oversight

U.S. Customs Service: Efforts to Curtail the Exportation of Stolen Vehicles

Published by the Government Accountability Office on 1999-05-12.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

                United States General Accounting Office

GAO             Report to the Chairman, Permanent
                Subcommittee on Investigations,
                Committee on Governmental Affairs,
                U.S. Senate

May 1999
                U.S. CUSTOMS
                SERVICE

                Efforts to Curtail the
                Exportation of Stolen
                Vehicles




GAO/OSI-99-10
          United States
GAO       General Accounting Office
          Washington, D.C. 20548                                                                                Leter




          Office of Special Investigations

          B-279627                                                                                       Letter

          May 12, 1999

          The Honorable Susan M. Collins
          Chairman, Permanent Subcommittee
           on Investigations
          Committee on Governmental Affairs
          United States Senate

          Dear Madam Chairman:

          This report responds to your request that we describe efforts by the U.S.
          Customs Service to curtail the exportation of stolen vehicles from the
          United States. We briefed your office on the results of our inquiry and
          identified potential witnesses for future hearings. We also agreed to
          provide you a report describing (1) applicable regulations for exporting
          used, self-propelled vehicles from the United States, (2) Customs policies
          and procedures for controlling the export of these vehicles, (3) methods
          used to illegally export these vehicles, and (4) improvements in operations
          being considered by Customs. As you requested, we have also discussed
          current and proposed treaties that deal with the repatriation of stolen
          vehicles.

          As agreed, we visited selected port operations in Florida, Texas, and
          California1 in order to observe the current operating process for the
          exportation of used, self-propelled vehicles. We held discussions with
          Customs headquarters officials who concurred with our observations
          regarding Customs’ overall used-vehicle export operations.



Summary   At the ports we visited, Customs complied with its regulatory procedures
          for exporting used, self-propelled vehicles by reviewing the documentation
          of ownership and inspecting the vehicles presented for export to ensure
          that they were the vehicles described in the documentation.

          To circumvent Customs vehicle exportation procedures, thieves have used
          false documents as proof of vehicle ownership. They have also altered
          vehicle identification numbers (VIN), switched vehicles after inspection of
          VINs, hidden vehicles in containers, and driven vehicles across border
          crossings without reporting them.


          1
           We visited the Miami Seaport and Port Everglades, Florida; Port of Brownsville/Los Indios, Port of
          Hidalgo/Pharr, and Port of El Paso, Texas; and Port of San Francisco, California.




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             In order to more efficiently and effectively deter the export of stolen
             vehicles, Customs has published proposed amendments to its regulations
             in the Federal Register.2 These amendments limit the type of document
             that can be used to establish proof of a vehicle’s ownership and would
             permit only an original or certified copy of title or an original
             manufacturer’s statement of origin as proof of ownership. In addition,
             Customs officials, state and federal law enforcement agencies, and the
             insurance industry are exploring methods, such as computer-assisted
             documentation checks and nonintrusive cargo container examinations, to
             curtail the export of stolen vehicles.

             The U.S. Department of State has been negotiating bilateral treaties with
             several countries to alleviate the difficulty that owners of stolen vehicles
             face when their vehicles have been transported across international
             borders. As requested, we have included a list of existing and proposed
             treaties.



Background   Customs reported that from 1996 to 1998, 1.84 million vehicles were
             presented for export from the United States: 582,173 in 1996; 642,838 in
             1997; and 615,446 in 1998. Of these vehicles, Customs identified and seized
             2,636 stolen vehicles valued at $38.1 million in fiscal year 1996; 2,119 stolen
             vehicles valued at $35.4 million in fiscal year 1997; and 2,109 stolen vehicles
             valued at $28.2 million in fiscal year 1998. During this same period,
             Customs made 547 arrests and obtained 265 convictions of individuals
             involved in the exportation of stolen vehicles.

             In addition, the National Insurance Crime Bureau (NICB)3 has estimated
             that 200,000 stolen vehicles are exported each year, some of which are
             included in the vehicles reported as exported by Customs from 1996 to
             1998. These stolen vehicles had an estimated value of $3 billion ($1 billion
             per year). According to Customs officials, other law enforcement officials,
             and NICB intelligence data, most stolen vehicles are transported to Central
             America, South America, and Eastern Europe.




             262   Fed. Reg. 55,764 (1997) (to be codified at 19 C.F.R. § 192).

             3
              NICB is a not-for-profit, tax-exempt organization that works closely with state and federal law
             enforcement authorities and maintains databases on exported vehicles.




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                        According to the Federal Bureau of Investigation’s (FBI) Criminal Justice
                        Information System, 1.35 million vehicles valued at approximately
                        $7.3 billion were reported stolen in 1997,4 with the highest number of thefts
                        reported in major cities that are in close proximity to an international land
                        crossing or seaport. While the number of vehicles reported stolen in 1997
                        declined slightly from that in 1995 (1.47 million) and in 1996 (1.4 million),
                        the value per reported stolen vehicle increased from $5,129 in 1995 and
                        $5,372 in 1996 to $5,416 in 1997. FBI officials advised us, however, that firm
                        statistics on the number and value of stolen vehicles are not available
                        because not all vehicle thefts are entered into the FBI’s National Crime
                        Information Center (NCIC) database. They explained that not every
                        vehicle theft is reported by the owner and that some state and local laws
                        may classify the theft as the unauthorized use of a vehicle, insurance fraud,
                        or bank fraud rather than a stolen vehicle.



Regulations for         Regulations for exporting used, self-propelled vehicles are contained in
                        19 C.F.R. part 192. The regulations at 19 C.F.R. section 192.2(a) and (b)
Exporting Used, Self-   require persons attempting to export automobiles, trucks, motorcycles, or
propelled Vehicles      buses to present the vehicle, an original or certified copy of the certificate
                        of title, and two facsimiles5 of the original or certified copy to Customs at
                        the port of exportation. If a certificate of title is not available due to state
                        statutory requirements, the person attempting to export one of these
                        vehicles may present another document to prove lawful ownership.
                        Generally, all ownership documents must describe the vehicle and include
                        the VIN or product identification number if the vehicle does not have a VIN.
                        (19 C.F.R. section 192.2(a))

                        For vehicles that are to be exported by airplane or ship, the regulations
                        provide that the documentation and vehicle must be presented at least
                        3 days prior to lading (loading). For vehicles that are to be driven or
                        transported by rail or highway, the documentation must be presented
                        3 days prior to exportation; and the vehicle must be presented on the day of
                        exportation. (19 C.F.R. section 192.2(c))




                        4The   latest year for which vehicle theft statistics are available is 1997.

                        5
                         Under a proposed amendment (62 Fed. Reg. 55,764), “facsimile” will be replaced with “copy” to avoid
                        confusion. “Facsimile” is currently used interchangeably with “fax.”




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                        Customs personnel are required to stamp both facsimile documents with
                        the date on which the exporter presents them at the port. The exporter’s
                        stamped copy is the only documentation acceptable as proof of compliance
                        with Customs requirements. (19 C.F.R. section 192.2(d))



Procedures for          At each of the six ports we visited, Customs had designated a specific area
                        to review the documentation of ownership and check if the vehicle
Exporting Used, Self-   presented matched the documentation. The inspection of vehicles and
propelled Vehicles      documents was conducted at an area adjacent to Customs’ processing
                        office, the shipper’s facility, or a bonded warehouse.

                        We found that Customs’ operating procedures for processing paperwork at
                        each of the ports we visited complied with the regulatory requirements.
                        Three of the six ports we visited were located in border areas in Texas
                        where vehicles were either driven or transported by rail or highway. We
                        learned that, consistent with the regulations, Customs personnel required
                        exporters (1) to forward to Customs the appropriate documents by mail,
                        courier, or electronic facsimile 3 days before the intended departure of the
                        vehicle from the United States and (2) to present the vehicle on the day of
                        export. Customs examined the documents upon receipt and, on the day of
                        export, compared the documents with the vehicle to ensure that the vehicle
                        matched the documentation.

                        Similarly, Customs procedures at the other three ports we visited in San
                        Francisco, Miami, and Port Everglades complied with the regulatory
                        requirements for exporting vehicles by ship. In this regard, Customs
                        required exporters to present the documentation and the vehicle at least
                        3 days prior to lading. Upon receipt of the vehicle and the documentation,
                        Customs inspected the vehicle to determine if it matched the
                        documentation.

                        At each of the six ports we visited, Customs also routinely entered the VIN
                        of vehicles being permanently exported into the Treasury Enforcement
                        Communications System (TECS) to determine if the vehicles were listed as
                        stolen. For vehicles not listed as stolen, Customs authenticated both
                        facsimiles of ownership. Customs then returned one facsimile to the
                        exporter and forwarded the other to NICB.

                        In order to observe another process used to detect stolen vehicles, we
                        accompanied the Miami Seaport inspectors and members of the local auto-
                        theft task force on a random inspection of cars at the shipping yards along



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                          the Miami River. The inspectors and members of the task force checked to
                          ensure that the cars ready for exportation had been approved by Customs.
                          To do this, they compared the VIN on each vehicle with the documentation
                          that the shipper had on file. They also entered the VIN of each vehicle into
                          the NCIC database to determine if the vehicle had been stolen. At one
                          shipping yard, they located five stolen vehicles, valued at over $144,000, for
                          which the shipper had no documents.



Methods Used to           During our visits to the ports, we learned that thieves have circumvented
                          Customs export procedures in three principal ways: they have used
Circumvent Port           duplicate or counterfeit titles and VIN plates; switched vehicles after
Operation Procedures      inspections; or not reported vehicles as exports, instead either concealing
                          them in shipping containers or driving them across the border.


False or Counterfeit      Customs advised us that car thieves have used counterfeit or duplicate
Documents and VINs        titles as proof of vehicle ownership if they did not find original titles in the
                          cars they had stolen. Thieves also have put counterfeit VIN plates on stolen
                          cars.

                          Customs explained, as an example, that a thief will obtain a duplicate title
                          for a car6 that is similar in make, model, and color to the one stolen; install
                          in the stolen vehicle a counterfeit VIN plate with the VIN that appears on
                          the duplicate title; and export the car. A thief will also purchase a salvage
                          vehicle, transfer that vehicle’s VIN plate to a stolen vehicle, and export the
                          car.


Vehicles Switched After   Inspectors at seaports advised us that after Customs clears a vehicle for
Inspections               export, the vehicle is stored at a shipper’s facility or at an approved vehicle
                          export broker’s location until it is exported. Customs has no control over
                          access to these storage areas. In some cases after a car was cleared for
                          export with the ownership papers in order, thieves switched the inspected
                          car with a stolen car. In such cases, the stolen vehicle was usually the same
                          make, model, and color as the inspected car, with a counterfeit VIN that
                          matched the VIN in the paperwork presented to the inspector. When
                          loading a vehicle, shippers checked the vehicle’s VIN against the VIN on the


                          6
                              In some instances, the duplicate title is sent to a mail drop.




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                            exporter’s stamped copy of ownership papers and, if the two VINs
                            matched, shipped the car.


Vehicles Not Reported for   Customs has found a number of stolen vehicles hidden in containers whose
Export                      contents were falsely manifested. For example, Customs found a hidden
                            compartment built inside a container. Two stolen cars had been loaded
                            into the compartment, and bags of cement were stacked in the
                            compartment to conceal the vehicles and to discourage closer inspection.
                            Customs advised us that with the millions of containers going through the
                            ports each year, it is virtually impossible to open and inspect each one.

                            Customs officials also told us that many stolen vehicles are simply driven
                            over border crossings. Unless a car has been declared as an export, it will
                            generally cross a border unchallenged.



Customs Management          Customs management told us that it is exploring a number of ways to
                            curtail the exportation of stolen vehicles. Its efforts include the following:
Initiatives
                            • Customs proposed amendments to its regulations to address the
                              documentation required for export.7 With regard to the documentation
                              required for automobiles, trucks, vans, minivans, motorcycles, and
                              buses, Customs proposed to accept only (1) an original or certified copy
                              of title or (2) an original manufacturer’s statement of origin for untitled
                              vehicles. Notarized copies of these documents will no longer be
                              accepted. For vehicles that are leased or encumbered by a lien, the
                              amendments require a letter from the lessor or lien holder approving the
                              export.
                            • In 1997, Customs initiated a pilot program at the Miami Seaport whereby
                              inspectors electronically transmit to NICB on a daily basis information
                              on all vehicles that Customs processed that day. NICB checks the
                              information against its various databases and by the next morning
                              provides Customs with a computerized printout that flags any vehicles
                              with incorrect VINs, reported as stolen, identified as being leased,
                              previously presented for export, and/or reported as salvaged. Customs




                            7
                                62 Fed. Reg. 55,764 (1997) (to be codified at 19 C.F.R. § 192).




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                     expanded this program to Port Everglades, Florida; Ports Houston,
                     Nogales, and El Paso, Texas; and Port Wilmington, Delaware.8
                 •   Customs is working with the FBI to develop an electronic database
                     called “Project VINNY.” Under this project, Customs will electronically
                     transmit vehicle exportation information for each port on a daily basis
                     to the FBI’s Criminal Justice Information Services Division data center.
                     At the data center, VINNY will be used to check the NCIC database and
                     electronically forward the vehicle information to NICB for its database
                     checks. NICB will respond to the data center, which will electronically
                     forward both the NICB and NCIC data check results to the port.
                 •   Customs is field-testing portable, hand-held computer scanners that will
                     give inspectors in the field instant access to TECS for VIN checks and
                     identify vehicles that have already been presented for export.
                 •   Customs is working with the Port Authority of Miami in testing gamma-
                     ray detection scanners for nonintrusive examinations of closed cargo
                     containers, rail cars, and truck trailers. This system produces an x-ray-
                     like image of a container’s contents. As a result of the test’s success, the
                     state of Florida has ordered 10 scanners for installation at selected
                     Florida ports.
                 •   As discussed below, Customs is working with the Department of State
                     on additional treaties that provide a process to facilitate the repatriation
                     of stolen vehicles.

                 Customs has indicated that while all these projects are or will be beneficial,
                 staffing resources and financial restrictions may impede implementation of
                 some of them.



Treaty Efforts   The Department of State, through the Stolen Vehicle Treaty Program, has
                 been working with Customs, the Department of Justice, and NICB to
                 eliminate the difficulties faced by owners of vehicles that were stolen and
                 transported across international borders. The United States currently has
                 one treaty in force, a 1981 agreement with Mexico, that is designed to
                 establish a uniform process for requesting the repatriation of illegally
                 exported vehicles.9



                 8The program was also expanded to the Port of Los Angeles/Long Beach but was terminated on Apr. 1,
                 1998, due to funding limitations.

                 9
                  Convention for the Recovery and Return of Stolen or Embezzled Vehicles and Aircraft, Jan. 15, 1981,
                 U.S.-Mex., 35 U.S.T. 325.




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              In recent years, the Department of State has begun to negotiate a number
              of similar bilateral treaties with countries in Central America, the
              Caribbean, and Central Europe. These proposed treaties provide for timely
              notification to the owner of record when suspected stolen vehicles are
              located and seized by the authorities in countries other than the country of
              registration. In addition, the proposed treaties identify procedures to be
              followed in returning vehicles to their owners. These procedures require
              the country that has identified a suspected stolen vehicle to (1) safeguard
              the vehicle to prevent modification of the vehicle’s VIN, (2) notify the
              embassy of the country from which the vehicle was imported whether the
              vehicle will be returned, and (3) make the vehicle available to the owner
              within 15 days of deciding that it will be returned. While the proposed
              treaties provide a recovery process, they do not require that the stolen
              vehicle be returned if local courts award it to a third party in the country of
              recovery. Appendix I lists the existing and proposed treaty countries as
              well as data on the number of vehicles recovered from these countries.



Scope and     We conducted our initial work from June 19, 1997, to December 14, 1997,
              and subsequent work, as requested by your Subcommittee, from October 9,
Methodology   1998, to March 8, 1999. We interviewed Customs headquarters officials and
              other Customs personnel responsible for issues concerning the exportation
              of vehicles. We also interviewed federal, state, and local law enforcement
              officials at Miami Seaport and Port Everglades, Florida; Port of
              Brownsville/Los Indios, Port of Hidalgo/Pharr, and Port of El Paso, Texas;
              and Port of San Francisco, California. We interviewed NICB officials and
              obtained information from participants of NICB conferences at which
              issues concerning stolen vehicles were discussed. We reviewed Customs
              policies and procedures for handling the exportation of stolen vehicles,
              procedures used at the different locations we visited, and documents
              related to vehicles being exported at the various locations.

              We discussed our limited observations with Customs personnel responsible
              for vehicle exportation. They concurred with our observations and advised
              us of proposed revisions to existing export procedures.


              As arranged with your office, unless you announce its contents earlier, we
              plan no further distribution of this report until 5 days after the date of this
              letter. At that time, we will send copies of the report to the Honorable
              Robert E. Rubin, Secretary of the Treasury; the Honorable David C.
              Williams, Treasury Inspector General; the Honorable Raymond W. Kelly,


              Page 8                                  GAO/OSI-99-10 Exportation of Stolen Vehicles
B-279627




Commissioner of Customs; the Honorable Louis J. Freeh, Director of the
FBI; and John G. Diliberto, President/Chief Executive Officer of NICB.
Copies will also be made available to others upon request. If you have any
questions or need additional information, please contact Assistant Director
Stephen V. Iannucci of my staff at (202) 512-6722. Major contributors to
this report are listed in appendix II.

Sincerely yours,




Robert H. Hast
Acting Assistant Comptroller General
 for Special Investigations




Page 9                               GAO/OSI-99-10 Exportation of Stolen Vehicles
Appendix I

Treaties and Information Relating to Stolen
Vehicle Recoveries in Foreign Countries                                                                                  AppeIx
                                                                                                                              ndi




                                                                      Number of stolen
                                                                vehicles located in the           Number of vehicles
               Country                       Status             foreign country in 1998          recovered,1996-1998
               Mexicoa                       Active                                   6,345                         6,011
               Belize                        Pending                                        b                           0
               Guatemalaa                    Pending                                      64                            10
               Dominican Republica           Pending                                      37                            33
               Costa Rica                    Pending                                        b                           2
               Panama                        Pending                                        b                           10
               Venezuelaa                    Pending                                      55                            15
               El Salvador                   Pending                                        b                           0
               Hondurasa                     Pending                                      36                            0
               Nicaragua                     Pending                                        b                           9
               Polanda                       Pending                                      19                            27
               Russia                        Pending                                        b                           0
               Note: NICB has advised us that although the existing treaty for facilitating recovery is with only Mexico,
               the other countries have followed the spirit of the pending treaties in allowing these vehicle recoveries.
               a
                 These countries, along with Germany (23 vehicles), Ecuador (21 vehicles), Haiti (21 vehicles), and
               Belgium (16 vehicles), comprise the top 10 countries in which stolen vehicles were located in 1998.
               bInformation   reflecting the number of stolen U.S. vehicles located in this country is not available.




               Page 10                                               GAO/OSI-99-10 Exportation of Stolen Vehicles
Appendix II

Major Contributors to This Report                                                                      ApIpexndi




Office of Special       Kevin P. Craddock, Senior Special Agent
                        Stephen V. Iannucci, Assistant Director
Investigations,         Barbara W. Alsip, Senior Communications Analyst
Washington, D.C.

Office of the General   Barbara C. Coles, Senior Attorney

Counsel, Washington,
D.C.




(600429)      L
              ertet     Page 11                             GAO/OSI-99-10 Exportation of Stolen Vehicles
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