable" on the grounds it was of "cultural interest" and could not leave the country.

It rejected the arguments of Botin, who said that the work should not be considered on Spanish territory because it was on a vessel flying a British flag.

French customs officials are now awaiting an official Spanish request to recover the painting.

Spanish police confirmed that "an inquiry has been ongoing for some time" but declined to give further details.
Source: Yahoo News 


8/03/2015

An Insurance Primer


Property Casualty 360 posted a little over a month ago some basic information on insurance coverage for collections and collectors.  The post briefly touches on appraisals (notes collections worth over $5000 should be appraised),  deductibles, limits (for a homeowners policy without a rider), coverage and claims.  A good primer on insurance that appraisers should be aware of.

I have seen an increase in my practice recently for insurance appraisals.  The $5,000 amount has been tossed about by clients on more than one occasion.
The chances are good that among your personal-lines clients, there are several serious collectors. What do they collect? The simple answer is: practically anything

Some of the most commonly collected items include fine art, sports memorabilia, wine, rare books, stamps and coins, antique rugs and tapestries, musical instruments, action figures, dolls, toys, auto and movie memorabilia, and guns.

Large private collections generally have proper risk management in place including fine-art insurance that covers the full value of the items. But many smaller collections (those valued below $1 million) tend to be insured under a traditional homeowners policy or have no insurance at all. If these collectors face a devastating event resulting in damage, they may discover too late that their coverage is not sufficient to address their financial losses.

In simple terms, the process of insuring collections of fine art and collectibles under a traditional homeowners policy tends to be time-consuming and difficult while possibly yielding lower limits and less expansive coverage when compared to obtaining coverage with a fine art and collectible insurance policy. The comparisons below address specific differences between the two types of policies.

Appraisals – Homeowners policies generally require appraisals for collections over $5000 as part of the underwriting process. Many collectibles insurance policies do not require appraisals at the time of application.

Deductibles – Zero-dollar deductibles are the standard for collectibles insurance polices with some offering additional deductible options. Homeowners policies may offer zero-deductible policies, but it is not as common.

Limits – The limit on fine art and collectibles coverage generally ranges from $500 to $2000 for a homeowners policy without the addition of a floater or rider. Even with an added floater or rider, homeowners policies tend to limit the level of exposure. A collectibles policy may offer coverage up to $1 million or more.

Coverage – One of the most important coverage differences between a homeowners policy and collectibles policy is the valuation of covered items. Homeowners policies tend to insure for actual cash value while collectibles policies insure the full collectible value of items in the collection. This distinction alone can reflect a startling difference in potential claims payments in the event of a loss. Homeowners policies generally cover named perils only, exclude coverage for items during transit, limit coverage on items stored away from the home to as little as 10 to 15 percent, and extend coverage to newly acquired items for only 30 days. By contrast, collectibles policies typically include all risk coverage and provide coverage for items in transit, items stored away from the home (such as in an office or storage facility), and newly acquired items for up to 90 days. Some collectibles policies may offer additional coverage benefits such as discounts for monitored fire and burglar alarms or items kept in a UL-rated safe.

Claims – In today’s insurance market, filing a claim against a homeowners policy may leave an insured vulnerable to premium increases at renewal or the possibility of non-renewal. With a separate collectibles policy, claims do not affect homeowner premiums or loss history. In addition, companies that offer collectibles insurance may have claims adjusters with a high level of expertise in this area. Adjusters with this specialized knowledge are better able to determine the value of unique or rare items, which should expedite the claims process and lead to a better outcome for the insured.

A detailed comparison of the benefits and limitations of standard homeowners insurance versus collectibles insurance demonstrates that specialty coverage can be very advantageous for serious collectors. With upwards of 90 million collectors in the United States, there is a large and growing market for collectibles insurance.

Collectibles insurance is easy to offer to your existing personal lines clients and tends to be well received once the client understands the benefits and its ability to add a layer of protection for a treasured and financially valuable collection.
Source: Casualty 360 


8/02/2015

ARTnews and Art in America to Merge


The Art Newspaper is reporting that art magazines Artnews and Art in America will be merging in the US. According to the article, if the merger is complete Art in America will print 11 editions per year while Artnews will focus more on online and special themed editions.

The Art Newspaper reports.
ARTnews and Art in America, two of the largest and most widely read art magazines in the US, are merging. Artnews S.A.—which operates ARTnews as well as the Polish magazine Art & Business and the online art market research outlet Skate’s—has acquired Brant Publications’ entire art publishing portfolio, including Art in America, The Magazine Antiques and Modern Magazine.

In exchange for the sale of its art magazines, Brant Publications, owned by the collector and newsprint magnate Peter Brant, has become the majority shareholder of Artnews S.A. with a more than 50% stake in the company, according to a spokeswoman. Brant Publications retains ownership of Interview magazine, the glossy founded by Andy Warhol.

Under the terms of the deal, which have not yet been approved by Artnews’s shareholders, Art in America will continue to produce 11 print issues a year, while ARTnews will no longer publish regular monthly editions. Instead, the publication will focus on the web and release select special themed editions throughout the year, like its recent “Top 200 Collectors” issue.

The company plans to launch a bundled print subscription and consolidate the websites into a single digital platform. Antiques, which had been published six times per year, and Modern Magazine will both be published quarterly moving forward. No staff reductions are planned, according to a spokeswoman.

ARTnews has been undergoing rapid changes behind the scenes for the past year. Skate Capital, a private asset management firm owned by the Russian executive Sergey Skaterschikov, bought the magazine fr om its longtime owners Milton and Judith Esterow in April 2014. The following month, Artnews merged with the Polish art media company Abbey House Group S.A., which is listed on the Warsaw stock exchange.

Izabela Depczyk, Artnews' chief executive, will continue her role at the newly combined company. As part of the transaction, Skate Capital sold more than 6.4 million shares of ARTnews to Brant’s company for $3.4m, according to Reuters. In 2016, ARTnews plans to list its shares on the German stock exchange.

“Under one umbrella, the combined company will have some of the most important cultural publications that together provide the complete content and history of decorative arts, classical arts and art-related news,” Peter Brant says in a statement. “We also see Skate’s Art Market Research as an area that has a significant growth potential.” 
Source: The Art Newspaper 


7/31/2015

The High Cost of Running a Gallery


Shifting gears from a few posts on the ivory ban and proposed regulations and exemptions to the gallery scene and the high cost of running a brick and mortar location.

Bloomberg looks at the difficult climate we are in for running a gallery, including high rents, too much competition, gallery staffing and pay needs to be strong, and the amount paid to artist (article notes a 50/50 split is high and should be 70/30 in favor of the gallery.

I know first-hand some of the difficulties from running two antique galleries in Old Town Alexandria, VA. A lot of this article does ring true. Rents have gotten so high many art and antique shops can afford the rent, and most of the independent shops and retailers have been replaced with chains, banks, nail salons etc.

In any event, the article gives some interesting insight into running a gallery.

Bloomberg reports
On Tuesday, the highly respected Wallspace gallery in Manhattan’s Chelsea neighborhood announced it would close its doors permanently on Aug. 7. The lease was up, and “it necessitated a reevaluation,” said Jane Hait, who co-founded the space with Janine Foeller. “It’s a particularly tough climate for people doing work that’s not necessarily super commercial.” The closure of such a celebrated fixture of the New York art scene underscores the fact that—despite the unprecedented avalanche of money blanketing the contemporary art world—it’s surprisingly difficult for galleries to make money.

The news of Wallspace’s closing comes just weeks before the English release of Management of Art Galleries, a slim, Day-Glo orange book that caused a furor when it was published in Germany last year. Written by a 31-year-old German entrepreneur/professor/art adviser named Magnus Resch, the book argues that most galleries are undercapitalized and inefficient, and moreover, that with McKinsey-like business strategies (Resch went to the London School of Economics and the University of St. Gallen, in Switzerland), the entire art market could be turned into a profit-generating machine. “I could have just said, ‘The revenue numbers are terrible,’ but rather than being so negative I’m actually offering solutions,” Resch says in an interview. “It’s based on the analysis that I did.”

Under different circumstances, Resch’s claims would probably have been waved away, but in what’s close to a first for the gallery world, he has the data to back them up.

Last year, Resch sent out an anonymous electronic survey to 8,000 galleries, and more than 16 percent, or about 1,300 people, responded with information about their revenue, number of employees, and location. (The original version of the book included data for just Germany. The English translation includes data for the U.S., the U.K., and Germany.)
The results are grim: Fifty-five percent of the galleries in Resch’s survey stated that their revenue was less than $200,000 per year; 30 percent of the respondents actually lost money; and the average profit margin of galleries surveyed was just 6.5 percent. (Lest a critic argue that the pool was too skewed to rural galleries selling crafts, or decorative arts galleries buckling under the weight of their unsalable Louis XV chairs, 93 percent of Resch’s respondents represent contemporary art galleries.)

After laying out his data and methodology, Resch isolates what he considers galleries’ key impediments to profitability.

The Rent Is Too High
In the U.S. and Germany, the physical cost of an exhibition space was listed as galleries’ greatest expense (in the U.K. it was second), and Resch writes that “the almost unanimous, and unquestioned, conviction that central premises in a major city are essential simply cannot be justified with an economic rationale.” In other words, collectors will go wherever the art is, and everyone else—the inevitable crowds at openings, the passersby who pop in to see whatever’s on view—has no bearing on the gallery’s bottom line. Paying a premium for a desirable location, according to Resch, is therefore pointless.

Artists Make Too Much
Galleries generally split the sale of a work 50/50 with the artist. Resch argues that—given that galleries often have to cover marketing, production, shipping, and insurance costs—it should be closer to 70/30. Cue artist outrage.

Gallery Staff Make Too Little
This is an interesting one. Resch discovered that the more a gallery spent on employee salaries (percentage of revenue allocated to employee salaries vs. profit margin), the more profitable the gallery became. In one respect, this makes intuitive sense: Once a gallery is successful, it can afford to pay its employees more. But Resch says that higher pay, tied to performance, is a greater incentive—the more money employees make by doing well, the more they want to succeed.


Everyone Is Selling the Same Thing
Resch points out that the vast majority of galleries were competing for the same, tiny world of contemporary art collectors. Diversify, he suggests. This is easier said than done, though: Sure, the contemporary collector base is small—but the group interested in other periods (11th century illustrated manuscripts, say) is even smaller. That’s basically why everyone is selling variations of the same art; it’s simply what collectors want to buy.

Resch has other points—galleries are terrible at marketing and branding; they’ve done a horrible job of expanding their collector base; they’re not active enough in the secondary market; they fail to innovate their business models in any measurable way—but those are less connected to the data and more closely aligned with Resch’s background in business. His recommendations (he’s careful not to call them solutions) range from the reasonable (galleries should have rigorous contracts with their artists) to the jaw-droppingly silly. In an effort to spice up the sales experience, for example, he suggests that galleries use sparklers to denote sold works at openings, and he makes the bold and perhaps unintentionally self-deprecating statement that, due to the art world’s low salaries, “the best educated people … will almost always choose another industry to work in.” Ouch.

The realities of the primary art market depicted by Resch’s data, however, are harder to argue with. It turns out that the upbeat world of biennials and art fairs and parties is in fact a cutthroat, antiquatecd, deeply flawed industry hampered by an obsession with keeping up appearances and an often misguided aversion to making money. No wonder a gallery like Wallspace was forced to close. “Our primary focus didn’t always correlate with financial success,” according to Hait. “It’s unfortunate, because galleries doing things like we were trying to do have a tough time staying in business.”
Source: Bloomberg Business 


7/30/2015

ASA Reviews Proposed Ivory Regulations


ASA released additional information with some interpretations and clarifications of the new proposed ivory regulations.  It is well worth the time to read through and review.

ASA reports
FWS Releases Proposed Ivory Regulations
Creates De Minimus Exemption; Clarifies Antique Exemption from Director’s Order 210

On July 29, the Fish and Wildlife Service (FWS) released proposed regulations affecting the sale, transfer, donation, or other disposition of African elephant ivory. The regulations, long expected in the personal property community, prohibit the “sale or offer for sale of ivory in interstate or foreign commerce and delivery, receipt, carrying, transport, or shipment of ivory in interstate or foreign commerce in the course of a commercial activity”. There are, however, several notable exceptions proposed in the regulation.

De Minimus Exemption

FWS has proposed a de minimus exemption for those items which contain a limited amount of ivory that is not the primary driver of the item’s value. Property that meets the de minimus exemption must meet the following requirements:
•    Items located in the United States, if the ivory was imported into the United States prior to January 18, 1990 (the date the African elephant was listed in CITES Appendix I) or was imported into the United States under a CITES pre-Convention certificate with no limitation on its commercial use;
•    Items located outside the United States, the ivory is pre-Convention (removed from the wild prior to February 26, 1976 (the date the African elephant was first listed under CITES));
•    The ivory is a fixed component or components of a larger manufactured item and is not, in its current form, the primary source of value of the item;
•    The manufactured item is not made wholly or primarily of ivory;
•    The total weight of the ivory component or components in the item is less than 200 grams;
•    The ivory in the item is not raw; and
•    The item was manufactured before the effective date of the final rule for this action.

FWS provides examples of items it expects to meet the de minimus exemption, such as “the ivory veneer on a piano with a full set of ivory keys”, “insulators on old tea pots, decorative trim on baskets, and knife handles, for example”. FWS also lists examples of items it does not expect to meet the de minimus exemption requirements, such as “chess sets with ivory pieces”, “an ivory carving on a wooden base”, “ivory earrings or a pendant with metal fittings”, or “figurines, netsukes, and jewelry”.

Antique Exemption

The proposed regulation retains an exemption for bona fide antiques, in line with Directors Order 210 as amended on May 15, 2014. This exemption allows for items that are more than 100 years old to be “sold or offered for sale in interstate or foreign commerce and delivered, received, carried, transported, or shipped in interstate or foreign commerce in the course of a commercial activity”. The proposed regulation clarifies, however, that items which were “imported prior to September 22, 1982, and items created in the United States and never imported” are not required to demonstrate that the antique was imported through an endangered species “antique port”. The enumerated requirements for claiming the antique exemption are as follows:
•    It is 100 years or older;
•    It is composed in whole or in part of an ESA-listed species;
•    It has not been repaired or modified with any such species after December 27, 1973; and
•    It is being or was imported through an endangered species ‘‘antique port.’’
NOTE: Under Director’s Order No. 210, as a matter of enforcement discretion, items imported prior to September 22, 1982, and items created in the United States and never imported must comply with elements A, B, and C above, but not element D.

As part of substantiating that an item is 100 years or older, those wishing to sell may use a “qualified appraisal”. However, it is unclear under the proposed regulation whether the use of this term ties back to its use for Internal Revenue Service (IRS) noncash charitable contributions. It is also unclear whether the “qualified appraisal” referenced here must be performed by a “qualified appraiser”, as the term is used at IRS, or if other qualifications would be used to determine an appraiser’s ability to perform a “qualified appraisal” for the purposes of this proposed regulation.

Musical Instruments

FWS enumerates four requirements for a musical instrument containing worked ivory to be exempted from prohibitions on import or export. It also reinforces that owners of these musical instruments must provide documentation to support that the ivory was obtained legally prior to February 26, 1976, though FWS clarifies that:
[T]here is sufficient information to show that the ivory was harvested (taken from the wild) prior to February 26, 1976, even though the instrument may not have been manufactured until after that date. It also means that there is sufficient information to show that the ivory was harvested in compliance with all applicable laws of the range country and that any subsequent import and export of the ivory and the instrument containing the ivory was legal under CITES and other applicable laws (understanding that the instrument may have changed hands many times before being acquired by the current owner).

The stated requirements for musical instruments are as follows:
•    The ivory was legally acquired prior to February 26, 1976;
•    The instrument containing worked ivory is accompanied by a valid CITES musical instrument certificate or equivalent CITES document;
•    The instrument is securely marked or uniquely identified so that authorities can verify that the certificate corresponds to the musical instrument in question; and
•    The instrument is not sold, traded, or otherwise disposed of while outside the certificate holder’s country of usual residence.

Inheritance/Household Move

In line with Directors Order 210, items containing ivory that are imported or exported as part of an inheritance or household move are exempt from the prohibition, provided that they are for personal use only and accompanied by a valid CITES pre-Convention certificate. However, the regulation clarifies that ivory imported or exported under this exemption “could not subsequently be sold or offered for sale in interstate or foreign commerce or delivered, received, carried, transported, or shipped in interstate or foreign commerce in the course of a commercial activity, even if it qualified under the de minimus exception.” [Emphasis added.] This does not appear to preclude donations of items which are availed under this exemption.

Donations of Items Containing Ivory

Finally, FWS makes clear in the proposed regulation that “[t]he donation of an item consisting of or containing ivory also would not be considered commercial activity, even if the donor qualified for a tax benefit where the tax benefit is not income.” This makes clear that donations of items containing ivory are permissible under the regulation, and can be done to secure a tax deduction for the donor.

ASA continues to review the proposed regulation, and plans to file comments with FWS. For those who wish to file comments, they are due no later than September 28, 2015. To read the full proposed regulation, click here.


7/29/2015

Proposed Ivory Regulations


The U.S.  Fish and Wildlife Service have just posted the proposed revisions for the African elephant ivory trade and sales. The new document is titled Endangered and Threatened Wildlife and Plants: African Elephant (Loxodonta africana) Rule; Revision and is now posted online at

http://www.regulations.gov/#!documentDetail;D=FWS-HQ-IA-2013-0091-0001

The U.S, Fish and Wildlife Service will be accepting comment on the proposed revision until Sept 28, 2015. The good news is there does appear to be an antique exemption (see second block quote).

The document is rather long with a lot of material, some of use to appraisers and some not.  I have yet to read the full document (it is a rather long and not enjoyable read), but since it is such an important topic, and this topic was posted on July 29, 2015, The proposed regs have some charts and tables that may be useful as well.  I wanted to get the information out so appraisers can start their review process.

U.S. Fish and Wildlife Services reports
We, the U.S. Fish and Wildlife Service (Service), are proposing to revise the rule for the African elephant promulgated under section 4(d) of the Endangered Species Act of 1973, as amended (ESA), to increase protection for African elephants in response to the alarming rise in poaching of the species to fuel the growing illegal trade in ivory. The African elephant was listed as threatened under the ESA effective June 11, 1978, and at the same time a rule issued under section 4(d) of the ESA (a “4(d) rule”) was promulgated to regulate import and use of specimens of the species in the United States. This proposed rule would update the current 4(d) rule with measures that are appropriate for the current conservation needs of the species. We are proposing measures that are necessary and advisable to provide for the conservation of the African elephant as well as appropriate prohibitions from section 9(a)(1) of the ESA. Among other things, we propose to incorporate into the 4(d) rule certain restrictions on the import and export of African elephant ivory contained in the African Elephant Conservation Act (AfECA) as measures necessary and advisable for the conservation of the African elephant. We are not, however, revising or reconsidering actions taken under the AfECA, including our determinations in 1988 and 1989 to impose moratoria on the import of ivory other than sport-hunted trophies from both range and intermediary countries. We are proposing to take these actions under section 4(d) of the ESA to increase protection and benefit the conservation of African elephants, without unnecessarily restricting activities that have no conservation effect or are strictly regulated under other law.

Antique Specimens
Section 10(h) of the ESA provides an exemption for antique articles that are: (a) Not less than 100 years of age; (b) composed in whole or in part of any endangered species or threatened species; (c) have not been repaired or modified with any part of any such species on or after the date of the enactment of the ESA; and (d) are entered at a port designated for ESA antiques. Any person who is conducting activities with a qualifying ESA antique is exempt from, among other things, any restrictions provided in a 4(d) rule for that species, including restrictions on import; export; sale or offer for sale in interstate or foreign commerce; and delivery, receipt, carrying, transport, or shipment in interstate or foreign commerce and in the course of a commercial activity. The taking prohibition would not apply to dead specimens such as antiques. Anyone wishing to engage in activities under this antiques exception must be able to demonstrate that the item meets the requirements of the ESA.

Items that qualify as antiques under the ESA are not subject to the prohibitions in the proposed 4(d) rule. The ESA antiques exemption does not apply, however, to prohibitions imposed under the AfECA on the import of raw and worked African elephant ivory into the United States and the export of raw ivory from the United States. As with the ESA section 9(b)(1) “pre-Act” exemption, nothing in the ESA provides that an exemption under that law modifies or supersedes provisions in other applicable statutes such as the AfECA. The provisions in the AfECA regarding the import and certain export of African elephant ivory were specifically enacted to address conservation concerns with African elephants and were enacted later in time than the earlier, more general ESA exemption applicable to all endangered and threatened species, so the later, more specific restrictions on import and export in the AfECA take precedence over the earlier, more general exemption in the ESA. As noted previously, section 4241 of the AfECA (16 U.S.C. 4241) specifies that the authority of the Service under the AfECA is in addition to and does not affect the authority of the Service under the ESA.

A qualifying ESA antique containing African elephant ivory could thus only be imported if it also qualified for one of the exceptions from enforcement of the AfECA moratorium created by Director's Order No. 210: antique raw or worked ivory for law enforcement purposes, antique raw or worked ivory for scientific purposes, antique worked ivory that is part of a musical instrument, antique worked ivory in a traveling exhibition, antique worked ivory that is part of a household move, or antique worked ivory that was inherited. As noted previously, we believe these exceptions are consistent with Congressional intent in enacting the AfECA, which focused on the harm caused by poaching to supply the illegal trade in ivory. An antique sport-hunted trophy could not qualify for import because it would not be able to meet the requirements under the AfECA that it was taken from an elephant range country with an elephant quota declared to the CITES Secretariat (which did not exist 100 years ago). Because the prohibition on the export of all raw ivory is under the AfECA, the ESA antique exemption also could not be used to export antique raw ivory.

For qualifying ESA antiques containing African elephant ivory that could be imported as described above and antiques containing African elephant ivory that meet all of the requirements under section 10(h) of the ESA and were imported before the AfECA import moratorium was put in place in 1989, whether those antiques could be commercialized in interstate or foreign commerce would depend on whether restrictions are based on the ESA or CITES. Any restrictions that are based on CITES or laws other than the ESA would remain in place.

As discussed earlier, one of the requirements to qualify for the ESA antiques exemption is that the antique must have been imported into the United States through a port designated for the import of ESA antiques. These ports were first designated on September 22, 1982. Therefore, under the terms of the ESA, no item that contains parts of any endangered or threatened species (including African elephant ivory) can qualify under the ESA antiques exemption unless it was imported into the United States through one of the designated ESA antiques ports on some date after September 22, 1982.

On February 25, 2014 (as amended on May 15, 2014), the Service issued Director's Order No. 210, which, among other things, provides direction to Service employees on implementation and enforcement of the ESA antiques exemption. Appendix A to Director's Order No. 210 reiterates the four statutory requirements for an item to qualify as an ESA antique and states that, as a matter of law enforcement discretion, the prohibitions under the ESA would not be enforced for antiques that meet the requirements of being at least 100 years old; being composed of an endangered or threatened species; and not having been repaired or modified with any part of an endangered or threatened species since December 28, 1973, but were imported prior to September 22, 1982, or were created in the United States and never imported and therefore do not meet the requirement of having been imported at a designated ESA antiques port. This Director's Order remains in place. The Service will apply its law enforcement discretion regarding otherwise qualifying antiques that were imported prior to September 22, 1982, or were produced in the United States and never imported, allowing them to be exported, sold or offered for sale in interstate or foreign commerce, and delivered, received, carried, transported, or shipped in interstate or foreign commerce in the course of a commercial activity, provided all other legal requirements are met. Appendix A of the Director's Order also contains guidance on documentation needed and other information for conducting activities with ESA antiques. Director's Order No. 210, as amended on May 15, 2014, including Appendix A can be found at http://www.fws.gov/policy/do210.html.

As described in Director's Order No. 210, the person claiming the benefit of the ESA antiques exemption must provide evidence to demonstrate that the item qualifies as an ESA antique. This evidence may include a qualified appraisal, documents that provide detailed provenance, and/or scientific testing. Since issuance of the Director's Order, we have heard from some people who are concerned about what the Service might require in terms of documentation or authentication of their antique items. We want to be clear that establishing provenance does not necessarily require destructive testing; there may be other ways to establish provenance, such as a qualified appraisal or another method that documents the age by establishing the origin of the item. We have listed scientific testing (in the Appendix to Director's Order No. 210) as an option for people who may want to make use of it in certain circumstance for certain items. However, this is only one option, in a suite of possible options. The provenance may be determined through a detailed history of the item, including but not limited to family photos, ethnographic fieldwork, or other information that authenticates the item and assigns the work to a known period of time or, where possible, to a known artist. Scientific testing could be necessary if there is no other way to establish the provenance of an item.

In addition, we want to be clear that we do not require scientific testing of the ivory components in a manufactured antique item. Where a person can demonstrate that an item, for example a table with ivory inlays, is older than 100 years, and that the table has not been repaired or modified with ivory (or any other threatened or endangered species) since December 28, 1973, the Service considers the age criteria in Section 10(h) to be met. We would not require testing of the ivory itself to determine its age. Of course, to qualify for the ESA antiques exemption a person must demonstrate that all four of the criteria in Section 10(h) of the ESA have been met.

We also want to clarify that these documentation requirements are not new. The ESA itself places the burden of proof on the person claiming the benefit of the exemption (Sec. 10(g)) and the Service has required documentation for antique items since the 1970s. This documentation requirement is also not unique to African elephant ivory; it applies to specimens of any species listed under the ESA when a person is claiming the benefit of this exemption from prohibitions. Over the years, the Service has provided information regarding acceptable documentation for establishing age and provenance; most recently, in the Appendix to Director's Order No. 210. Our CITES regulations at 50 CFR 23.34 also provide information on the kinds of records a person can use to show the origin of a specimen. We seek comment from the public on whether additional guidance is needed in the regulatory code regarding implementation of the ESA antiques exemption.
Source: U.S. Fish and Wildlife Services 


7/28/2015

China's Stock Market Decline Causing Art Market Concerns


Artsy just posted an interesting article about the recent decline and losses in China's main stock exchanges.  On Monday one exchange fell by 8.5% and since mid June the exchange had previously lost 30% ($3 trillion).

The article interestingly looks at the issues in the art market, particularly the impressionist sector when the Japanese economy started to fail and the bubble burst in the late 1980s and early 1990s..

Artsy reports
Here’s where things get interesting. Most sufficiently humble financial analysts—with the exception of the inner circle of Chinese President Xi Jinping’s economic advisers who are engineering the stabilizing measures that faltered on Monday—will admit that very few people actually have a particularly clear answer as to what’s ahead for Chinese markets. But, as reported by Quartz, several analogues do exist, one of which—Japan, 1989—has serious cross-over to what we’re seeing in the art market as well.

In the lead up to Japan’s two-decade-long stint in the economic doldrums out of which it has only recently reappeared, the country’s collectors became infamous on the auction circuit for their serial record-setting bids. Vincent van Gogh’s Sunflowers (1888) became the world’s most expensive painting in 1987 when purchased by Yasuda Marine & Fire Insurance Company for $39.9 million. Businessman Ryoei Saito set another record in 1990 when he dropped $82.5 million on another van Gogh, Portrait of Dr. Gachet (1890). An Australian collector had set a new benchmark in between, but the more than doubling of the record in just three years was quick to raise alarm among pundits about an imminent art market bubble. (If that doesn’t sound familiar, read this.)

As it turned out, the economic bubble in Japan had already burst; its effects simply hadn’t yet become apparent. In order to sustain the rampant growth that had propelled Japan to be the world’s second-largest economy, the government began subsidizing that expansion with cheap loans. Consumption fell and instead the country ended up with a hoard of so-called “zombie banks and corporations,” creating export-oriented supply for which there was insufficient demand. It invested in rolling over existing lines of credit—and thus mushrooming its debt—rather than in new growth sectors. And, a majority of that lending was collateralized in real estate, another bubble that burst.

Prices of art on the domestic Japanese market dropped 80–90% by some estimates. And Japanese collectors receded from the international stage en masse. Coupled with a decline in U.S. spending on art at the time, the art market fell dramatically, particularly in the Impressionist and Modern sector, which had seen such fervent investment from the Japanese. (Other sectors, which hadn’t experienced as much exposure to the boom, fared better.)

Across the board, China’s economy sits on a very similar-looking ledge. After Monday’s selloff, a spokesman for the China Securities Regulatory Commission told the Wall Street Journal that the subsidiary of his commision, which has been a main driver of official stabilization measures would continue to purchase shares and even increase its investment if need be. Though it would be beneficial to the market in the short term, the move is very much out of the Japanese playbook.

However, other reports suggest the government could be pulling back on its efforts to prop up the markets. Bloomberg cites major slumps in the share price of key state-backed conglomerates that had been used to juice the market over the past month as a potential sign of shifts in strategy. Other analysts have suggested that the government is simply struggling to maintain the level at which many of the firms listed on its markets have been trading.

Any back-down on government support would be welcomed by some within the global economic community, perhaps most prominently among them the International Monetary Fund (IMF), which, as Bloomberg reported, urged the Chinese state to reduce the magnitude of its interventions, keeping debt manageable in the interest of the long-term viability of its economy.

What impact such a wind-down will have in real terms on both the Chinese and global economy—and indeed China’s art market and the numerous art world ventures that have invested heavily in the region—is unclear. (Some have postulated that due to the relatively small percentage of the country’s wealth that is traded on its exchanges, the impact could be more slight than projected.) Moreover, key questions about the fundamental health of the Chinese economy and the potential knock-on effects of a planned increase in U.S. interest rates remain unanswered. Art purchases will no doubt be particularly sensitive to market corrections, something which the recent auction data suggests is already taking place. But, avoiding a long-term Japan-style meltdown of the Chinese economic machine is likely worth the sting.
Source: Artsy