What Art Dealers Need to Know before Doing a Fair

At noon on April 17, 2013, as collectors streamed into the VIP preview of Belgium’s biggest art fair, Art Brussels, seven of the participating galleries were in a jam. The bulk of the work they’d planned to show—and hopefully sell—was caught up in customs amid a shipping snafu. Some dealers made do by showing smaller works they’d stashed in their luggage, while others had no choice but to leave their booths empty while they waited. One gallery hung an apologetic note: “Please come back later.”

The incident offered a rare glimpse into the complex, largely invisible work that goes into participating in art fairs. In the five years since, those logistics have only grown more complex as the art world calendar has filled up with well over 250 fairs each year, according to Clare McAndrew’s The Art Market | 2018 report, released earlier this year by UBS and Art Basel. Nor are these fairs optional: Dealers made almost half of their sales (46 percent) at art fairs in 2017, with each gallery participating in an average of five fairs per year—and a full 30 percent of all sales happening specifically at international fairs.

Beyond the costs of the booths themselves—which are significant—taking part in a fair engenders a slew of legal and logistical negotiations. These typically include ironing out import and export licenses, shipping costs, consignment agreements, and tax obligations; finalizing invoices and contracts with collectors who may only be in town for a day;and making sure all the requisite information is reported to the appropriate authorities. Most of these tasks fall to dealers and their often-limited staff.

Getting some guidance

To help clarify some of the potentially murky issues surrounding art fairs, Art Basel released an eight-page document last year outlining best practices and industry guidelines for the art market. As part of the application process for its fairs, galleries are now expected to adhere to those guidelines, which stresses maximum transparency with artists, consignors, and buyers, as well as extensive documentation of all transactions during fairs.

The Art Basel document is very much in keeping with the Art Dealers Association of America’s “Code of Ethics and Professional Practices,” which mandates standards of professional behavior among its members, and a more extensive bilingual pamphlet published by France’s Comité Professionnel des Galeries d’Art, which outlines ideal business practices between galleries, the artists and estates they represent, clients and consignors, and other dealers. These documents—all of which were created within the last decade—suggest that galleries and fairs are increasingly recognizing the importance of making the art market less opaque.

“A lot of these galleries are small; they don’t have the resources to necessarily have their lawyers review laws for them in every jurisdiction that they go to when they participate in a fair—that’s a really big ask,” says attorney Diana Wierbicki, leader of the global art practice at Withersworldwide. “If these organizations are able to give some best practices or just highlight some issues, considerations, and laws that galleries should be aware of when they participate in these fairs, I think that’s a great way to consolidate legal effort.”

Hit the paper trail

Another important piece of housekeeping—which can help dealers nail down sales amid the chaos and schmoozing of a fair preview—is to be rigorous about sales invoices.

“That also helps you in closing a transaction,” says Los Angeles–based attorney Thaddeus J. Stauber of Nixon Peabody. “When you’re on the gallery side and you’re at a fair and only going to be there a couple of days, and maybe the collector is somebody who’s flown in—if somebody signs their name on a piece of paper, they’re generally going to stand behind the deal.”

Indeed, the first half of Art Basel’s “Principles and Best Practices” document emphasizes meticulous record-keeping, expounding on the importance of sales invoices, receipts, and consignment agreements.

“For a first-time gallery, I would emphasize making sure that your consignment agreements are very flexible, so that you can do the best job of selling the work for your clients,” says Wierbicki. “Sometimes, what the collector may feel is best may differ from what the gallery feels is best.”

While maintaining a clear paper trail is paramount in the Art Basel guidelines, an issue that gets only a passing mention—and to which the dealers stranded at Art Brussels became acutely sensitive—is shipping.

The importance of being ship-shape

“The number one issue is logistics on shipping,” says Wierbicki. “Because there is so much work that is moving to these fairs at the same time, to have a clear understanding of how that’s happening is really important.” And just as crucial as getting the work to the fair is how it will get to its (hopefully) new home.

“Don’t be afraid to talk about shipping,” says Stauber. “What the smaller or emerging gallery will often find is that they’ve closed a deal, and nobody stopped to think about the fact that it’s going to take $1,500 to ship a work, and all of a sudden that gallery has to figure out if they’re sharing that cost, if they’re eating that cost—that’s going to eat into your profit margins very quickly.”

Because Art Basel’s guidelines are intended for dealers in every region of the world and galleries of very different scales, the terms and requirements it lays out are necessarily general. (“Exhibitors must comply with all applicable laws in the country or countries where they do business,” the second half of the document begins, and Art Basel itself has fairs in three very different jurisdictions—Miami, Florida; Basel, Switzerland; and Hong Kong.) But complying gets complicated quickly.

Don’t jet just yet

Galleries traveling to other countries should get acquainted with local tax laws. For instance, Wierbicki points out that a foreign gallery coming to New York for an art fair should make sure to clarify where any transactions that occur during the fair are technically taking place: Is it where the gallery is based, where the fair is occurring, or where the sold work will be delivered to the buyer?

Depending on the answer, that foreign gallery may have U.S. income tax responsibilities to fulfill based on its fair sales. A foreign gallery that sells out its booth at a major New York fair may also suddenly find itself liable for sales tax, which any business that delivers 12 or more sales in a given year in New York State must withhold and remit to the state government. “Very few foreign galleries are even aware of that, and it’s a very low threshold,” Wierbicki says.

Another potentially byzantine issue faced by fair-going dealers is the need to secure import and export licenses for artworks and artifacts crossing borders. And while many fairs take place—not coincidentally—in places with relatively straightforward import-export processes, others can become major headaches for dealers. For instance, Brazil has fairly restrictive import-export laws, but for several years, international galleries benefited from tax exemptions on sales at Brazil’s banner fair, SP-Arte.

“I would start a relationship with an experienced importer-exporter,” Stauber says. “They tend to know better than lawyers—or other dealers, or even the fair that you’re attending—the nuanced rules for import and export, and how long it’s really going to take to get your artwork from Brazil to the U.S. or to Belgium, or whatever the case might be, and they’re going to do it in a pretty cost-effective way.”

Who has home-court advantage?

Art Basel’s best practices guide extensively outlines how it will handle any legal disputes (by having a legal compliance board and panel review them). But even then, it’s not hard to see how disputes arising from transactions at art fairs could get complicated very quickly. In cases where an invoice goes unpaid, an artwork gets damaged in transit, or any other number of possible problems, the question of jurisdiction becomes extremely important.

“It can be very costly if you’re not aware of where it is that you would have to handle an issue,” says Wierbicki. “A lot of the time, there’s only an invoice, it’s not a written contract, so are we dealing with the governing law of the location where the gallery is primarily located? Are we dealing with the governing law of the fair location? Are we dealing with the governing law of where the artwork is being delivered to the buyer? That becomes relevant, because the laws are very different globally in terms of whether they’re more beneficial for the buyer or the seller, due diligence, and what information needs to be disclosed.”

In other words, galleries going to fairs have to do an enormous amount of due diligence before, while, and after they cozy up to collectors and close deals with them. But with almost half of their sales on the line, it’s a heavy lift that more and more dealers will have no choice but to take on.