National Treasures
Hi Friends!
If you followed this newsletter for long enough, you know that I make a habit of looking at and tracking adjacent marketplaces. Although classic and exotic cars are certainly considered to be premium collectibles, I have found that there are little signals and cues elsewhere that can provide a lot of clarity regarding where this market is going. Things like sneakers for example, I think were a couple of years ahead of what we’re seeing happen out there with cars right now. I also think that there were indicators in the real estate market prior to the downturn in 2023, that if recognized correctly provided some protection too. Still though, the top of the heap remains the fine art market. Not only is that where the biggest sales occur, but trends materialize there prior to virtually anywhere else and no matter what your collector of, it pays real dividends to watch what’s happening with fine art.
Last October, Bonham’s sold an important work by London born artist Howard Hodgkin entitled “Mrs Action in Delhi”. Initially, the sale made headlines as it exceeded its initial estimate by a significant amount, again last week, the oil on canvas painting made headlines once again by having its export blocked by the UK government. Citing something called “Waverley Criteria”, the UK government’s department of Culture, Media and Sport can stop something from leaving the country if it’s deemed the item in question meets certain marks regarding history, aesthetics or study. This means that if you are a foreign buyer or you intend to move the item outside of the borders of the UK semi permanently, the UK government can stop you and in some cases hold your money or force you to sell.
As we all know, art tends to be very expensive. Especially art from significant artists during critical points in their careers. It seems unlikely that because of this, this would have any effect on collector cars, but despite the headlines, the reality here is that Mrs Action in Delhi only sold for $2.3 million. While this sounds like a lot, when you consider what else goes on in that space, this is basically the equivalent of low to mid six figure car or bike and sales like this happen constantly all over the world.
As the initial inceptions of the automobile continue to get further and further into the rearview mirror, more and more governments around the world are going to begin to recognize the cultural significance that cars, motorcycles, automobilia, etc. present. In fact, in 2013, the UK government already cited these criteria and used them to keep a 1929 Bentley 4 1/2 Liter supercharged single-seater (which at the time was the most expensive car ever sold at auction) from leaving its borders. Additionally, back in 2019, the Italian government designated the Ferrari 250 GTO as a work of art. This was more specifically done to prevent replicas and copycats from being built, but that doesn’t mean that this can’t also be applied in situations like this because of it.
Okay, so these are both pretty high dollar examples, so what’s there really to be worried about here? There’s actually a lot. In the UK specifically, if a car is over 50 years old and a value to above a certain threshold (allegedly £65,000), It’s required that you apply for an export license and this is basically where they can get you. Italy and France are even more aggressive. If the car is over 70 years old and deemed significant, they can deny your export permit entirely. This is why you sometimes see Ferraris listed in Italy below market value versus the rest of the world. These cars are essentially trapped within their borders and the global market is cut off as a result. If the government decides that your vehicle is historic, of aesthetic importance or lends itself to art, learning or history in some capacity, they can deny your export and hold your vehicle or if there’s enough interest elsewhere within their borders, they can force you to sell if a buyer inside the country steps up within the designated timeframe as specified by the government in question. When you think about what could potentially fall into this area, it includes a lot of stuff. Movie cars, celebrity owned vehicles, vehicles that were used in significant advertising, early or prototype examples, the list is surprisingly long and as history marches forward, it’ll likely get longer.
So how do you protect yourself against this? I reached out to a couple of attorneys that Motorwerks works with pretty regularly and here was the basic rundown (Note: I am not an attorney and this is not formal legal advice. Consult your attorney or legal professional before proceeding with a sale like this):
- Demand an Export Pre-Check: Before the hammer falls, ensure the seller or auction house has a “pre-clearance” or “intent to export” document from the local ministry of culture.
- Know the 70-Year Rule: In many European countries, 70 years is the magic number where a car moves from “used vehicle” to “cultural object.” Be extra cautious with anything that falls outside that range.
- Hire a Specialized Broker: Don’t use a general freight forwarder. Use someone who lives and breathes classic car logistics. There’s a handful of companies out there that specialize in this and they’re not hard to find. Although they are expensive, they can be worth it and it’s definitely a good idea to at least have a conversation with one of them.
- Budget for the “Stay-Put” Scenario: If you buy a car in Italy, are you prepared to keep it in a private garage in Milan for potentially months at a time? It sounds romantic, but it’s a logistical and financial hurdle most don’t plan for.
- Check the Annex Code Classifications on all customs paperwork: Even single digit on a customs form can cost you big. Verify everything.
The moral of the story here is that as the world gets smaller, it also gets easier to buy things from far-away places, but the walls around “cultural heritage” are getting higher and the number of things that may be hiding in plain sight behind them will assuredly continue to grow. Owning a piece of history is a privilege, but in the eyes of many governments, that history belongs to the nation first and the owner second. Make sure you aren’t unknowingly sitting in that silver medal seat.
That’s it for this week……
Darin Roberge