Much has happened in our industry over the past several months. With a trade war between the USA and China as well as the Chinese temporarily closing down the 3C’s, there has been a lot of uncertainty in the market place. However, the good news is that the 3C’s are beginning to open again and I expect that we will be seeing the ports open for business within a short amount of time.
The trade war is of course another matter. From the information we have been able to obtain, it appears that only those cars manufactured in the United States are subject to the additional tariffs levied by China. This of course has slowed the trade down for those of us who export US manufactured automobiles. As far as other vehicles are concerned, I believe they are unaffected and, in fact, the tariffs on those cars have been reduced.
We are all asking how long can this go on? It’s not just the parallel market that is affected. The OEM’s are feeling the strain too. In 2017 the United States was the third leading exporter of vehicles in the world with over $50 billion in export trade – a large share of which went to China. Ford, Mercedes, BMW and others, all of whom manufacture or assemble here in the United States, are feeling the pinch. At some point the effect of the action will begin to impact the job outlook. When this occurs, the Administration will have to resolve it. Looking at the imports of vehicles into China, approximately 14% come through the parallel market, so independent Chinese dealers are also feeling the pinch because they cannot get inventory. As always, it’s the “little people” who suffer when those in charge cannot seem to find common ground. My best guess is that this issue will be resolved before the US General Elections in November. Let’s hope I am right.
In the meantime, NAATA is not standing still. Mike O’Rourke and I traveled on August 16 to meet with CBP in Washington DC. Through the relationships we have tried to build for the organization and as a result of trying to solve a member’s problem relating to a held container, I was introduced to Carla D’Onofrio who is assigned to the Outbound Enforcement & Policy Cargo & Conveyance Security Office of Field Operations for Customs and Border Protection. In the course of corresponding with Carla, I asked her for an in-person meeting to go over general issues of concern for CBP and NAATA.
During our meeting on August 16, we had the opportunity to meet with Carla and her supervisor Robert Rawls, Branch Chief Outbound Enforcement and Policy Cargo and Conveyance Security. The first part of our meeting was spent “educating” them about our industry. They had little idea that the parallel market is responsible for 14% of the import market in China. In addition, they were under the impression that the business is confined to “individual buyers in China who sought to import a special car” from the United States. Mike and I had a discussion with them explaining the complex nature of the industry: the system of Chinese supported wholesale importers; the system of independent Chinese retailers; the 3C’s requirements and the overall regulatory nature of the parallel market as controlled by the Chinese government.
The discussion then moved to issues that CBP has and we discussed how NAATA may be able to assist CBP. Theft and fraudulent transactions are their number one priority; how to prevent stolen vehicles and vehicles with liens from leaving the country. We were informed that the reason that CBP is now asking for proof of payment on the vehicles we export is because liens do not always show up on either Carfax or the other databases CBP “pings.” By having proof of payment, a cancelled check, a wire, etc., they know that the car has been paid for. To be very clear, they have NO INTEREST in assisting the manufacturers or dealers in curtailing the export trade. In their opinion, this is a matter between NAATA members and the OEM’s and not the business of CBP. Carla also opined that the “Dollar Liens” are of no consequence in their treatment of exports. CBP is trying to automate the entire process and create some standards for export that they can distribute nationwide so that exporters can upload a package of documents and have their vehicles move through the process. Carla invited NAATA to form a committee to assist her and CBP in developing these standards and protocols. The suggestion to work with CBP is a great development. We expect that it will take a few months to put this plan into effect, but there is a definite willingness on the part of CBP to work with NAATA.
We discussed our Cancun conference with Carla and its importance to our members. I had already requested that Carla attend the conference as a speaker. Both Carla and Rob Rawls suggested that we send a formal invitation to CBP requesting Carla to speak at Cancun. They do not know if their budget will allow Carla to participate, but the willingness to cooperate is certainly evident.
The take away from all of this is that CBP views NAATA as the legitimate representative to the trade in the United States. Mike and I will continue to follow up with CBP and move this relationship forward.
Over the course of the past several months, I have opened up a dialogue with Mr. Wang Hongchang who is the General Secretary of Chamber of Auto Market of China Automobile Dealers Association. As I understand it, Mr. Wang is the head of the trade association that specifically deals with the Parallel Market importers in China. He has invited a delegation from NAATA to attend their parallel market exhibition in Shanghai which will be held October 15 to 17. Many of our members have already signed up to attend; we welcome participation from the entire membership. We have invited a delegation headed by Mr. Wang to attend our conference in Cancun. We are preparing the necessary invite letters so that they will be able to obtain visas, if necessary. This is the first step in creating a formal and open dialogue between NAATA and our largest import market, China. I believe that a formal and official dialogue between the Chinese authorized trade association and NAATA is essential to our growth and is in line with our responsibility towards our members.
Our conference in Cancun will be held November 7 to 9 with sightseeing scheduled for November 10. Hillary Chouinard, Raul Leon and Celina Molina and their team have done an excellent job arranging a beautiful location for the conference. It is very important that we have full participation by all members of the organization. We will have an array of speakers who will be discussing topics ranging from legal issues, to cyber security, as well as the best way to conduct business in Mexico. Mexico is a very “hot” market for car exports. This has been made more so because the U.S. market is on hold and the current exchange rate is very favorable for the peso. How do you safely do business in Mexico? How do you get a refund of the taxes you have to pay? For these answers as well as other critical information, please join us at the conference.
If you have not already registered for the conference, please do so before the end of the month in order to get your discounted attendance fee. Costs go up September 1. I look forward to seeing all of you in Cancun. As always, please feel free to reach out to me, Mike or any of your Board Members.
Very truly yours,
Charles S Brofman
President of the North American Automobile Trade Association