Grey import vehicle
Grey import vehicles are new or used motor vehicles and motorcycles legally imported from another country through channels other than the maker's official distribution system. The synonymous term parallel import is sometimes substituted.
Car makers and local distributors sometimes regard grey imports as a threat to their network of franchised dealerships, but independent distributors don't mind since more cars of an odd brand bring in money from service and spare parts. Also, car makers frequently arbitrage markets, setting the price according to local market conditions so the same vehicle will have different real prices in different territories. In order for the arbitrage to work, there must be some means to reduce, eliminate, or reverse whatever savings could be achieved by purchasing the car in the lower priced territory. Examples of such barriers include regulations preventing import or requiring costly vehicle modifications. Grey import vehicles circumvent this profit maximization strategy. In some countries, such as Vietnam, the import of grey-market vehicles has largely been banned.
Grey imports are generally used vehicles, although some are new, particularly in Europe where the European Union tacitly approves grey imports from other EU countries. In 1998, the European Commission fined Volkswagen for attempting to prevent prospective buyers from Germany and Austria from going to Italy to buy new VWs at lower pre-tax prices; pre-tax price is lower in Italy, as in Denmark, due to higher tax on cars. It is even possible for car buyers in the United Kingdom to buy right-hand drive cars in EU countries with right-hand traffic where left-hand drive cars are the norm.
Japanese used vehicle exporting is a large global business, as rigorous road tests and high depreciation make such vehicles worth very little (in Japan) after six years, and strict environmental laws make vehicle disposal expensive. Consequently, it is profitable to export them to other countries with left-hand traffic, such as Australia, New Zealand, the Republic of Ireland, the United Kingdom, Malta, South Africa, Kenya, Uganda, Zambia, Mozambique, Bangladesh and Cyprus. Some have even been exported to countries such as Peru, Paraguay, Russia, Burma, Canada, and the United Arab Emirates, despite the fact that these countries drive on the right. It is actually because of these vehicles' RHD configuration that many of them are sent to LHD countries in the first place, for use as mail delivery vehicles. Many Japanese market Jeep Cherokees, for example, have found new use with rural mail carriers in the United States.
There have also been exports of used cars from Singapore, where cars more than ten years old are scrapped or exported. As a result, thousands of these vehicles are exported every year, making Singapore the second largest exporter of used right-hand drive cars after Japan.
Thailand is the third largest exporter of brand new and used right-hand drive cars after Japan and Singapore, because of that country's high-volume production of diesel 4x4 vehicles such as the Toyota Hilux Vigo, Toyota Fortuner, Mitsubishi L200, Nissan Navara, Ford Ranger, Chevy Colorado, and others. The Toyota Vigo is the most exported vehicle by parallel exporters. Unlike Japanese and Singaporean exports, the majority of Thailand's grey exports are of new vehicles and the market is dominated by two companies.
Similarly, there are exports of left hand drive (LHD) used cars from Germany to countries in Eastern Europe, EU countries and LHD markets in West Africa. Some cars in the United States are sold only as export by insurance companies due to having been stolen and recovered or damaged in other ways.
U.S. grey imports are also found in Bulgaria, while UK grey imports are banned in Serbia since 2012.
The United States continues to use a unique set of safety and emission regulations administered by the National Highway Traffic Safety Administration (NHTSA) for motor vehicles, which differ significantly from the international UN Regulations used throughout the rest of the world. Vehicle manufacturers thus face considerable expense to type-certify a vehicle for U.S. sale, at a cost estimated to be upward of USD $2 million per vehicle model. This cost particularly affects low-volume manufacturers and models, most notably the makers of high end sports cars. However, larger companies such as Alfa Romeo and Peugeot have also cited costs of “federalizing” their vehicle lineups as a disincentive to re-enter the U.S. market.
NHTSA and Environmental Protection Agency (EPA) regulations criminalise the possession of a vehicle not meeting U.S. standards. Even Canadian-market vehicles may not meet these requirements. Exceptions exist for foreign nationals touring the U.S. in their own vehicle and for cars imported for show or display purposes.
Because of the unavailability of certain car models, demand for grey market vehicles arose in the late 1970s. Importing them into the US involved modifying or adding certain equipment, such as headlamps, sidemarker lights, and a catalytic converter as required by the relevant regulations. The NHTSA and EPA would review the paperwork and then approve possession of the vehicle. It was also possible for these agencies to reject the application and order the automobile destroyed or re-exported. The grey market provided an alternative method for Americans to acquire desirable vehicles, and still obtain certification. Tens of thousands of cars were imported this way each year during the 1980s.
The Lamborghini Countach was one of the first grey market vehicles, and the Range Rover and Mercedes-Benz G-Class were initially available only through the grey market. Other vehicles that entered the US in small numbers via the grey market included the CX and Renault 5 Turbo. This avenue of vehicle availability was increasingly successful, especially in cases where the US model of a vehicle was less powerful and/or less well equipped than versions available in other markets. For example, Mercedes-Benz chose to offer only the lower-output 380SEL model in 1981 to Americans, some of whom wanted the much faster 500SEL available in the rest of the world. BMW had the same issue with their 745i Turbo. The grey market was successful enough that it ate significantly into the business of Mercedes-Benz of North America and their dealers. The corporation launched a successful million-dollar congressional lobbying effort to stop private importation of vehicles not officially intended for the U.S. market. An organisation called AICA (Automotive Importers Compliance Association) was formed by importers in California, Florida, New York, Texas, and elsewhere to counter some of these actions by Mercedes lobbyists, but the Motor Vehicle Safety Compliance Act was passed in 1988, effectively ending private import of grey-market vehicles to the United States. No evidence was presented that grey-import vehicles' safety performance differed significantly from that of US models, and there have been allegations of improper lobbying, but the issue has never been raised in court.
The grey market declined from 66,900 vehicles in 1985 to 300 vehicles in 1995. It is no longer possible to import a non-US vehicle into the United States as a personal import, with four exceptions, none of which permits Americans to buy recent vehicles not officially available in the United States.
A vehicle not originally built to U.S. specifications can, under certain circumstances, be imported through a registered importer who modifies the vehicle to comply with US equipment and safety regulations and then certifies it as compliant, and an independent commercial importer who modifies the vehicle to comply with US emissions regulations and then certifies it as compliant. Those who import nonconforming motor vehicles sometimes bring in more than one car at a time to spread the substantial cost of the necessary destructive testing, modification, and safety certification. Destructive crash testing is not always needed if the vehicle can be shown to be substantially similar to a model sold in the U.S. The Smart Fortwo was imported in this manner prior to its official U.S. release.
The Show or Display provision allows temporary import of noncompliant vehicles for show or display purposes.
Since Canadian regulations are similar to those in the U.S., an individual can import a vehicle manufactured to Canadian motor vehicle safety standards if the original manufacturer issues a letter stating that the vehicle also conforms to U.S. motor vehicle standards. The decision to issue a compliance letter is solely at the discretion of the manufacturer, even if the vehicle is known to meet U.S. standards. Before issuing a compliance letter, most manufacturers request proof that the owner of the vehicle is a resident of Canada, and that the car was registered and used in Canada for a minimum period. This is done because the manufacturers maintain separate pricing structures for the U.S. and Canadian markets.
In 1998, NHTSA granted vehicles over 25 years of age dispensation from the rules it administers, since these are presumed to be collector vehicles.
Some Americans are interested in Japanese domestic market vehicles, like the Nissan Skyline. In 1999, a California company called Motorex had a number of Nissan Skyline R33 GTS25s crash-tested. They submitted their information to NHTSA and petitioned for 1990-1999 GT-Rs and GTSs to be declared eligible for import. Many Skylines were subsequently imported through Motorex. This lasted until late 2005, when NHTSA learned not all 1990 through 1999 Skyline models would perform identically in crash testing. Motorex had submitted information for only the R33, but had asserted that the data applied to R32, R33, and R34 models. NHTSA determined that only 1996-1998 R33 models have been demonstrated as capable of being modified to meet the federal motor vehicle safety standards, and that only those models are eligible for import. In March 2006, Motorex ceased all imports and Motorex principal Hiroaki "Hiro" Nanahoshi was arrested and held on $1 million bail on financial, kidnapping, and assault charges.
Cars not originally manufactured to Canadian-market specifications may be legally imported once they are 15 or more years old. This has led to the import of many Japanese sports cars such as the R32 Nissan Skyline. The only categorical exception to the 15-year rule is that many – but not all – vehicles manufactured to United States-market specifications can legally be imported into Canada under the compliance modification and inspection program administered by the Registrar of Imported Vehicles. Typically, modifications to meet Canadian standards include the installation of daytime running lights and tether anchors to permit secure attachment of infant car seats, documentation indicating that any repairs required in response to the original manufacturer's factory recalls are complete, and passenger cars assembled on or after September 1, 2007 are also required to have an immobilization system that meets the CMVSS 114 standard. Labelling of the vehicle to indicate its imported status, to warn that the odometer is counting in miles (as made-for-Canada odometers have used kilometres since 1976) and to translate safety-related warning labels (such as airbag maintenance procedures) is typically also required. Speedometers in US and most Canadian vehicles indicate both miles per hour and km/h, either with dual calibration or with a single set of numbers that can be made to display miles or kilometres at the driver's option, so are usually left unmodified.
In March 2007, Transport Canada initiated proposed rulemaking to change the importation laws such that vehicles not originally manufactured to Canadian-market specifications would be eligible for import only once they are 25 years old, rather than the present 15-year cutoff rule. The main impetus behind this proposal is the significant influx of Japanese-market vehicles in Canada in recent years, particularly in Western provinces such as British Columbia due to geographical proximity to Asian ports of departure. BC's public auto insurance administrative body, Insurance Corporation of British Columbia, in 2007 released research finding that right-hand drive vehicles are involved in 40% more crashes than left-hand drive vehicles in that province.
In the 1980s, New Zealand eased import restrictions, and reduced import tariffs on cars. Consequently, large volumes of used cars from Japan appeared on the local market, at a time when most cars in New Zealand were locally assembled, and expensive compared to other countries, with most used cars available being comparatively old.
Local buyers now had a much wider choice of models, but despite specifications being higher than so-called "NZ New" cars, there were many problems with "clocking" or odometer fraud, with the odometer wound back to display a much lower mileage. Other problems include written-off vehicles involved in accidents in Japan.
However, the widespread availability of used Japanese imports prompted official importers to reduce the price of brand new cars, and in 1998, New Zealand became one of the few countries in the world to remove all import tariffs on motor vehicles.
Nevertheless, a great many used vehicles are imported, 94.6 per cent of which come from Japan, most of which are Japanese makes. Most of the other makes are German, such as Audi, BMW, Mercedes-Benz, Porsche and Volkswagen. There are a smaller number of United States makes such as Chevrolet and Chrysler, which were built in right hand drive for the Japanese market. Although in heavy decline from 2005, used-vehicle import totals are higher than those of vehicles first registered in New Zealand. In 2006, 123,390 ex-overseas vehicles were registered, compared to 76,804 brand new vehicles.
Used vehicles must, with some exceptions, be right-hand drive, and they must comply with recognised European, Australian, Japanese, or American emission and safety standards, or they are ineligible for import to New Zealand.
Japanese used car importing has been quite common in Ireland since the 1980s. The imported cars are cheaper than local used cars due to the very low value of used cars in Japan (and to an extent, used products in general), and a much larger range of specifications are available on Japanese models compared to the very limited ranges sold locally - even in comparison to the UK, model ranges of Japanese cars can be very limited - mostly due to the high vehicle-registration tax and other taxes imposed on new cars sold in Ireland.
For example, the Toyota Corollas sold in the late 1980s up until the late 1990s (E90 and E100 series) were only available in Ireland in one specification level, with few features and only the base 1.3 litre petrol and diesel engines. In Japan, however, 1.5 and 1.6 litre engines were also available, with around 6 different trim levels, options such as sunroofs, central locking and electric windows available on many specs as early as 1989, ABS and driver airbags optional since 1991, four-wheel drive, and performance GT models. Very basic saloons and diesel-engined models with automatic transmissions also appealed to taxi drivers.
In more recent years, Japanese imports have become less common with typical family cars, probably due to the great change in the Irish economy over the past 20 years — people generally have larger incomes now, and sales in new cars have soared. Imports from Japan has become more of a speciality market now - importing of sports models not originally available in Europe such as the Mitsubishi FTO, Toyota Corolla Levin/Toyota Sprinter Trueno, Toyota Starlet Glanza and Honda Integra has become quite popular, and sports cars like the Nissan Skyline GT-R, Toyota Supra and Mazda RX-7 are more easily available as imports. Also, small commercial kei car models such as the Daihatsu Midget II and Nissan S-Cargo are used by some businesses as advertising aids, as they are quite distinctive and eye-catching on the roads in Ireland.
No modifications are required for Japanese imported cars to be registered and driven on the roads in Ireland. One disadvantage is that Japan uses a different FM radio band than everywhere else, so a band expander or a replacement stereo system is required to receive the full FM band used locally. Like all other cars used on public roads in Ireland, Japanese imports have to pass the National Car Test.
Other used imports sold in Ireland are from the UK, the most readily identifiable being those from General Motors, which badges its cars in the UK as Vauxhalls, not as Opels as in Ireland. As of 2007 the number of cars being Imported into the Republic of Ireland from both Northern Ireland and Great Britain is at record high levels due to high new-car taxation in Ireland and the fact that UK cars are of a higher spec than Irish ones. This trend was highlighted by RTÉ in a consumer programme entitled "Highly Recommended".
In the United Kingdom, many people have chosen to buy new cars in other EU member states, where pre-tax prices are much lower than in the UK, and then import them into their own country, where they only pay the UK's rate of value added tax (VAT). This is especially the case in Northern Ireland, as pre-tax prices in the Republic of Ireland are kept low because of a Vehicle Registration Tax levied on top of VAT. Other UK buyers can also request a model in RHD when ordering from a dealer in continental Europe for a small supplement. Motor dealers in the EU are compelled under EU competition law to supply right hand drive models at the same price as LHD models if a buyer request it. Strictly speaking, such imports are known as parallel imports.
Warranties on new cars bought in an EU member state are valid throughout the EU, meaning that a UK resident who has bought a new car in another member state and then imports in into the UK will be covered by the same warranty. However, whereas UK warranties tend to be for three years, those in other EU countries may be only for one or two.
There are also some Japanese imported cars found in the UK, the most popular being the Mazda Eunos Roadster and Mitsubishi Pajero as well as performance cars such as Nissan Skylines, Mitsubishi FTOs and highly tuned Subaru Impreza and Toyota Supra variants that were never officially imported into the UK. These cars tend to be cheaper than official UK imports, but often have better Japanese domestic market specification levels by comparison. The range of Japanese vehicles in the UK is rising all the time as UK customers see the impressive high spec, low mileage Japanese vehicles on the roads. Each month new models are being imported by dealers and rapidly become popular on the UK market.
In Australia, the commercial import of used motor vehicles is significantly regulated and restricted. The allowed imports are limited to what are called special and enthusiast vehicles, or most cars manufactured before 1 January 1989. Until the present regulations entered force at the start of 2004, cars over 15 years old could be imported, and would need to gain a roadworthy certificate (needed for registration transfer in many states anyway) and often safety modifications to ensure that they met with regulations that would have been in force at the time of their manufacture.
To bring a special or enthusiast vehicle into Australia, the importer must either apply to have the car added to the SEVS register, or import a car already listed on the register.
In Sweden the main source of grey market vehicles is the US via Germany, which has more liberal laws and better tax deals on new imported cars. Many used cars also come from Germany, which has a bigger domestic market and rigorous roadworthiness tests. There are no age restrictions on imported vehicles, as such.
In Thailand, most grey imports are expensive, rare, and/or sports cars. Most are right-hand drive cars from the United Kingdom or Japan, though some are brought in from the USA (as left-hand drive cars).
Mercedes-Benz Thailand has a new policy as of 2011 of not providing warranty work to grey-market imports.
Trinidad & Tobago
In Trinidad & Tobago nearly all used imports come from Japan, with some vehicles coming from Thailand and Singapore. Cars more than five years old are not permitted, and, presumably due to high traffic problems, no new importer dealerships are allowed. An import licence is required, and most imports are through dealerships.
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