—The New York Times Description of Event Nowadays, there is a trend that US targets buyers of China-bound luxury cars for the reason of a looking to profit from growing demand in China for cars from the likes of Mercedes, BMW and Range Rover. According to The New York Times, a business man named Michael Downs has done this business for three year old, he buy new cars from dealerships in the US, then sells those vehicles to other companies, which ship them to mainland China.
For example, once in China, the cars that retail for $55,000 to $75,000 in the US, after reselling can be as much as three times than those prices. According to him, “ we’re taking advantage of a legitimate arbitrage situation. ” But to the federal government’s opinions, like Mr. Downs’s businesses are potentially violating customs laws and deceiving auto manufactures like BMW and Mercedes-Benz, which try to keep tight control over sales to domestic dealers and to foreign countries like China.
According to The New York Times, last year, the federal prosecutors and agents with Secret Service and the Department of Homeland Security began to research and a wild range of crackdown on this “ gray market” export business, which is estimated by some to be responsible for sending the amount of 35,000 new luxury cars a year to mainland China from United States. Connection to International Business Although the authorities say that using straw buyers to buy cars is deceptive.
In most cases, prosecutors also say that their companies that shipping the cars overseas have created misleading export documents. So from this opinion, this action belongs to exporting and importing, and among them are the tariff barriers. But I think it belongs to smuggling also. Smuggling is the illegal transportation of goods, such as out of a car across an international board, in violation applicable laws or other regulations. In this case, the transporting of cars from US to China breaks the profits of luxury car sells in China obviously.
The domestic divisions of Mercedes-Benz and BMW say the clampdown by federal authorities is a legitimate attempt to regulate trade to ensure the US car consumers. According to Kenn Sparks, spokesman for BMW of North America, “ The BMW Group has been working closely with federal authorities for nearly two years to forbid illegal exports of our vehicles from US. ” In recent years, luxury auto manufactures are pressing to take large advantage of the demand for high-end cars in China, so these manufactures are the main opponent to the smuggling.
How Others Learn from Situation I think this action has different meanings for the suppliers, distributors, retailers and consumers both in US and China. The back of this is the profit conflict. As we all know, China is the big car importing country especially the luxury cars. According to customs, in 2013, China has imported about 1 million cars, taking BMW as an example. Last year BMW imported 36 thousand cars, which increased by 19. 4%.
So under this background, more and more people want to transport cars into China whether the legal ways or the illegal ways like smuggling. In the above case, such sellers transport cars though their official companies that looks like legal, and for them it means kind of legal interest arbitrage. But for US government, it’s a method of violating tariff laws for the reason of a cheating to auto makes like Benz and BMW, such manufacturers are trying to control the domestic auto retailers to foreign marketing sales.
For other opinions, such behavior is not illegal for China, because if they pay tariff and have the related product information, even the cars are the common importing good. But there is a question, the manufacturer doesn’t willing to do such actions, because they want to control the whole market as the brand owner, so they can set up the high price in China and achieve more profits. Otherwise, the manufacturer has the relationship with the authority sellers, they need to protect their profits, that’s why they oppose.