How to look after your latest acquisition in China
A guide for collectors with questions about insurance, conservation, transport and China’s tax system
By Xia Fan. From Art Basel Hong Kong daily edition
Published online: 22 May 2013
You’ve spotted a great work at the art fair—but there’s more to it than doing a deal with a gallery. Insurance, transport, conservation and storage (not to mention customs duties and tax) are all part of the purchase
With 245 galleries showing art from all over the world, 60,000 visitors expected, and lots of VIPs (not that Art Basel will ever reveal how many) drummed up by 24 VIP relations managers (up from three years ago according to Magnus Renfrew, the director Asia of Art Basel), it is easy to forget in the excitement of buying that works of art need a lot of careful looking after.
Insurance, transport and storage have to be organised. “Some collectors and galleries in China are still too new to fully appreciate the problem. For example, some galleries don’t understand the logic of spending so much on insurance and transportation to attend an art fair,” says You Yang, the deputy director of the Ullens Center for Contemporary Art, Beijing. “Some collectors and galleries are aware of the importance of insurance, but decide to control cost in the end,” he adds.
The first risk that collectors face is accidental damage to a work—which are most vulnerable when they are being moved around, from fair to home. Among the works on show at Art Basel Hong Kong is Giorgio De Chirico’s Piazza d’Italia, 1913. Severely damaged (it has a hole in its centre), the work is on show as part of a presentation by Axa Art to provide collectors with information and advice on safeguarding their collections. Axa Art is showing five examples of damaged works demonstrating the harm that fire, water, smoke, bumps and bangs can cause to a work of art.
“Our aim is to point out to collectors how the unexpected can happen and the significant role art insurance plays in their collections,” says Jennifer Scally, the regional manager of Axa Art Asia.
Established in Cologne, Germany, in 1982, Axa Art is among the leaders in art insurance (other firms include Hiscox, Chubb, Atlantic Mutual, and Tata AIG Private Client Group). Axa Group opened a Hong Kong office in 2003, which has also brought its fine art insurance services to the region. In February 2012, Axa’s art insurance service in mainland China was authorised by the China Insurance Regulatory Commission, and is operated by its member company Winterthur Insurance (Asia) Limited, Shanghai Branch.
For commercial art galleries, a work of art is insured as stock for a proportion of its cost value or selling price. Axa’s clients at Art Basel Hong Kong may add a policy for the art fair to their existing insurance policies.
Private collectors may arrange insurance through galleries for works purchased at the art fair. Alternatively, they may add new works to their existing Axa insurance policies. “In general, art exhibitions and transit insurance policy covers the gallery’s booth, until the buyer takes it off the stand,” Scally says.
But it isn’t just calamities that can damage works: inappropriate storage or display environments can cause harm. The condition of an oil painting, for example, can be easily affected by climate and humidity, and is determined by different types of support. Pei-Yu Chen, one of the two professional art conservators at Beautiful Mind art storage and restoration studio in Hong Kong, has seen cases of curled-up support caused by heat, and mildewed or moth-eaten support due to humidity. She says: “Temperature and humidity have to be monitored and strictly stabilised. Exposure to the sun should be avoided as it causes craquelure to the surface.”
If an accident does happen, or a work has deteriorated, collectors need to choose a conservator carefully. Chen warns: “Unprofessional or excessive restorations do no good to the artwork, and instead damage it even further.”
Art conservation and restoration in Asia mainly takes place at art museums and research centres at universities. Some conservators also establish small restoration studios. Beautiful Mind is one of Asia’s few large-scaled commercial conservation studios. Collectors can consult their art insurance companies about conservation services, as usually art insurance companies are in partnership with conservation studios.
In Hong Kong, even though land is very valuable, space for art storage is vigorously expanding. Vinci Chang opened Beautiful Mind, a 10,000 sq. ft store for works of art in North Point, Hong Kong, in March. Previously Chang had worked for Christie’s Hong Kong for 15 years. Beautiful Mind employs two art conservators from Taiwan.
Different storage conditions are required for different media: 25°c and 50% to 70% relative humidity for oil paintings, and 21°c to 24°c and 40% relative humidity for Chinese calligraphy and paintings. Chang says that although Beautiful Mind is based in Hong Kong, its clientele is regional. Hong Kong’s free trade policy with no taxes on the import and export of art gives it an advantage. In contrast, the cross-border trade of art and antiques from mainland China is subject to a number of regulations.
Besides insurance, transport is also an issue. Transportation requires professional handers and strict control over aspects such as wrapping, temperature, humidity and stability. “Art logistics and storage in China are quite advanced,” says You Yang. The Ullens Center uses the Singapore-based company Helutrans for art handling. It has regional offices in Hong Kong, Beijing and Shanghai.
Art fair organisers sometimes recommend logistical services to exhibitors and buyers. High-end galleries and experienced collectors generally have their own preferences, and collectors may also arrange shipping through galleries. In mainland China, options such as the China-based Trojans Art Service are available. Meanwhile, many major international shipping companies (including Crown Fine Art, BALtrans International Moving, Michelle Art Services) are focusing on the Chinese market.
Hasenkamp, the German family-run business, is one of the leaders in the field. “Hasenkamp art and storage services set the standard of the field,” claims Li Danyang, the general manager at Beijing’s Gehua Cultural Development Group. Gehua Group is the developer of the freeport in Beijing’s Tianzhu Free Trade Zone. It has formed a partnership with Hasenkamp for high-quality art logistics.
Tax in China
Taxation remains a major issue regarding the opening up of mainland China’s art market. Works of art imported to China are in the same category as luxury goods and a rate of import duty was set at 12% until 2011. Import duties was halved to 6% for a trial period by the Customs Tariff Commission of the State Council in December 2011, if the country of origin of the work has a preferential trading agreement with China, which covers most areas. Even if import duties remain 6%, on top of the import VAT of 17%, the total taxation of a work of art adds up to 23%. Hong Kong, in comparison, imposes no tax on the import and export of art. Tax on the profit derived from the sale of art does apply, however, at a rate of 15% to unincorporated businesses and 16.5% to corporations.
The further growth and opening of art markets in Beijing and Shanghai are restricted by the large tax burden. “Beijing wishes to become an international trade hub of art, but the current tax situation is a big problem,” says Ji Pengcheng, the director of Gehua Art. For private collectors, tax regulations in mainland China make their purchase of art and antiques even more costly. Therefore, many opt to keep their art in storage facilities in Hong Kong rather than importing works to the mainland. Insurance, transport, storage, conservation, customs duties and VAT may add more than 30% to the cost of a work of art.
“First-timers attempt to control cost by reducing these costs. However, loss caused by unstable factors can be even more significant,” warns You Yang, of the Ullens Center. Yang insists that professional standards ought to be consistent at every stage of collecting art. It is better to be safe than sorry, as the saying goes.
Additional reporting by G. Yeung
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