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May 2018

The challenges of registering import titles

A search for the perfect car sometimes stretches beyond U.S. borders. An international move might mean a motorcycle ships stateside. In both cases, those vehicles will need to be imported.

Importing a vehicle can be a daunting process for the customer. All vehicles entering the United States must comply with regulations set by numerous organizations, including the U.S. Customs and Border Protection (Customs), the Environmental Protection Agency (EPA) and the National Highway Traffic Safety Administration (NHTSA).

The importation of motor vehicles has created challenges for DMVs across the country as well. In the past decade, jurisdictions nationwide have experienced an increase in the number of vehicle imports that do not meet the Federal Motor Vehicle Safety Standards (FMVSS) being improperly titled and sold, especially from within North America.

And then there are dealers that know the jurisdictions without strong importation policies where they can easily obtain a title even if the vehicle doesn’t ever physically go to that jurisdiction. In some cases, these dealers get over-the-counter titles for the imported vehicles without following process, then transfer the title to other states multiple times. The vehicle never traveled to those states; the dealer was simply washing the title from one location to another.

Increase in imports

The volume of imported vehicles surged from 6,000 in 2008 to 345,000 in 2016, says Coleman Sachs, chief of the Import and Certification Division, Office of Vehicle Safety Compliance at NHTSA. This rapid increase of title transactions took many jurisdictions by surprise.

In Colorado, more than 500 motor vehicles were imported by one used motor vehicle dealership from 2016 to 2017—an odd occurrence for the state. The main concern was that these vehicles imported from Canada received Colorado titles immediately after importation, says Tony Anderson, operations director, Title and Registration Section of the Colorado Division of Motor Vehicles.

This led to an investigation conducted by the Colorado DMV Motor Vehicle Investigations Unit (MVIU) and the Colorado Auto Industry Division (AID), which determined that the specified dealership was improperly completing the Department of Revenue 2698 Verification of Vehicle Identification Number and violating Rule 26: Physical Inspection of Motor Vehicles.

Nebraska also experienced an extreme increase in the number of issued titles. Approximately 16,000 titles for imported vehicles were issued over a two-year period, with the majority from one title issuance office, says Betty Johnson, administrator of the Nebraska DMV Driver and Vehicle Records. “The volume of imported vehicles we have experienced over the past few years is extraordinarily high for the state,” Johnson says.

Why has the volume of titles increased so significantly? While there could be different incentives for dealers and importers, the most likely reason is because of the increasing strength of the U.S. dollar against foreign currencies, particularly the Canadian dollar.

Safety first

The Canada Motor Vehicle Safety Standards (CMVSS) are similar to FMVSS, so there are fewer concerns that a Canadian-certified vehicle can conform to the FMVSS.

Foremost among jurisdictions’ concerns when dealing with imported motor vehicles is ensuring each vehicle entering the United States meets the minimum safety performance requirements. For a motor vehicle to be lawfully imported into the United States, it must comply with the following NHTSA requirements:

A vehicle that was not originally manufactured to comply with all applicable FMVSS, or was not so-certified by the original manufacturer, also known as a “non-conforming” vehicle, must be determined eligible for importation by NHTSA. That eligibility is based on the vehicle’s capability of being modified to conform to all applicable FMVSS. And it must be imported by a NHTSA-registered importer (RI), or by a person who has a contract with an RI to modify the vehicle so it complies with all applicable FMVSS following importation.

A Department of Transportation (DOT) conformance bond must be furnished for the vehicle to ensure it is brought into compliance with all applicable FMVSS within 120 days of entry, or is exported from, or abandoned to, the United States.

To obtain release of the conformance bond, the RI furnishes conformity data on the vehicle for NHTSA’s review. If it is satisfied that the vehicle has been adequately modified to conform and that the vehicle has no outstanding recalls, NHTSA will release the DOT conformance bond.

The RI is then able to release custody of the vehicle so that it can be titled or registered by the DMV for on-road use. If NHTSA does not release the DOT conformance bond within 30 days from the agency’s receipt of the conformity data, the RI is free to release custody of the vehicle so it can be titled or registered for on-road use.

Related concerns

While the volume of title transactions has been the main challenge for jurisdictions, other concerns have also emerged, including:

  • Increased workloads for DMVs
  • Greater difficulties for customers if importers and dealerships do not follow all requirements
  • Increased risk of fraudulent activity

“The increasing volume of imported vehicles taxed NHTSA’s ability to review and process conformity packages on Canadian imports in a timely manner,” says Sachs. Additional staff members were added to help with the problem, but fraud occurring in the title application process still causes problems for DMVs and customers as well.

Individuals who purchase a vehicle after a fraudulent act has been committed may experience a number of different types of repercussions, including diminishment of the vehicle’s value, loss of vehicle, loss of money and, in some cases, individuals may need to prove that they are a victim and not a suspect, Johnson says.

In many instances, individuals who have been victims of title and/or odometer fraud turn to the jurisdictions and law enforcement for assistance. Unfortunately, jurisdictions often are unable to identify the source of the fraud or provide restitution, which makes it a challenge for jurisdictions to investigate and resolve all reports of fraud and related issues, Johnson says.

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Workers prepare vehicles for loading aboard the Manon Wallenius Wilhelmsen, a giant vehicle carrier, at the Autoport in Eastern Passage, Canada. The renewed strength of the U.S. dollar against the Canadian dollar has led to a surge of import activity on the Southern side of the border.

“In my opinion, odometer fraud is the most common and likely risk related to imported vehicles,” says Johnson. Nebraska experiences a high volume of requests for corrected odometer readings on titles issued to imported vehicles. The large number of requests creates suspicion and diminishes trust in the odometer readings reported as part of the title application process.

In addition to odometer fraud, the possibility of vehicle identification number (VIN) cloning, VIN alterations and ownership fraud increase due to the lack of historical data available at the time of title issuance.

In my opinion, odometer fraud is the most common and likely risk related to imported vehicles. — Betty Johnson, Administrator of the Nebraska DMV Driver and Vehicle Records

Updated processes

To combat the challenges caused by the increase of imported vehicles and to mitigate risks of fraud, jurisdictions have updated their procedures for titling imported motor vehicles. A majority of the changes are to ensure that vehicles are conforming and are branded correctly.

Following the investigation conducted by the MVIU and the AID, the Colorado DMV issued a statement to Colorado motor vehicle dealers to outline all updates to foreign import titling procedures in March 2017. The main resolution was that “the Colorado DMV will no longer issue titles without a NHTSA bond release letter or proof that 30 days have passed following submission of a conformity packet to NHTSA.”

“[Until recently,] we didn’t deal with a high number of imported vehicle titles on a frequent basis,” says Anderson. “We had to take a look at our existing procedures, and then make updates based on the findings from the investigation.”

In Nebraska, jurisdiction offices have also established policies and processes to ensure that foreign import titles are issued in a timely manner without impeding the titling process for other customers, says Johnson.

 

 

Moving forward

For jurisdictions facing similar issues with imported vehicles, updates to importation requirements may also be in order. AAMVA and industry leaders continue to work with jurisdictions on importation- related problems to keep DMVs working efficiently and their customers safe.

Through member networking and educational opportunities, AAMVA has helped jurisdictions to understand the ownership and import documents available and recommended for vehicles imported into the United States, says Johnson. AAMVA has also provided opportunities to open communication with other stakeholders, such as NHTSA, Customs, Canadian jurisdictions and so on.

NHTSA will continue to welcome the opportunity to present on vehicle importation issues at AAMVA meetings, workshops and law institutes, says Sachs.

Ultimately, it’s important to “set firm and thorough policies regarding the documentation accepted for title issuance,” says Johnson. “Be sure to understand and train frontline staff on the document nuances to ensure authenticity of documents and that all import requirements have been met.”