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Used-car shipments piling up at the port - Dealers might be misreading market says Reese

Published:Friday | January 25, 2013 | 12:00 AM
Lynvalle Hamilton, president of the Jamaica Used Car Dealers' Association and managing director of Auto Channel Limited. - File PHotos
Commissioner of Customs Major Richard Reese.

Marcella Scarlett, Business Reporter

The Jamaica Used Car Dealers' Association (JUCDA) is blaming a rise in penalty fees and miscommunication with suppliers in Japan with the high number of motor vehicles ending up on the auction block at the Queen's Warehouse.

But the Customs Department is knocking the claim on fees, saying the penalties for breaches have not been increased.

On Monday, 159 motor vehicles were listed by the Jamaica Customs Department for auction in late February.

"There are a lot more cars there, but what I can tell you is that very soon, you won't see those size auctions," said Lynvalle Hamilton, president of JUCDA.

Some, he said, are likely to be cleared ahead of the auction date.

Of the 159 motor vehicles listed, only six were imported by individuals. The rest were consigned to used-car dealers, with the majority split between Auto Channel Limited and Crichton Automotives Limited, which together accounted for close to half of the total.

Several of the vehicles were deemed to be in breach of the motor-vehicle policy, including some described as damaged even though a ban on the importation of damaged vehicles is in place.

Kirk Crichton, managing director of Crichton Automotives, said his case involves disagreements with suppliers.

Hamilton, who is also managing director of Auto Channel, said even though dealers are listed as consignees, in some cases they are unaware of the shipments.

He blames it on a failure to communicate.

"There is one particular supplier who sends vehicles in your name without even telling you anything and that causes a lot of dealers to have cars on the wharf, and don't even know about them," he said.

Notwithstanding, Hamilton said in some cases, the dealers will accept the shipment and negotiate compensation for any penalties, but he told the Financial Gleaner that a spike in fees for Customs breaches has made that option unaffordable.

"What causes a lot of them (vehicles) to be there now is the increase in the breach fees by Customs," he said.

"If a vehicle comes into the island without an import licence, usually we would have to pay J$40,000 for the breach fee and get the licence to import the vehicle. But late last year, they increased the breaches without any notice, all the way up to about J$300,000," he said.

He said that this has discouraged dealers from clearing vehicles as the fees would push their costs too high.

However, Commissioner of Customs Major Richard Reese said penalties are unchanged.

"We have not increased any fees. When you are in breach, we can within the law go up to three times the value of the car. When you breach, you are penalised," he said.

Reese shrugged off JUCDA's explanation that suppliers ship more vehicles than the dealers order, saying the local operators would have had to pay insurance for the shipment, as well as the cost to ship the vehicle.

No flat fees for breaches

Further, he said there is no flat fee for the breaches; that once advised, the importer is required to write a letter acknowledging and explaining the breach, which Customs will consider in its decision on the penalty to be applied.

"For example, first offence might just get a warning; repeat offence might get a J$100,000 fine; habitual might get a J$150,000 fine - but it depends, because within the law we can penalise them up to three times the value of the goods," Reese said.

Reese said recently he has been seeing a lot more applications to re-warehouse motor vehicles by dealers who have not been able to move the stock and pay the associated duties within the allowed 12-month period.

"Maybe they have bought too much. They might have read the market wrong and the cars are not being sold as fast as they had anticipated - and yet still they are ordering more," he said.

"That is why they have vehicles that they can't clear within the specified time; they have no storage and still they are ordering more. Some of them are applying for additional space for bonded warehouse and I don't understand why they are not following through if they need it," said the Customs commissioner.

Hamilton said the number of cars being auctioned is also influenced by the change in the motor-vehicle policy in 2011.

That year, the Government increased the age limit for imports from three to five years for cars and from four to six years for lightweight commercial vehicles.

Hamilton said immediately before the change in the policy, many dealers would have imported cars of model year 2008 onwards. With the change, the dealers were able to import older vehicles which began to sell faster.

The dealers then gave preference to clearing fast-selling stock, the JUCDA president said.

Of the 159 vehicles being auctioned, only a few of them landed in Jamaica before 2012 and most of them are of model years 2007 and 2008.

"The older 2007 cars came and saw the newer cars at the wharf and left them there, because it was cheaper to move the older cars ... people wanted a good car at the lowest possible prices, so we cleared the cars that we can sell," Hamilton said.

He said the cars cannot be sent back to suppliers because Jamaica does not export cars to Japan.

Rather, the supplier can opt to send the cars to a destination that Jamaica trans-ships vehicles to, but this has to be done within a certain timeframe and a valid reason must be presented to the Trade Board - such as "if it falls outside of the age restriction of the import policy".

However, the Trade Board will not issue an export licence "just because the dealer does not want to take the vehicle", Hamilton said.

"In all fairness, Customs try to work with us. Any fault is with the dealer and the supplier. I must say Customs have been very lenient because where the law is breached they can charge you up to three times the value of the freight, but they have been very relaxed in how they exercise this," he said.