Exported Vehicles…Still Making Costly Waves
Sometimes, the grass is not greener on the other side. And in the case of exported vehicles, it can be a costly green. Exported vehicles remain a hot topic as they are still costing dealers thousands of dollars. Why? Because the OEMs are still auditing dealerships, finding export violations and thus, huge charge-backs.
Manufacturers have written policies and clear communications on exports being prohibited stating that their U.S. dealers are authorized to sell only to customers located in the U.S.; and only sell new vehicles intended for sale or distribution in the U.S. Any other sale is considered a violation of their Dealer Agreement. Sales to brokers, resellers, and wholesalers are prohibited in that same context.
For the manufacturers, export concerns range from exposure to foreign country’s laws/fines, non-compliance with varying equipment requirements (i.e. metric conversions, homologations), and vehicle warranties.
Meanwhile, individuals posing as established businesses/owners are duping dealerships, purchasing multiple vehicles and immediately shipping them overseas for use or resale. The models they love the most are SUVs, luxury sedans, and vans. These hot, high-demand vehicles have surfaced in Canada, China, Great Britain, United Arab Emirates, and Australia. In the old days they were called “swimmers” because they made it across the ocean to various destinations.
Penalties to dealers found to be in violation of export policies include the following: a) allocation adjustments; b) debit of any incentives, refunds, allowances, discounts, support programs, salesperson/dealer payments; and c) the OEM’s right to enforce the terms of their Dealer Agreement, including possible termination. Chrysler dealers are subject to an additional charge of $3,100 per vehicle. These are all very costly consequences.
It is difficult, but dealers have to be responsible, make reasonable inquiries and do their best to know to whom they are selling.
Signs of potential exports that should cause alert or concern are:
a) Multiple vehicles sought for purchase (may not ‘fit’ intended ‘use’)
b) Transactions handled via fax versus coming into dealership
c) Post office box used as purchaser’s address (different from driver’s license)
d) Request made for arrangements for a vehicle(s) to be shipped out of state to a drop location (close to a port city) or picked up by a third party
e) Cash transaction: funds wired to dealer (payee name may differ from purchaser)
f) Not wanting to pay sales taxes
g) Not wanting to register/title vehicle(s)
h) Request original, unsigned CO/MSO (never relinquish such)
Tools are available to help identify suspected exporters. Many manufacturers publish a List of “Known/Suspected” Exporters for dealers, based on validated information from independent sources (port shipping data) and in-dealership audits. These ever-changing lists are highly recommended as a reference in screening unknown companies and suspicious customers. Always have adequate sales documents, approved by your attorney, for customers’ signature that includes a statement of intent (hold harmless) to not export vehicles outside the U.S.
If valid businesses or fleet customers truly have needs to purchase vehicles for their overseas operations, dealers should contact their manufacturer’s international sales/fleet department for assistance.
To reduce your internal risks, always have controls within your operations providing:
a) Clear dealership policies and employee acknowledgment of manufacturer’s policies
b) Management approval of every delivery before sales are finalized
c) Provisions for disciplinary action when employees violate policies
So be alert and educate your staff. Remember, if a deal sounds too good to be true, it probably is, and is not worth the risk.
Sherralyn Peterson is an automotive incentive specialist with 30 years of automotive experience. She helps dealerships prepare for sales audits, conducts compliance reviews, reconciles schedules, performs staff training, and resolves incentives issues. For more information, call 312-310-8380, email firstname.lastname@example.org, or visit www.sherralynpeterson.com.