Asia Briefing: US to crack down on cars sent to China

The US government is currently trying to crack down on “carbitrage” where people buy cars in the United States and sell them in China for three times the price.

A BMW X5 sport-utility vehicle, for example, costs about €40,000 in America but it costs nearly three times that in China, which is a great opportunity for arbitrageurs.

Some 35,000 luxury vehicles are purchased at dealers and sent out of the country this way each year, according to Andrew Grossman in the Wall Street Journal.

The US government is cracking down on the practice, saying it circumvents export restrictions and has seized dozens of cars and frozen millions of dollars in bank accounts.

In the US, many dealers require car purchasers to sign an agreement promising not to export the car for a certain period and prosecutors allege buyers signed these agreements even though they knew the cars were to be immediately exported.

The deals become fraudulent if buyers misrepresent their intentions to dealers and car insurance companies and prosecutors believe buyers signed papers, even though they knew the cars were to be immediately exported.

Lawyers say the US government is making a criminal case out of a civil dispute.

"Any time you use lies and a scheme to induce someone to do something that they would not otherwise do, that's a fraud," said Evan Weitz, an assistant US attorney in Newark, New Jersey, whose case involves the seizure of 19 BMW SUVs and one Porsche Cayenne.

The exporters are fighting back and are contesting the seizure of their property. Last year, two men pleaded guilty to fraud charges involving luxury car exports and were given three years’ probation.