Back in 2012, a couple in Memphis, Tennessee found out the hard way that U.S. Customs and Homeland Security agents, not to mention automakers themselves, are paying close attention to what's leaving American ports.
The feds in 2012 seized a dozen BMW X5s being exported by Yifan Kong and his wife Erxin Zhou. The vehicles were being transported to China where they command significantly higher prices. Kong and his wife came to Memphis from China about a decade ago and had set up a lucrative business of exporting premium cars. As USA Today reports, several years on, the feds are seeking the forfeiture of the 12 BMWs plus 35 other seized cars linked to the couple.
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What they're doing isn't illegal, a lawyer representing the couple says. Yet a federal judge in Manhattan, near where the cars were seized at the port of Staten Island in New York, may rule otherwise. The ruling is expected to come any time now.
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Prosecutors say that the use of "straw buyer"s to conceal the couple's plan to export cars to Asia is among several deceptive tactics they used. Over the past several years the couple had exported thousands of vehicles in this way. Documents show $80 million worth of cars were exported by a business related to them in 2012 alone.
Exporting a brand-new car from the United States isn't quite as simple as slapping stamps on it and dropping it off at a port. Instead, car manufacturers ask their dealers to verify that recently-sold cars aren't being purchased with the immediate intention of exporting them.
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Automakers defend this practice as a way of knowing where their new cars are located for parts availability and in the event of a recall, but one aspect they leave out is that new cars are generally less expensive in the U.S. than anywhere else. That's due in part to taxes levied elsewhere, but also due to the highly-competitive American market, where automakers benefit from scale rather than from margins.
Stay tuned for an update.