This article was originally printed in the latest issue of Numismatic News.
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Dealers say new rules imposed by the U.S. Mint on the sale of 5-ounce silver bullion coins are far from clear.
“I think there is some question on exactly how those rules apply, and we don’t have answers to the questions,” said Michael Haynes, CEO of American Precious Metals Exchange, one of 11 companies authorized by the Mint to sell the new America the Beautiful coins.
APMX has ordered 3,000 sets, the maximum allowed per distributor.
“We have ordered them. That’s good. We’re players, but we need to understand the rules,” Haynes said.
New rules say the authorized companies can only sell one coin of each design to a household to ensure wide distribution of coins to the public. And they are to be sold according to a price structure set by the Mint.
“We understand we can sell one coin, but we don’t know what public means,” Haynes said. “We think it means citizens of the United States, but we are awaiting further clarification.”
The new rules just won’t work, said Ross Hansen, CEO of Northwest Territorial Mint, which sells bullion coins, but is not one of the 11 authorized purchasers.
“The U.S. Mint has made a mess of this,” Hansen said.
There are 11 authorized purchasers of the 5-ounce coins, but all but one of them are wholesalers, he said. They aren’t set up to sell individual orders to the public.
Then there’s the matter of price fixing, Hansen said. The Mint said the authorized purchasers can’t sell the coins for more than 10 percent above the price at which they acquire them from the Mint.
“But this is bullion and price fluctuates with the price of bullion,” Hansen said. “So they’re trying to enforce a fixed cost with a commodity whose price is always in flux.”
An authorized purchaser who ordered the coins when they were first offered on Dec. 10 would pay the Dec. 13 bullion price of $29.33 an ounce for the coins. That would put the cost of a set of five coins, one of each design, at $782 when the $9.75 per coin premium set by the Mintis added in. Add to that the 10 percent markup allowed to the distributors and it puts the cost for each set at $860.20 plus shipping.
“You can give manufacturers a suggested retail price, but you can’t control what your retailers ultimately sell their product for,” Hansen said. “I can’t do that as a wholesaler and neither can the U.S. Mint.
But the Mint does, and that’s just arrogance, Hansen said.
“They don’t communicate well with their retailers,” Hansen said. “They just say, this is the way it is. They don’t make partners out of their distributors and retailers, and that’s what they need to do, make them viable partners.”
Hansen said this confusion could have been solved with a 10-minute conversation between all involved.
“But they’re not working with their authorized purchasers as true partners,” Hansen said. “That’s one reason I’ve never signed up with them. They’re such pain in the rear ends to deal with.”
The new sales rules are “ridiculous,” said Bill Hodges, owner of Southern Coin Investments in Atlanta, Ga., who sells numismatic and bullion coins.
“I strongly feel that some distributors won’t handle them at all, and I don’t blame them,” he said.
It’s tantamount to price fixing, Hodges said.
When dealers were first allowed to place orders with the 11 distributors, Hodges signed up for 20 sets at $1,500 each from one wholesaler. But that deal no longer is valid because of the Mint’s new rules.
Hodges called Mint officials and told them that if the Mint wants wide distribution of the coins, restricting coins to the 11 authorized purchasers isn’t the way to do it.
“They are shutting out our company and hundreds of companies around the country,” Hodges said. “We’re getting calls from hundreds of people, and we keep telling them, we can’t help you.”
That’s what is really frustrating, Hodges said.
“The U.S. Mint needs to employ some people with business and marketing experience to help decide the best means of doing distribution,” Hansen said.
The current plan isn’t working, he said.
“We have 35,000 people in our database, which means we could distribute the coins widely, but we have no opportunity, Hodges said.
“What I hate the most is all the people who call us and we can’t help.”