China may currently be experiencing an explosion of wealth, but their car prices remain astronomical compared to the U.S. Several entrepreneurs have hatched schemes to profit from this fact — all they had to do was break a bunch of laws in the process.
Automotive News has a detailed story on a scheme to export vehicles from the U.S. to China using hapless "straw buyers." This scheme resulted in convictions for two men in California and charges for another in New Hampshire.
To understand the issue, you have to start with car prices in China. From the story:
High prices and heavy demand for luxury cars and SUVs in China, caused in part by 25 percent tariffs on imported new vehicles, mean scammers can often sell the vehicles for at least double what they would get in the United States. A new BMW X6 costs more than 1 million yuan in China, or about $171,500, compared with a U.S. starting price of $60,725; the Porsche Cayenne has a base price of 922,000 yuan, or about $148,750, in China, and $50,575 at U.S. dealerships.
U.S. law only allows new vehicles to be exported by their manufacturer, the story says. And U.S. dealerships are contractually forbidden by their automakers from selling cars to people who plan to export them.
To get around this, Frank Ku, 31, and Danny Hsu, 33, of California are accused of finding "straw buyers" on Craigslist whom they paid a few hundred dollars to buy and title new luxury vehicles. They did so with buyers in New Hampshire, because it is the only state with neither a sales tax nor a requirement that vehicle owners carry insurance, AN reports.
According to Valley News, the men obtained fake New Hampshire driver's licenses for themselves and their associates using forged leases and utility bills. The cars were sent to California for export, but their registrations in New Hampshire made them look "used" on customs declaration. Then Ku and Shu would export the cars to China.
It seems like a clever plan, and it probably is, but it violates federal law; Ku and Shu were recently convicted of mail fraud and violating customs laws.
All in all, the story says, the two admitted to scheming to export 93 vehicles that they and other people purchased in 16 states worth more than $5.5 million. Ku and Shu only received a fine and probation for their crime, and the unwitting straw buyers — described simply as people they found on Craigslist who needed money — were not charged. Authorities are working to bring the vehicles back.
Police have also charged a Chinese national who lives in the U.S. named Hong Chen with similar crimes, and he faces trial soon.
Chen ran a similar scheme, according to the story, that was uncovered after a town clerk in New Hampshire found that a man was coming in every few weeks to register high end SUVs like the Porsche Cayenne, the BMW X6 and Mercedes-Benz GL350. When confronted by police, the buyer said he did so after answering a Craigslist ad.
Be sure and check out the full report at Automotive News and tell us what you think.
Photo credit BMW/Shutterstock