TEA EXPORTS (DUTY-FREE SHOPS) (Hansard, 24 February 1976)

§ Mr. Robert Taylor (Croydon, North-West)
Having sat in the Chamber since 4 o'clock hoping to catch the eye of the Chair, I take a crumb of comfort from being able to raise on the Adjournment a subject of some importance particularly affecting one of my constituents. It is a matter of principle, the question whether the Government are genuinely intent upon supporting small exporting firms in accordance with statements often made by many Ministers.
The question is whether a small company should be permitted to sell its products through the outlets of the duty-free shops at London Airport. One of my constituents has asked me to raise it as he is an executive in a company which has sought this outlet for its products. The firm is the Tea Planters and Importers Company, a well-known and well-established company of great repute. It has an international reputation for high-quality blended teas, which it buys in the market place in Calcutta, Colombo or Canton.
The company's present exports amount to about £250,000 each year. In the main they are the result of a mail order business which the company has built up among customers who return to it after having sampled its products. The company is confident of substantially increased business if it can have permission to sell its products through the 343 duty-free shops, particularly at London Airport, because there is no doubt that if the returning travellers buy the products at that point of sale, there is a strong likelihood of repeat orders in the years ahead. As one who has sampled the company's products and who uses Heathrow Airport frequently, I can confirm that the products are very acceptable and certainly suitable for sale through that outlet.
After the management decided that that was a sensible course, it naturally approached the concessionaires at Heathrow—Hills Airport Shops Ltd.—who investigated and, after considering the question with great care, decided that here was a product likely to sell in substantial quantity. They agreed that they would like to display these blended teas. It was then necessary to approach the British Airports Authority for permission, as it still has control over what is sold in the duty-free shops. The Authority wanted to be convinced that the selling price of the products would be less than the equivalent sterling price at which they were available abroad. It was satisfied with the company's answers and the project thus had the support of the concessionaires and of the Authority.
As a result, this small company received an initial order worth £1,900 as the start of a three-month trial period. This was subject to the consent of the Customs and Excise. I am sorry to inform the House that the Government, through the Customs and Excise, stepped in to prevent the orders being fulfilled, saying that permission would not be given for the products to be sold through these outlets.
At this stage, my constituents asked me to take up the matter and I have been in correspondence with the Minister of State, whom I am glad to see here tonight. He told me in a letter in November that the Government were relying on the Customs and Excise Act 1952 for the ruling. Apparently the Customs and Excise have the right to prohibit the sale of any goods to which they take exception through these outlets.
I understand that the basis of the refusal was that non-dutiable goods should not be sold through duty-free shops—that any product which does not 344 attract duty in this country is not suitable for sale in these outlets. But when the 1952 Act was introduced duty-free shops did not exist. It was not designed to take account of the sort of situation I have been describing.
The Minister of State was inclined to help the company and he suggested to me that it should endeavour to sell its products through other outlets in the departure lounge. In effect, this meant the company had to try to sell tea through W. H. Smith and Son Ltd as this is virtually the only other outlet in the lounge. It must be evident that this is totally unsuitable, even if W. H. Smith was prepared to sell tea on its book shelves.
If it is so important that the only goods available in duty-free shops should be those which incur duty in this country, who does the Minister think will be buying these products? The people who spend money in these shops are those returning home from this country. When I go abroad, I do not usually spend money in the duty-free shop at Heathrow, but rather in the shops of airports abroad as I leave them. The object of these shops is to collect travellers' loose change in local currency which would be of no use when they got home.
If one accepts that travellers returning home are those most likely to purchase these products, it is relevant to point out that the products incur duty in foreign countries. The tea would incur a duty of 20 per cent. in Norway, 17.65 per cent. in Sweden, 15 per cent. in Denmark, 12.4 per cent. in Finland and in Germany it would have a tax of 4.15 deutschemarks per kilo plus a 5.5 per cent. tax. In the Netherlands it would incur a duty of 4 per cent. and in France 7 per cent., and so on.
On this basis the company was able to convince the British Airports Authority that its prices at Heathrow would be less than the sterling equivalent of the price at which the product would be available overseas. Thus, the product incurs duty for those people who are likely to purchase it, and thus it must be an attractive product for anyone who is departing from the country.
I wish to refer back to the Customs and Excise Act, 1952, on which I understand the Minister is basing his case. From meetings with Customs and Excise 345 it has become apparent that Customs and Excise use Section 80 of the Act for their case. The case is built on flimsy grounds because Section 80 states: The Commissioners may approve, for such periods and subject to such conditions, as they think fit, places of security for the deposit, keeping and securing.…subject to such conditions and restrictions as aforesaid, of goods for exportation". I maintain that anything sold to a traveller leaving this country is as good as any item which is exported from this country to an overseas market.
If the Minister does not accept that proposition, Section 80(4) states: The Commissioners may at any time for reasonable cause revoke or vary the terms of their approval of any warehouse under this section. So there is plenty of latitude whereby Customs and Excise can give permission.
The case is not founded upon law and it is perfectly possible, instead of the Commissioners using Section 80 to make an administrative decision, for them to designate the associated warehouses as export points and to operate them under Sections 47 and 49 of the Act. Section 49 deals with the exportation of goods not liable to duty but for which export documentation is required. That is an easy way for the Minister to give his permission for these products to be sold at London Airport and other duty-free shops.
A matter of principle is involved here, not a matter of law. I defy the Minister to point to any part of the Act which specifically prohibits him from giving his permission to the company. If the Government are determined and genuine in their desire to help small exporters, there is no reason why the Minister should refuse consent. He may have a brief in front of him prepared by Customs and Excise, but that is of no consequence.
At present this company is exporting £250,000 worth of tea a year. If the Minister says "Yes" to the company tonight, there is no doubt that that figure will substantially increase. That would help our balance of payments.
I ask the Minister not to shield behind the Act, because it is not sufficient a shield to prevent his giving his consent. I ask the Minister to discard his brief 346 and to say that he will support this company in its efforts to increase its exports.

§ The Minister of State, Treasury (Mr. Denzil Davies)
I am sorry to say that I cannot go along with the hon. Gentleman's invitation to discard my brief. However, I have some sympathy with his constituent, who is an employee of this company, about the arrangements for a retail outlet for the sale of high-quality teas to departing passengers at the airports. The hon. Gentleman also mentioned the question of principle. Unfortunately, as in so many of these cases, there are one or two, or possibly more, conflicting principles. We adhere to the principle of helping exporters. Unfortunately, another principle is involved which we have to balance against it.
Perhaps I should first point out that there are, of course, two areas in the airport where sales to outgoing passengers can be made. First, there is the general concourse area, before the passenger has passed through Customs, immigration and security controls. Secondly, there is the departure lounge when he is on the air side of those controls.
The establishment of sales facilities in the concourse area raises no special problem about Customs or security controls and would be a matter simply for negotiations with the airport authority. Therefore, the hon. Gentleman will recognise that we are not preventing the company from selling its product in the concourse area. Indeed, many other products are sold in that area.
The company wishes to have a facility in the departure lounge, and it is this desire which gives rise to the problem. From the point of view of the security of an airport—and in these days, unfortunately, it is necessary to think not only of security against evasion of Customs duties but of the physical safety of aircraft and travellers—there must be a firm boundary between the part of the airport which is on the air side of the controls, to which only limited access is permitted, and the part which is on the land side of the controls, which is open to the general public. Close control must be maintained over the movement of goods and of persons between one side and the other.

§ Mr. Robert Taylor
The British Airports Authority gave its permission for the sale of these goods. Therefore, it must follow that the British Airports Authority has not raised an objection on the ground of security.

§ Mr. Davies
I was making a general observation. I accept entirely what the hon. Gentleman has said. We are concerned with the security on the air side, which involves not only the security against evasion of Customs duties but the security of aircraft passengers. This means that there have to be limits on the sales activities which can be carried on in the departure lounge of an international airport. I shall refer to these two types of activities because the hon. Gentleman has mentioned them.
First, if, as at most major airports, there is a duty-free shop in the departure lounge, tobacco, wines and spirits and other goods are sold free of duty and value added tax. Secondly, whether or not there is a duty-free shop, there will be light refreshments and facilities for the sale of newspapers, periodicals and some other goods which passengers may require for their comfort or convenience on their journey. The goods sold through these facilities are not normally subject to duty and are not sold free of VAT.
I turn to the legislation mentioned by the hon. Gentleman. I make it clear that Customs take the view—I do not think this can be challenged—that a duty-free shop is, legally, what is known as a Customs bonded warehouse. It is an essential part of the Customs arrangements for control over bonded warehouses—including duty-free shops—that they are places for handling goods which, though liable to duty or tax, have not in fact borne it.
A bonded warehouse cannot be used for goods which are not subject to any duty or tax. The control arrangements are based on the principle that dutiable and non-dutiable goods should not be mixed. It is essential to have controls to ensure that goods sold in duty-free shops which duties and VAT have not been paid are duly exported and are not improperly directed to home use. I do not accept what the hon. Member said about passengers at an airport not buying from a duty-free shop when they are 348 outgoing. Some incoming passengers buy from the duty-free shop, but not all passengers buy only when they come into the country and not when they leave.
The tea which the Tea Planters and Importers Company wishes to sell in the airport departure lounge is not subject to duty of any kind and is zero-rated from valued added tax. I took note of what the lion. Member said about the tax position in other countries. Because of the tax position and because of the need to separate dutiable goods from duty-free goods, Customs had to say that they could not agree to the tea being taken into a duty-free shop for sale there. Most people expect in a duty-free shop to buy goods which are dutiable, but from which the duty has been removed.
The Customs would not rule out the possibility of the company making arrangements to supply its tea through one of the sale facilities in the departure lounge other than the duty-free shop. We are not therefore preventing the sale of this commodity. We are merely saying that from the point of view of the Customs we cannot agree to its sale in the duty-free shop. The hon. Member mentioned the sale of tea through W. H. Smith. It is a matter for arrangement between the company and the British Airports Authority to determine where the goods can be sold on the air side of the departure lounge.
I recognise that this solution may not be altogether satisfactory for the company. I should add, however, that the Tea Planters and Importers Company is by no means the only company to have made a case recently to be allowed additional facilities to make sales or provide services to passengers in the departure lounge at our international airports. Other suggestions have been put forward, for example, for making use of the departure lounge as a sales point for other luxury kinds of foodstuffs; and there have been representations on behalf of organisations in the travel industry which would wish to be able to make a service available to travellers on the air side of the official controls.
It would obviously not be possible for arrangements to be made for the sale of tea without paying regard to the interests of other traders who might wish to have 349 similar facilities. This leads to the problem not only of the physical limits on the facilities which could be made available in a departure lounge, but the larger problem that if the number of organisations permitted to have personnel and goods moving to and from the air side of the official controls is increased, the more difficult becomes the task of the control authorities.
The hon. Member will, however, be interested to know that the Customs and Excise have recently set in hand a review of their own policy as regards the carrying on of business activities on the 350 air side of the controls. This review will take a little time to complete, because it is not just a Customs matter—it will call for consultation with airport authorities and the other official interests—and I cannot predict the outcome of the review. But I can give an assurance that the interests of the hon. Member's constituents, as of other organisations with similar interests, will be kept in mind in the course of the review.