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Take proper steps with Canadian vehicle trade-ins

November 24, 2010

The following story, first published by the Wisconsin Automobile and Truck Dealers Association, is true. As Detective Joe Friday was wont to say, only the names have changed. Bob Smith was thrilled with the vehicle he purchased from Big City Dealership. It was practically new, and he paid considerably less than the current going rate.

Big City had been outstanding in ensuring Smith's complete satisfaction with the sale. Big City told Smith the vehicle was imported from Canada and the odometer was changed from kilometers to miles (reported as actual) prior to Big City purchasing the vehicle at auction. But the other shoe was about to drop. A few months after Smith bought the vehicle, a Canadian bank contacted Smith and Big City to inform them the vehicle had an unsatisfied lien dating to its days in Canada.

The bank repossessed the vehicle, much to the chagrin of Smith and Big City. Big City took care of Smith, but at a substantial loss. They went back to auction to unwind the deal, but never fully recouped their loss. Big City didn't have a lot of experience with the purchase of Canadian vehicles. They believed if the odometer has been converted from kilometers to miles, then the vehicle is fine for sale. Big City employees were unaware of what to look for on Canadian documents when purchasing the vehicle, so they weren't suspicious when no documents accompanied the vehicle. Some people believe that the North American Free Trade Agreement gives them the luxury to purchase a vehicle in Canada, drive it across the border and sell it in the United States.

That is not true. When an individual brings a vehicle into the United States for the purpose of resale, the vehicle must meet the safety and emissions standards set by the National Highway Traffic Safety Administration and it must be unencumbered by liens. The NHTSA enables dealers to safely buy and sell Canadian vehicles and protects dealers from vehicles imported illegally. A registered importer is a business that has applied for and been issued authority to purchase vehicles outside the United States for resale. Registered importers are required to post a bond valued at 150 percent of the cost of each imported vehicle.

To obtain a bond release (and subsequently offer the vehicle for sale), the registered importer submits a packet to NHTSA for each vehicle. The packet includes photos of the vehicle and certification that it meets U.S. safety and emissions standards. If everything is in order, the NHTSA issues a bond release letter. The bond release letter is essential to the paper trail protecting dealers from fraudulent sellers. When dealers purchase a vehicle from a registered importer, make certain the following documents accompany the vehicle:

• A sticker affixed to the driver's door or pillar which indicates the vehicle was modified to conform to U.S. safety standards; 
• A copy of the recall warranty insurance policy; 
• A copy of the bond release letter. The documents insure a vehicle is imported properly. Imported vehicles which do display all three documents may not be sold in the United States and may be subject to seizure by U.S. Customs. Another key point is whether the vehicle can be sold as used. All imported Canadian vehicles are considered never to have been privately titled. A vehicle can be sold to a dealer, regardless of franchise, ONLY if the following criteria are met: • The vehicle has been driven more than 6,000 miles; 
• It has been driven more than 4,000 cumulative miles and owned more than 120 days by the licensee selling the vehicle; 
• It is of a previous model year. A vehicle shall be considered to be of a previous model year after Dec. 31 of the calendar year identical to the manufacturer's designated model year.

The other likely scenario concerns a vehicle taken to the United States by an individual who now wants to trade in the vehicle. The most important point is, they still need to meet U.S. safety standards and have the documents to prove it. A properly imported vehicle will have (1) a letter from the manufacturer, (2) customs entry form, (3) U.S. Department of Transportation HS7 Declaration Form, and (4) and EPA 3520-1 Emissions Form.

A dealer may accept an imported vehicle for trade-in as long as those documents are submitted along with proof of ownership. Visit the NHTSA Web site at for more on selling an imported vehicle.