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Grey import vehicles

Grey import vehicles are motor vehicles and motorcycles, which may be imported, either brand new or used, from another country, where they are more readily available and competitively priced. The term grey import, in reference to the grey economy refers to an item that has been imported into a country, legally, but without the agreement of the manufacturer. The term parallel import may also be used.

Japanese used vehicle exporting is a large global business, as rigorous road tests and high depreciation make such vehicles worth very little 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 New Zealand, the Republic of Ireland, the United Kingdom, Malta, South Africa and Cyprus. Some have even been exported to countries such as Peru, Russia, and Burma, where they have proved popular with local buyers despite the fact that these countries drive on the right. In Peru, used cars imported from Japan are converted to left hand drive before being allowed on the roads, the cost of which is offset by the high taxes applied to new cars.

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 L300 Delica, 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 USA are sold only as export by insurance companies due to having been stolen and recovered or damaged in other ways.

Car makers and local distributors sometimes regard grey imports as a threat to their network of franchised dealerships, but other 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. Grey import vehicles undo this profit maximization strategy. In some countries, such as Vietnam, the import of grey-market vehicles has been banned.

Grey imports are generally used vehicles, although some are brand new, particularly in Europe, where the European Union tacitly encourages 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 taxfree prices (taxfree price is lower in Italy due to higher tax on cars, another country with low taxfree price is Denmark due to their high tax on cars). It is even possible for car buyers in the United Kingdom to buy right hand drive cars in other EU countries, even countries that drive on the right and therefore normally supply left hand drive cars.

United States

The United States continues to use a unique set of standards for its automotive safety and emissions regulations, which differ significantly from the internationalised ECE Regulations used throughout the rest of the world. This means that vehicle manufacturers 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 impacts 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 EPA regulations criminalise the possession of a vehicle not meeting U.S. Federal Motor Vehicle Safety Standards. Even Canadian-market vehicles may not meet these requirements. Exceptions exist for foreign nationals touring the US in their own vehicle and for cars displayed in museums.

Because of the unavailability of certain cars, 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 agencies 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 alternate 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, encouraging the Italian manufacturer to prepare a US model. The Range Rover was initially available only through the grey market, and the popularity of the model eventually convinced the parent company to re-enter the US market in 1987. Other manufacturers, like PSA Peugeot Citroën with the CX and Renault with the mid-engine Renault 5 Turbo, missed the signals sent by the grey market about American consumer tastes and demand.

This avenue was increasingly successful, especially in cases where only lower-specification models were officially offered on the US market. For example, Mercedes-Benz chose to offer only the lower-output 380SEL model to Americans in 1981, ensuring a huge demand for 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 Inc. The corporation launched a successful congressional lobbying effort to eliminate the US grey market, and the Motor Vehicle Safety Compliance Act was passed in 1988. 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.

It is no longer possible to import a non-US vehicle into the United States as a personal import, with some exceptions. For example, 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 US 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 US 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 US 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. It is also possible to certify the car though a Registered importer for DOT work and an ICI for EPA work, bringing in a number of cars to spread the cost of type approval and destructive testing. Destructive crash testing is not always needed if the vehicle can be shown to be substantially similar to a model sold in the US. The Smart Fortwo car is imported in this manner. Finally, the Show or Display law allows import of vehicle[s] "of such historical or technological significance that it is in the public interest to show or display it in the United States even though it would be difficult or impossible to bring the vehicle into compliance with the Federal motor vehicle safety standards. This provision is intended to facilitate the importation of a make or model of a vehicle which its manufacturer never certified for sale in the United States." However, this provision still demands compliance with emissions standards.

Recently, a vehicle which came to notoriety is the Nissan Skyline, which was featured prominently in video games, movies and magazines. This vehicle became an object of interest and in 1999, a California company, Motorex, sacrificed a small number of R33 GTS25s for the purpose of crash testing. They submitted their information to the US National Highway Traffic Safety Administration, and petitioned them to allow 1990-1999 GT-Rs and GTSs to be imported, at the condition that they were modified to meet federal motor vehicle safety standards.

Many Skylines were subsequently imported through Motorex. This lasted until late 2005, when the NHTSA became informed that not all 1990 through 1999 Skyline models would perform identically in crash testing. Motorex had submitted information for only the R33, and told the NHTSA that it was sufficient for all R32, R33, and R34 models. According the further review by the NHTSA, only 1996-1998 R33 models have been demonstrated as capable of being modified to meet the federal motor vehicle safety standards. After that, only these 1996-1998 models are eligible for importation. 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.

Another recent vehicle that has gotten notoriety was the Mercedes-Benz Geländewagen, which like Jeep and Hummer before it was a military-designed vehicle that became popular among consumers. Due to the popularity of the vehicle in the United States grey market (as well as the aforementioned lawsuit by the automaker), Mercedes-Benz began selling official Geländewagen's (now rebadged as the G-Class) in the early 2000s. The automaker wanted to replace the vehicle with the Mercedes-Benz GL-Class in 2006, but the popularity of the G-Class prompted Mercedes-Benz to build both. This is similar to what Jeep did with the XJ-body Cherokee after it was originally to be replaced with the Jeep Grand Cherokee.

The NHTSA administers the Registered Importer Program that allows companies to import and bring into compliance non conforming vehicles.

Canada

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 importing of many "exotic" 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 US-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, 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 has a system of public auto insurance. The ICBC has determined that right-hand drive vehicles are involved in 40% more crashes than comparable left-hand drive vehicles, and that covering Japanese-market vehicles is particularly costly due to the limited availability of replacement parts.

New Zealand

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 lift import tariffs on motor vehicles.

Nevertheless, a great many used vehicles are imported, 94.6 per cent of which come from Japan. Most of the rest are German, such as Audi, BMW, Mercedes-Benz, Porsche and Volkswagen. There are a smaller number of US 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.

In 2008, however, the Labour Government will pass Emissions laws that state second hand vehicles must comply with Japanese "GF" or Euro II rules, whilst getting progressively stricter as time goes by. General opinion is that this will rule out up to 70% of vehicles that currently come into New Zealand second hand.

Ireland

Japanese used car importing has been quite common in Ireland since the 1980s. The imported cars are significantly 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 VRT 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 the one XL (XLi on later models) spec, with little features outside a cassette radio (central locking was only added in the late 1990s), 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's airbags optional since 1991, four-wheel drive, and performance GT models with a power output of 160 PS in later models.

Options like the above were more easily available on imported 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 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 keicar 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 an adaptor 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 NCT.

Other used imports sold in Ireland are from the UK, the most recognisable being those from General Motors, which badges its cars in the UK as Vauxhalls, not as Opels as in Ireland. However, this may begin to decline to due it being preferable to have kilometres per hour as the predominant measurement on speedometers (metric speed limits were introduced in Ireland in 2005), however all UK-spec cars have dual speedometers which state the speed in both Imperial and Metric. As of 2007 the number of cars being Imported into the Republic of Ireland from both Northern Ireland and the United Kingdom is at an all-time high due to crippling motor taxation in the Republic and the fact that UK cars are of a higher spec than Irish "VRT specials" like the BMW 316 which is currently only sold in the ROI and Turkey. Large VRT Charges have left many ROI-Spec cars without common safety equipment and luxuries such as Air-Conditioning and Automatic Transmission are left as expensive add-ons in the average ROI-spec car, this added to the excellent condition of British roads in comparison with the ROI 3rd world standard have convinced many ordinary Irish people to import their cars from the UK. This trend has been highlighted by RTÉ in a recent consumer programme "Highly Recommended".

UK

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 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 (although some dealers charge extra for RHD or refuse this outright).

Most 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 Toyota Estima and Mitsubishi Pajero as well as coupes such as Nissan Skylines and Mitsubishi FTOs. These cars are cheaper than official UK imports, but have better 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.

Australia

In Australia, the commercial import of used motor vehicles is far more regulated and restricted than in New Zealand. The allowed imports are limited to sports cars and off-road vehicles, but not family cars.

For a while, cars over 15 years old could be imported, and only needed to gain a roadworthy certificate (needed for registration transfer in many states anyway), but this has been changed to vehicles only made prior to 1 January 1989. Nevertheless, some grey imports, especially Nissan sports coupes, are fairly common on Australian roads.

Sweden

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 that can make it difficult and costly to keep an older car in Germany. There are no age restrictions on imported vehicles, as such, but Sweden's environmental laws are stricter than Germany's, so a car road legal in Germany can fail in Sweden.

See also

Notes

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