Export Controls on Luxury Goods

BY:

Steve Berry
7 October 2022

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Export Controls have always existed but the types of goods and the controls in place have evolved, meaning further considerations for the seller to be trade compliant.         

Certain products will require a licence to allow export from the UK. In the world of export controls, this means Strategic Goods. Military, specially designed for a Military purpose, or modified from a civil specification for a Military Purpose. The other alternative is Dual Use - not to be confused with Dual Purpose - this classification controls goods based on their inherent capability, together with the fact that the criteria is within the UK Strategic List, making the goods “caught”. 


Military and Dual Use goods will always require an export licence. If there is no Open Licence available, the exporter must apply to the Export Control Joint Unit to ask for a licence. There is no guarantee that the licence will be granted, and the exporter must wait for the ECJU to respond before proceeding.  


The worldwide sanctions that have implemented on Russia add complexity to the types of controlled product. As UK Sanctions increase, UK Exporters need to consider terms applicable to new restrictions. This includes controls on Infrastructure and Energy related goods, based on specific Commodity Codes and certain product criteria in certain instances.


The exporter must check who will be using the goods when considering trade compliance. Supply to Russia applies “directly or indirectly” Export Controls requires the trader to enquire further than just establishing the consignee (mandatory for a customs declaration, which includes a Safety and Security requirement) as the end user and end user must be known.  


The restrictions on the supply of goods to Russia now include Luxury Goods.



The Russia (Sanctions) (EU Exit) Regulations 2019, Chapter 4B, 46B states; “The export of luxury goods to, or for use in, Russia is prohibited”.


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       


When is a product deemed to be a luxury and prohibited for supply? Schedule 3A of the Regulations provides the details.


There is a value consideration within the schedule, “where a sales price is specified per item, ‘item’ is to be construed as the unit usually packaged for retail sale (where applicable), whether a singular good or a number of goods, if packaged to be sold together”.   


Bearing in mind the value threshold, examples of prohibited luxury items are horses (together with the saddle and harness), caviar and truffles, cigars and alcohol, electronic goods, cars and motorbikes, musical instruments and antiques. There are also a wide range of prohibited clothing and shoes as luxury goods. The detail is important. For example, the “vehicles” section also includes accessories and spare parts.             


The advice is to check the list prior to supply (or quotation), to clarify if the controls are relevant, whilst remembering that direct or indirect to Russia is prohibited.             


Any regulations and restrictions that relate back to a Commodity Code underlines the importance of accurate tariff classification. The Commodity Code relates to so many areas of trade compliance, but these additional controls emphasise the exporter’s responsibility to ensure the eight-digit code is correct.     


There is now the added restriction based on valuation of the goods. The valuation must be compliant, with a warning that if the price is not available to other parties and is lower than the market rate because the seller and buyer are related to one another, it may not be compliant. Export Controls have always existed but the types of goods and the controls in place have evolved, meaning further considerations for the seller to be trade compliant.           


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