Export Controls On New Vehicle Titles

Exporting Vehicles
We get a lot of calls in our car titles division about people who want to export vehicles. Sometimes the business model is they want to buy a new vehicle in the United States and export it to another country. Why would you want to do that? Well, there are some vehicles that are not sold in other countries. Some Highline vehicles, like Land Rovers, especially, are not sold in places like China or India, and there are wealthy people in those countries who are willing to pay a premium for them.

The Profit Potential and Challenges
Even if you pay full sticker price for some of these cars in the US, by the time you pay shipping and export fees, you can still make a lot of money by selling them in China. The problem is, these vehicles are not allowed to be sold in those countries. What happens is, the dealerships that sell them are very suspicious of people buying them to export to another country. Why would the dealership care if you’re paying full price for the vehicle? Who cares where it’s going? Well, they do care.

Dealerships and Manufacturer Restrictions
If you are a franchise dealership, let’s say for Land Rover, Mercedes, or BMW, and you sell a vehicle without performing proper due diligence to ensure it stays in the United States, and it ends up in China, the manufacturer will find out. They may penalize you financially, cut your allocations—meaning they won’t give you as many cars to sell in the future—or even pull your franchise if this happens enough. So, dealerships look for red flags. Is someone buying a car and wanting to register it out of state? Are they buying a car without living in the area? Do they have other cars in their name? Are there red flags on the transaction? These vehicles are not supposed to be sold in other countries, and the dealership is the frontline for the manufacturer to ensure this doesn’t happen.

Why Manufacturers Care
Why does the manufacturer care if the vehicle goes to another country? They want these cars in the US because they generate service and repair business. If someone buys a car in the US, in three or four years, they’re probably going to buy another car of the same brand. If the car goes overseas, they’re going to lose that future business. In addition, the manufacturer may sell other models of that car in other countries that aren’t as competitive, so they could lose sales in other countries because these cars came from the US.

Potential Legal Issues for Exporters
The reason we say this is that sometimes people call us up and say, “Hey, I want to get into the business of flipping these cars—buying new cars from dealerships and sending them overseas.” The problem is the dealership is going to be very cautious about doing it. There will be some export problems because you won’t have a title—you’ll have a manufacturer statement of origin. Some people who want to do this want to avoid sales taxes and try to figure out how to do that. In most cases, the only way to actually make money doing it is to do something illegal. Otherwise, it’s not going to be profitable. Sometimes, those things that are illegal seem like legitimate loopholes, but technically, there may be some violations involved.

Compliance and Due Diligence
You have to declare vehicles that are leaving the country. CBP doesn’t let you export vehicles without declaring them, so you have to declare it. You can’t hide it in a container. You have to have a title—normally, they don’t want cars leaving with a manufacturer statement of order or MSO. If you are a dealership coming across this, we can talk about some things that will help you identify it and perform due diligence on your buyer. If you are a potential exporter, make sure that you’re following all the rules of purchase. Sometimes, your purchase agreement will state that if you sell it overseas, you may have a financial penalty that you have to pay to the dealership, and they could sue you for that.

Consequences of Illegal Activities
These kinds of exports may seem, on paper, like, “Well, if it’s my car, I bought it, who cares if I export it?” But there may be some restrictions. Now, this article you’re reading on screen shows a person who took it a step further. They were getting loans on the cars in other people’s names, selling them overseas, and not paying off the loan, essentially getting a free car and keeping all the money. But even if you purchase it legitimately by paying cash, there are still some red flags that could arise between exporting it and laundering the title paperwork.

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