Nominees, strawmen, agent, fake buyer. Call them what you will, the UCDA has never thought sending an individual to a dealer to buy a car that they pretend is for their personal use, but is actually destined for export, was ever anything but fraud.
These vehicles are intended to be flipped for export by some company lurking in the shadows who pays a fee to the nominee and then sells that same car for much more money overseas in places like the Middle East, China, Africa or Europe.
The lucrative nature of the trade might explain why some vigorously defend the practice and are quite self-righteous about it in the bargain. Many of these companies are ghosts in the transaction, never actually registering the unit in their name here in Ontario, so it appears the consumer was the last “owner”.
As we have written many times prior in Front Line, and elsewhere, we view this practice as unethical and illegal. Not just because it thwarts the legitimate business interests of vehicle manufacturers, but it also hurts the selling dealers (who face consequences from those same manufacturers) and the pawns used as nominees who have faced lawsuits by the selling dealer (for illegal export among other causes) and prosecution by regulators like OMVIC.
Examples of all this abound, and have for years, yet the “exporter” makes off scot-free in the wake of the chaos.
Just to be clear, we do not oppose exporters buying vehicles for export from other dealers. As long as they are upfront about it, use registered salespeople to act on the transaction and put the vehicle in their dealership name, like any other dealer would. As long the selling dealer enters willingly into the transaction with their eyes wide open. That is all we have ever expected to see … transparency, fairness, ethics, legality and professionalism.
Meanwhile, the good news is the worst of the practices outlined above may be coming to an end.
Here is OMVIC’s full message to all would-be nominees and exporters who are considering this practice as part of their business plan going forward:
Highlights are, export dealers must enter into a proper written contract to buy vehicles, register the vehicle in the dealer name prior to export and use properly OMVIC-registered salespeople to buy vehicles.
Take Ownership Prior to Export
Generally, like all dealers, Exporters must ensure that they complete and retain all appropriate documentation when they purchase a vehicle for the purposes of facilitating a future trade when they sell the vehicle to a subsequent purchaser.
In particular, Exporters are required to take ownership of any vehicle prior to exporting it by: (1) entering into a contract to buy the vehicle in the name of the dealership; and (2) within six days after becoming the owner of the vehicle, the Exporter must apply to the Ministry of Transportation (“MTO”) for a new permit for the vehicle. The result of the latter process is the issuance of a new permit by the MTO in the name of the purchaser (i.e., the exporter’s business name).
Given that Exporters are only permitted to buy vehicles and subsequently sell them elsewhere, it is important that Exporters comply with the MVDA provision that they are under a mandatory obligation to take ownership of the vehicle before exporting it. They cannot simply broker a sale between an Ontario resident that owns a vehicle and a purchaser outside of Ontario that wishes to purchase it.
Employees And Agents
Exporters are subject to the general statutory obligation that dealers, regardless of class of registration, must not retain the services of an unregistered salesperson. This includes the prohibition from retaining the services of unregistered individuals to facilitate the purchase of vehicles from another dealer, a manufacturer or a private seller.
Employing a person in their business to assist with acquiring vehicles constitutes employing an unlicensed salesperson. If an Exporter employs anyone in a capacity that requires registration who is not registered to them, the Exporter will be in breach of their obligations.
When applying for registration or renewal of registration, an Exporter will be required to identify all the salespersons who will be acting on their behalf. If the dealer hires or terminates a salesperson, the dealer must, within five days after the event, notify the Registrar in writing of the date of commencement or termination of the employment of the salesperson. In the case of termination, the dealer must also provide the reason for the termination.
Every salesperson employed by the Exporter is responsible for obtaining their registration and complying with their own require-ments. Salespersons are prohibited from trading a vehicle on behalf of a vehicle dealer unless the salesperson is registered to that dealer. Salespersons must also provide notice of changes of employment within the prescribed timeline.