Auto Dealer Shipping Vehicles To Russia?

The Marianas Business Journal (sorry, registration required) ran a very interesting story earlier this month. Apparently local auto dealer Atkins Kroll is quietly selling millions of dollars worth of automobiles to a person in Helsinki, Finland. These vehicles, intended for the US market, are being sold in Russia and other former Soviet bloc states by the Finnish exporter, Aleksander Odrischinsky, and his company, Catamount Oy.

Government officials on Guam in mid-April began investigating this extraordinary trail of millions of dollars worth of luxury SUVs and sedans. The trail goes from Atkins Kroll on Marine Corps Drive, into shipping containers at the Port of Guam, on to Helsinki, via Korea, and across the Finnish border into Russia.

The reason that vehicles bound for Russia would need to be sourced from Guam was a mystery to Customs agents; however, a Toyota official in Helsinki explained that attractive U.S. prices and demand for certain hard-to-get models were the reasons for the Guam connection.

The Journal was unable to reach Catamount or Odrischinsky, but on April 27 spoke by phone with Vesa Tikka, general manager of Toyota Motor Finland Oy, which has 60 dealer outlets and a national office in Helsinki that sold 27,000 Toyotas and 50 Lexus vehicles in 2003. Tikka described Catamount as “a company that is selling cars to Russia – a small company that is very active in this, boats as well.” Tikka said he thought Odrischinsky was managing director of Catamount. Vesa said the route to Russia through Finland is not unusual. “All Lexus and Toyota vehicles would be going through Finland, even if going to Russia.”

Tikka said that the Lexus LX 470, GX 470 and RX 330s that were shipped from Guam to Finland in April are SUV models that are not yet available in Finland or Russia. He said the RX 330 will be available in Finland at the end of 2004. The April shipments from Guam also contained 20 Toyota Camrys, which in Finland each sell for about 35,500 Euros, the equivalent of about $42,000, compared to about $20,000 on Guam. Tikka said the shipments of new cars into Russia must be an issue for RussiaÂ’s authorized Toyota dealer. “This must bother the dealer in Russia. I can imagine, yes,” Tikka said.

“He buys cars wherever he can find them,” Tikka said of Odrischinsky.

The whole thing is a little off color. Because the cars are not registered on Guam, sale of the vehicles does not register on monthly reports used by the Guam Automobile Dealers Association. When questioned by the Marianas Business Journal, AK management basically said their business dealings were nobody else’s business. How long this arrangement has been going on is unknown, but it has caught the attention of Guam customs officials.

Shipping documents show that Odrischinsky made shipments of 17 vehicles in February, 31 in March, and 50 in April. AK wouldn’t reveal the number of cars sold to Odrischinsky, or say how long the large car buys had been going on, and the Journal was only able to look at a selection of shipping documents. Export figures from the Guam Department of Labor show that automobile exports in 2003 were $3.73 million, up a remarkable 84% from the previous year… Auto industry experts said the Toyota and Lexus vehicles going from Guam to Finland could be described as gray market vehicles. A gray market is a source of supply from which scarce items are bought for quick delivery at a premium above the usual market price, usually by a speculator.

Guess AK struck upon a lucrative business deal. Too bad it looks like that gravy train is drying up. Toyota officials in Japan are looking into the deal, and are concerned because vehicles bound for the US have different emissions and safety specifications than those destined for Europe. And Odrischinsky doesn’t seemed particularly interested in continuing to deal with Guam anymore either. Contacted via telephone for an interview, Odrischinsky indicated that he would cease dealings with the island due to the ‘unfavorable’ article published on May 3rd. He went on to claim that the vehicles are not bound for Russia, but would not divulge their ultimate destination. In fact, his quote is taunting. “I’m buying the cars, that’s true. I’m a big exporter to the ex-Soviet bloc, that’s true. But that’s not the destination of these cars. I do export all over the world. These cars are not going to Moscow… You’re on the right track. They come to Helsinki, but, there you’ve lost the trail,” he said.

This sort of thing is hardly unique to Guam. Forbes ran an excellent article in April about middlemen trafficking in US goods through foreign markets, with the goods often ending up in countries subject to U.S. embargo, like Iran and North Korea. It is an enticing business, with the middlemen charging exorbitant fees for flipping cargo through intermediate ports like Dubai to these sanctioned destinations. “Interviews with private business people and U.S. officials, along with court documents, reveal a simple scheme. Companies located around the world sell goods–from cigarettes to medical devices and PCs–to buyers in the U.A.E. Dubai traders repackage the items and send them along by air or ship to agents in, say, Tehran, Pyongyang, Damascus or Islamabad.” Forbes highlights the more dangerous end of this illicit trade, with innocuous parts designed for medical equipment being repurposed for nuclear weapons development. Apparently Pakistan’s Abdul Qadeer Khan, who created that country’s nuclear weapons, used this process to seed countries around the world with prohibited technology to further their nuclear ambitions.

Now, I’m not saying shipping overpriced SUV’s to Finland is comparable to sowing the dragon’s teeth of nuclear weaponry to rogue nations, but it is part of the same continuum. And the primary motivator is both cases is money – a desire to increase profits at the expense of someone or something else. AK can say what they want about their business dealings, but they made a decision to ship their Toyotas to a foreign market, on a fellow Toyota dealer’s territory, in order to make a quick buck. It might not be illegal, but it certainly presents an ethical challenge.