Chinese Auto Tariffs Creating a New Black Market for Straw Buyer Fraud

British Colombia, CA – 10 June 2019 – When China slapped a 25% tariff on vehicles imported from the US last year, they unintentionally created a demand for black market vehicles. And with no vehicle more coveted in China now, than the BMX X5, a series of straw buyer cases where the vehicles have been intercepted heading for China has been discovered.

While so far, this scam has only been reported in Canada, it comes without any surprise that it has or will erupt here in the United States at the same time, with vehicles either driven across the border to Canada or Mexico. The vehicles are not solely limited to BMW’s and include other high end luxury vehicles with the majority being either “black or white” in color.

According to reports, straw buyers are being recruited and paid a commission of several thousand dollars for their participation in the scheme and in each case the straw borrower visits the dealership, quickly picks out a BMW X5 model, makes small down payment and enters into a lease or purchase contract, eventually taking possession of the car.

Hours later, they deliver the vehicles to their controllers who then place the cars in shipping containers headed to China and are being sold on the gray market.

BMW X5’s can be purchased in Canada for about $45,000 but can fetch a whopping $115,000 in China. With the cost of shipping at about $5,000 and up, the profit, even after payingteh straw buyer and paying for shipping, is clearly dramatic.

BMW Financial Services of Canada has recently filed four new lawsuits against straw buyers or persons acting as fronts for the exporters with every intention of holding them all responsible.

In order to prevent further fraudulent exports, BMW is now requiring all new purchasers to sign a “No Export” contract advising them that it is fraud to export the cars without BMW’s permission.

The new contract allows BMW Canada authority to periodically check the location of their vehicles for the first 12 months after purchase via a GPS device in eth vehicle to assure it is still in Canada. In the event the vehicle is not locatable, BMW will pursue the buyer for potential fraud if the vehicle is deemed exported after all.

While BMW was listed, other luxury vehicles have been spotted ready for export to China, including at least two Mercedes Benzes

In one case, a bailiff followed the GPS on a black sapphire BMW X5 to a string of car repair garages in Richmond, BC

The $81,000 luxury SUV sat in the end unit — presumably ready for export to China.

In a pattern that’s becoming almost routine in B.C. courts, lawyers for BMW Financial Services Canada went to B.C. Supreme Court to try to stop the car from leaving the country.

“High-end vehicles are purchased here and then shipped to Asia. Apparently, there is good money in it,” lawyer Kim Labelle told a judge as he applied for an order to seize the vehicle in January.