Michael A. Downs, a businessman in Fort Lauderdale, Fla., says he is simply looking to profit from the growing demand in China for cars from the likes of Mercedes, BMW and Range Rover.
His three-year-old business recruits people in a dozen or so states to buy new cars from dealerships in the United States. He then sells those vehicles to other companies, which ship them to China. Once in China, the cars, which typically retail for $55,000 to $75,000 in the United States, can be resold for as much as three times those prices. “We’re taking advantage of a legitimate arbitrage situation,” he said.
But to the federal government, businesses like Mr. Downs’s are potentially violating customs laws and deceiving auto manufacturers like Mercedes-Benz and BMW, which try to keep tight control over sales to domestic dealers and to foreign countries.
Last year, federal prosecutors and agents with the Secret Service and the Department of Homeland Security began a broad crackdown on this “gray market” export business, which is estimated by some to be responsible for sending as many as 35,000 new luxury cars a year to China from the United States.