What are Gray Market Cars?

Cars that are legally imported from other countries without using the maker’s usual official distribution channels are referred to as gray-market cars. Gray market cars particularly in the 1980’s were European cars engineered and built for European roads, but were shipped to the United States.  The cars were sold to US customers outside the normal dealer channels through a loosely formed network of independent gray market dealers.  Americans enjoyed the look and performance of European cars, and were more than happy to try alternative ways to obtain them.

Any Mercedes vehicle that was imported outside of the Mercedes-Benz of North America dealer network is technically considered a gray-market car.    Gray-market Mercedes-Benz (GMMB) cars were purchased in Europe, imported and then the modifications were made so that they would be legal to own in the United States according to federal law.  In dealing with a gray market car one had to contend with regulations from three different agencies: the Department of Transportation, The Environmental Protection Agency and the U.S. Customs Service.

The 1970’s:  Underpowered,  Unloved & Ugly  Bumpers

In 1973  the federal government mandated that every car sold in the US had to have bumpers that could withstand a 5 mph collision without damage.  Although well intentioned the bumpers of the time were notoriously ugly.  For almost a decade Americans had to contend with bumpers that no doubt were an embarrassment to  car design teams, and laughable to our European friends.   To add insult to injury, starting in 1974,  emission standards in the US were tightened so much that engine performance and efficiency were significantly reduced which actually increased the amount of fuel needed to get from point A to point B.

Gray-market cars however had significantly much more horsepower, normal looking bumpers and enticing options not available in the US. Such characteristics made them highly desirable over their American counterparts.  In addition, a particularly strong US dollar fueled demand.  Price savvy Americans figured out that they could buy a highly sought after Mercedes in Europe for about half the cost they would pay in the U.S. The only issue was getting them here and modifying the cars to meet U.S. Department of Transportation safety standards and Environmental Protection Agency emissions standards.

In 1981 Mercedes-Benz only offered the 380 SEL to the U.S. However the much more powerful 500 SEL was available to the rest of the world. This of course created a surging demand for what Americans couldn’t get. Mercedes afficianados yearned  for the more powerful European built Mercedes-Benz.  The gray-market provided opened the door to obtain such a highly valued automobile.

In 1980, an estimated 1,500 gray market cars were sold to US customers.  But by 1985 an estimated 60,000 cars were sold in the US.  Following that tens of thousands of cars were imported into the US each year during the decade. However, this kind of business did not go unnoticed by Mercedes-Benz of North America and their associated dealers. 60,000 cars even at a super modest value of say $20,000 each, would have an estimated value of about $1 billion dollars.   With forecasts of both unit and dollar sales doubling in 1990, gray market cars were beginning to take a serious bite out of potential profits.  As a result Mercedes wanted to put a stop to the practice of private importation of cars.

Automotive makers and official distributors suited up  to thwart gray-market importation.  Going on the offensive they invested in multi-million dollar campaigns to lobby congress.  Their ultimate aim was  to get federal regulations that either banned imports from certain countries or to get laws passed that required expensive car modifications like special exhaust or safety features to be added.  Of course adding special headlamps, sidemarker lights, special bumpers or catalytic converters would not only be inconvenient, but also add to the total price of a gray-market car.  The makers and the distributors hoped this would  make the “non-official” cars less attractive to buyers.   Even after the addition of these items the NHTSA and EPA could review the paperwork and had full authority to either approve or reject the possession of the vehicle.  If they were rejected they could order the car to be destroyed or re-exported.

The Automobile Importers Compliance Association was a non-profit trade association whose members imported, modified, tested or sold vehicles which weren’t originally manufactured to meet the US safety and emission standards.  The AICA in it’s day provided a “Packet Review Program” to it’s members for a preliminary review of their compliance packets to the EPA and DOT.    Preliminary reviews helped importers understand if there were any problems to be fixed in the forms.  “Once corrected, the packet is hand-delivered to the agency (EPA, DOT) and a signed, VIN-specific delivery receipt is generated and kept on file.  Computerized tracking records are maintained for each vehicle.”

The AICA handbook wisely notes:  “While it may be financially attractive  to purchase a vehicle in a foreign country and import it into the US, the complications imposed by the safety ad emission requirements may make the process seem impossible.”

“The commercial imports industry exists as an expression of free trade and freedom of choice for American consumers.  AICA was formed out of the desire by the commercial imports industry to oppose the efforts to change laws and regulations which would eliminate the activity of importing vehicles by other than the original manufacturer.”

Ending of the Gray-Market

In response, gray-market automotive importers tried to protect their livelihoods and formed an organisation called AICA (Automotive Importers Compliance Association).  The group of importers from California, Florida, New York, Texas, and elsewhere teamed up to fight back.  But despite their efforts to counter the actions by Mercedes lobbyists, the Motor Vehicle Safety Compliance Act was passed in 1988.  This effectively ended the private import of grey-market vehicles into the United States.

As a result of being practically banned, the grey-market declined from 66,900 vehicles in 1985 to a mere 300 vehicles in 1995.  Now it is no longer possible to import a non-U.S. vehicle into the United States as a personal import, with four exceptions, none of which permits Americans to buy recent vehicles not officially available in the United States.

Is the Car I’m looking at a Real Gray Market Import?
Want to figure out what a gray market car had to go through in order to be legally imported?  Try the Handbook of Vehicle Importation, put out by the American Importers Compliance Association in 1985. This rare book helps one figure out if a car that you are looking at is indeed a legal gray market import.  It carefully outlines all the procedures that were necessary to follow in order to successfully import a gray market car.