U.S. Customs Service: Efforts to Curtail the Exportation of Stolen
Vehicles (Letter Report, 05/12/99, GAO/OSI-99-10).

Pursuant to a congressional request, GAO reviewed the Customs Service's
efforts to curtail the exportation of stolen vehicles from the United
States, focusing on: (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.

GAO noted that: (1) at the ports GAO 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; (2) to circumvent Customs vehicle exportation
procedures, thieves have used false documents as proof of vehicle
ownership; (3) 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; (4) 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; (5) 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;
(6) 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; and (7) the
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.

--------------------------- Indexing Terms -----------------------------

 REPORTNUM:  OSI-99-10
     TITLE:  U.S. Customs Service: Efforts to Curtail the Exportation
	     of Stolen Vehicles
      DATE:  05/12/99
   SUBJECT:  Larceny
	     Motor vehicles
	     Customs administration
	     International agreements
	     Smuggling
	     Contraband
	     Fraud
	     Law enforcement
IDENTIFIER:  Florida
	     Texas
	     California
	     Mexico
	     Central America
	     Caribbean
	     Europe

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Covers1b.book GAO United States General Accounting Office

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

  GAO/OSI-99-10

United States General Accounting Office Washington, D. C. 20548
Lett er

Page 1 GAO/OSI-99-10 Exportation of Stolen Vehicles

GAO

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 California 1 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.

B-279627 Page 2 GAO/OSI-99-10 Exportation of Stolen Vehicles

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.

2 62 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.

B-279627 Page 3 GAO/OSI-99-10 Exportation of Stolen Vehicles

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 Exporting Used, Selfpropelled Vehicles

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) require persons attempting to export
automobiles, trucks, motorcycles, or buses to present the vehicle,
an original or certified copy of the certificate of title, and two
facsimiles 5 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))

4 The 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.

B-279627 Page 4 GAO/OSI-99-10 Exportation of Stolen Vehicles

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 Exporting Used, Selfpropelled Vehicles

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 presented matched the documentation. The inspection
of vehicles and 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 autotheft task
force on a random inspection of cars at the shipping yards along

B-279627 Page 5 GAO/OSI-99-10 Exportation of Stolen Vehicles

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 Circumvent Port Operation Procedures

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

False or Counterfeit Documents and VINs Customs advised us that
car thieves have used counterfeit or duplicate

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 car 6 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 Inspections

Inspectors at seaports advised us that after Customs clears a
vehicle for 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.

B-279627 Page 6 GAO/OSI-99-10 Exportation of Stolen Vehicles

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

Vehicles Not Reported for Export

Customs has found a number of stolen vehicles hidden in containers
whose 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 Initiatives

Customs management told us that it is exploring a number of ways
to curtail the exportation of stolen vehicles. Its efforts include
the following:  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).

B-279627 Page 7 GAO/OSI-99-10 Exportation of Stolen Vehicles

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
gammaray detection scanners for nonintrusive examinations of
closed cargo containers, rail cars, and truck trailers. This
system produces an x- raylike 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

8 The 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.

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

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 Methodology We conducted our initial work from June 19,
1997, to December 14, 1997,

and subsequent work, as requested by your Subcommittee, from
October 9, 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,

B-279627 Page 9 GAO/OSI-99-10 Exportation of Stolen Vehicles

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 10 GAO/OSI-99-10 Exportation of Stolen Vehicles

Appendix I Treaties and Information Relating to Stolen Vehicle
Recoveries in Foreign Countries Appendi x I

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. b Information reflecting the number
of stolen U. S. vehicles located in this country is not available.

Country Status Number of stolen

vehicles located in the foreign country in 1998 Number of vehicles

recovered, 1996- 1998

Mexico a Active 6, 345 6, 011 Belize Pending b 0 Guatemala a
Pending 64 10 Dominican Republic a Pending 37 33 Costa Rica
Pending b 2 Panama Pending b 10 Venezuela a Pending 55 15 El
Salvador Pending b 0 Honduras a Pending 36 0 Nicaragua Pending b 9
Poland a Pending 19 27 Russia Pending b 0

Page 11 GAO/OSI-99-10 Exportation of Stolen Vehicles

Appendix II Major Contributors to This Report Appendi x I I

Office of Special Investigations, Washington, D. C.

Kevin P. Craddock, Senior Special Agent Stephen V. Iannucci,
Assistant Director Barbara W. Alsip, Senior Communications Analyst

Office of the General Counsel, Washington, D. C.

Barbara C. Coles, Senior Attorney

(600429) Let t er

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