Open Wide: Competition Policy Review Opens Door To ‘Wide-Scale Grey Imports’ Photo:

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Tim O'Brien | Apr, 01 2015 | 17 Comments

New Zealand used-car ‘grey import’ model recommended for Australia.

Among the 56 Recommendations of The Final Report of the Competition Policy Review, chaired by Professor Ian Harper, is this chestnut: Recommendation 13.

Viz: that "parallel import restrictions on (...) second-hand cars should be removed”.

"As of 2017, manufacturing of passenger vehicles will cease in Australia, which will, in turn, mean that all new vehicles sold in Australia will be imported from overseas," the Report states.

"The original purpose for the restriction of parallel importing of passenger vehicles will no longer apply."

In the view of Professor Harper’s panel, "removing such restrictions would be in the public interest”.

In this, it points to the New Zealand experience, concluding that the removal of restrictions on parallel imports "resulted in lower prices for consumers and improved supply”.

Currently, under the Motor Vehicles Standards Act, applications for approval to place a ‘used import plate’ (or to sell a used imported vehicle without such a plate) can only be for a single vehicle.

Automotive workshops are also currently prohibited from importing more than 100 used vehicles in each vehicle category in a 12-month period.

These restrictions, among others, the Report recommends, should be set aside allowing ‘wide-scale’ imports of second-hand cars. And it urges the Government to waste no time in acting on the recommendations.

"The Australian Government should, within six months of accepting the recommendation, announce that (...) parallel import restrictions on second-hand passenger and light commercial vehicles will be progressively relaxed.”

The Report however recommends that the relaxing of restrictions should begin "no earlier than 2018” to allow a regulatory compliance framework to be put in place to "ensure appropriate levels of community safety, environmental performance and consumer protection”.

But the industry has "serious reservations".

These recommendations are sure to attract the ire of the FCAI, the Federal Chamber of Automotive Industries (which made submissions to the Review).

FCAI argued that "Australia has one of the most competitive new car markets in the world and removing parallel import restrictions on second-hand vehicles would not lower prices for motor vehicles.”

It also expressed concerns that "it has (…) serious reservations about (...) the safety of used vehicles including compliance with the standards that applied when the vehicle was built and the continued compliance with such standards following any modifications or repair”.

But, both the Review Panel and the ACCC would seem to differ: "The restrictions on importing second-hand vehicles have largely been justified on the basis of consumer protection and road safety, as a way of ensuring that all vehicles meet minimum safety standards.

"However, they have also restricted the importation of used vehicles into Australia,” the Report states.

Ford Australia argued that "modern vehicles are demonstrably safer and more environmentally friendly. This is in stark contrast to allowing greater market access to the importation of questionable, second-hand ‘Grey’ vehicles that have been cast off by other advanced economies”.

ACCC in accordance with Review recommendations

The ACCC, however, would appear to sit in accordance with the Review Panel’s recommendations, its broader view being that parallel import restrictions (on a range of products) "effectively provide an import monopoly to the domestic distributor” and can thus be to the detriment of Australian consumers.

The Review references a Productivity Commission report (Australia’s Automotive Manufacturing Industry) which recommends that "in the long term, the progressive relaxation of restrictions on the wide-scale importation of second-hand vehicles would have net benefits for the community as a whole”.

So, according to this Competition Policy Review, which sends a report to the Government hostile to the position of the FCAI, the Government should work to allowing "wide-scale” grey imports from 2018.

That the lifting of restrictions begin with vehicles "under five years old (since the date of manufacture)”, and "limited to vehicles manufactured in countries with vehicle design standards that are consistent with those recognised by Australia”.

These vehicles, the Report states, will be "least likely to pose safety, environmental and consumer protection concerns”.

So, what does that mean, and what happens next?

The Report has now gone to the Government. The Minister for Small Business, the Hon. Bruce Billson, said the Government would consider the recommendations and respond.

With Australian vehicle manufacturing to cease by 2017 (as the Report notes), and with economic ‘drys’ at the helm in Canberra, the industry will need to mount a concerted campaign if it is to head-off the recommendations in this Report.

For you and me, in all likelihood, we can expect to see the beginnings of a New Zealand-style grey import industry within two to three years.

Should the Government accept the Recommendations, that is.

But, certainly, it won’t mean any old car crossing the border. "The new regulatory arrangements,” the Review concludes, "should be developed in accordance with the outcomes of the review of the Motor Vehicle Standards Act.”

The danger in this report, for new vehicle manufacturers and importers, is that an acceptance of its findings by Government may also set some to thinking about new cars where import restrictions can "effectively provide an import monopoly to the domestic distributor”.

It’s not such a leap. I can, after all, import a new boat and put it on the water...

(Go to pages 165 - 178: Parallel Imports)

MORE: Australia ‘No Dumping Ground’ For Grey Imports

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