So You Want to Import a Car …

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As exchange rates fluctuate, collector cars cross the oceans in the direction of the arbitrage. Add in some recent changes in U.S. import rules, and there is now quite a bit of interest in importing collector cars into the U.S. Is that a feasible option for the collector?

U.S. law imposes a number of regulatory requirements on cars — safety, bumper, theft-prevention, emissions and other standards — which have often been very different than the requirements in other countries. The U.S. Customs and Border Protection Agency describes this plethora of safety requirements as “all applicable Federal Motor Vehicle Safety Standards,” which it affectionately shortens to FMVSS. The primary considerations when importing a vehicle is whether you must modify it to comply with FMVSS and EPA emissions requirements.

The 25-year-old free pass

Cars that are at least 25 years old get a free pass at the federal level but may still have to meet your state’s emissions regulations (check with your local DMV). They can be imported without having to conform to FMVSS. They don’t have to deal with emissions requirements either, as those apply only to cars under 21 years old. For those cars, the only costs are transport costs and duties.

This is a very broad and valuable exception, and has actually resulted in many unscrupulous importers masquerading some newer cars as older cars. (See “Legal Files,” March 2015, p. 40.)

Conforming cars

Cars under 25 years old are classified as either “conforming” or “nonconforming.” Cars that were initially built to comply with all FMVSS (so the manufacturer didn’t have to mess with different rules) are conforming cars and can be imported automatically. They will have a factory-affixed label to that effect, usually found near the driver’s door.

Note that the car was either built that way or it wasn’t — it can’t be “certified” now, not even by the manufacturer. If the car doesn’t have that label, it is considered “nonconforming.”

Nonconforming cars

A nonconforming car can be imported only if is pre-approved for import and it is modified once it arrives in the U.S. so that it complies with all FMVSS and EPA emissions requirements. That isn’t something you can do yourself. Rather, the importer must contract with a Department of Transportation Registered Importer to do the conversion work before the tires touch U.S. roads. A list of Registered Importers is available at the NHTSA website: www.nhtsa.gov.

The approval process considers the feasibility of converting a particular model to comply with FMVSS. The list of nonconforming models that have previously been approved for importation is also available at the NHTSA website. If your car is on the list, you’re good to go. If it isn’t, you will have to submit a petition to have it approved before you can import and convert it.

No indication is given as to how much time to allow for that process. Just keep in mind that the process is a bureaucratic function, so it isn’t likely to be quick. You should also be prepared for a denial, as the standards are whether the conversion is feasible from a physical and economic perspective. Your personal willingness to spend more to do the near impossible isn’t going to matter.

Show or Display

A Show or Display category became effective in 1999. This category is designed for nonconforming cars that are of such historical or technological significance that it is in the public interest to show or display the car in the U.S. — even though it would be difficult or impossible to bring it into compliance with FMVSS.

Significance is determined under five key factors, as well as others:

  • Whether the same model was available for sale in the U.S. when new
  • Whether the model has previously been approved
  • Whether the vehicle is currently in production
  • Whether production exceeded 500 units — if it did, exceptional significance will be required
  • Whether the vehicle is a kit car, replica or special construction vehicle

The NHTSA website includes lists of vehicles that have been approved and disapproved for Show or Display. There do seem to be some inconsistencies. For example, a Porsche 959 was approved, but a Porsche 959 S (race car) was not approved.

Proving your case

Whether your car is on the list or not, you must specifically apply for permission to import a Show or Display vehicle. You must prove your case.

For technological significance, you must identify the specific technology, engineering and construction features that set it apart from others of its vintage.

Particular historical significance must be identified. If ownership by a person of historical significance is the basis, you must submit proof of such ownership. If it is the first or last of a particular model, manufacturer’s documentation is required if available, otherwise through a recognized historical source. One-of-a-kind status must be proven.

Show or Display cars cannot be driven more than 2,500 miles per year. The FMVSS exemption does not extend to the EPA emissions requirements. The car must be made emissions-compliant.

Disassembled vehicles

A vehicle shipped without an engine and transmission is considered an assemblage of parts — not a motor vehicle. However, you must remove (and cannot import) all parts that would be subject to FMVSS but are not certified by the manufacturer as complying with FMVSS. Examples include tires and rims, seat belts, brake hoses and lamps.

The assemblage is treated as a vehicle if it is shipped with an uninstalled engine and transmission. If you’re going to do that, ship them separately at different times.

Importation expenses

Importing cars isn’t cheap. There are a lot of variables — the nature of the car, distance, countries involved, the shipping company you select, transport modes, security, and all sorts of other details, bells and whistles. But there are some basic guidelines we can consider.

You have to pay a 2.5% duty, but there are a variety of harbor fees, processing fees and so on that can bring the final charges up to around 3% of the value of the car. You are required to post a surety bond to cover these charges, which generally runs around 0.4% of the value of the car.

Insurance is typically 1% of the value of the car.

Transport costs depend on a lot of things. If shipping by ocean, you have containerization, warehousing and handling fees at either end, distance traveled, top-deck vs. below-deck placement and a host of other details that can affect the cost.

As a general benchmark, figure on $4,000 to $5,000 for U.K. to U.S. shipping. If you ship by air, costs are based upon the size of your vehicle. Figure on double or triple ocean costs, but you have lower handling fees, so air transport sometimes compares quite favorably. Either way, add in transport fees to get your car to the export terminal and from the U.S. port to your home.

Put that all together, and you can end up around 4.4% of the value of the car plus $5,000–$20,000 of transportation costs. On a $500,000 car, that adds up to $27,000–$42,000.

Conversion expenses

The cost of converting a non-complying car, or making a Show or Display car emissions-compliant, is completely model-specific, and the variables are numerous. Les Weaver at Houston’s Wallace Environmental Testing Labs was kind enough to give us some rough guidelines.

The more “normal” cars — modern Mercedes-Benzes and Porsche 911s — usually fall into the $15,000–$20,000 ballpark. The limited-production, “special” cars — Ferraris, Maseratis, Alfas — usually fall into the $50,000 ballpark. But Weaver cautions that we can’t generalize that much.

“1996 models are significantly more expensive than 1995 models because the rules changed,” Weaver said. “And silly things can kill you. If you have to add tire pressure sensors, the system programming is very difficult, and that modification can run $4,000 by itself.”

Tips from an importer

If you’re going to import a car, get a good importer to help you. One of the best is Martin Button at Cosdel International Transportation. Button gives two good pieces of advice:

First, don’t skimp. Use reliable, experienced companies, as a lot can go wrong when you are moving goods halfway around the world. When glitches arise, you want someone who knows what to do.

Second, buy good insurance.

“Accidents happen. Shipping is a risky business,” Button said.

It’s been decades since a car container fell off a ship, and very few cargo ships sink, but there are instances of port crane failures where containers are dropped. Cars also get driven into and out of containers and terminals, with resulting risks.

Button also mentions an unusual risk to insure. If the cargo vessel suffers a breakdown while en route, it has to be “saved” with emergency repairs so it can continue on its journey.

The towing and repair costs are customarily charged to all of the cargo on the ship, allocated based upon its relative declared value. That can make for a lopsided allocation with a $5 million or $10 million car.

I wouldn’t have thought of that one. ♦

John Draneas is an attorney in Oregon. His comments are general in nature and are not intended to substitute for consultation with an attorney. He can be reached through www.draneaslaw.com.

 

John Draneas

SCM Columnist

John practices law in the Portland, OR, suburb of Lake Oswego, where he focuses on tax and estate planning, business organizations and transactions, and representation of collector-car owners. He is a past president of the Oregon region of the Porsche Club of America and served as the chairman of the PCA’s 2006 parade. His collection includes two Porsches, a Ferrari, an Alfa, a Lotus, a BMW daily driver, a John Deere tractor — and one increasingly famous Jaguar E-type. This month’s “You Write, We Read” on p. 20 is full of SCMer advice on whether Draneas should restore his Jag.

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