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Export cars from the U.S.

Return on Investment and Exporting Vehicles from the USA

By Mike Richards Updated: 06/18/2020 Posted: 10/26/2015

When thinking in terms of purchasing a car at an auction in the United States and sending it abroad for sale, one of the key considerations involves return on investment or ROI. ROI is an approach for evaluating the financial consequences of business investments, decisions, or actions. If an investment has a positive ROI, and there are no other opportunities with a higher ROI, then the investment should be undertaken. A higher ROI means that investment gains compare favorably to investment costs.

To calculate return on investment, the benefits (or returns) of investment are divided by the costs of the investment as follows:

Return on Investment = Net Profit After Interest and Tax / Total Assets

Net profit is calculated by taking revenue minus cost of goods minus operating expenses and all other expenses, such as taxes and interest paid on the debt. (1)  In the context of selling exported vehicles abroad, the ROI calculation would consider shipping costs, taxes and duties related to export and import and shipping insurance. The material below outlines these major considerations more in depth.

Shipping Costs

When purchasing an investment vehicle for the export market, shipping costs can quickly cut into a seller’s profit margin. Given the number of variables that enter into the calculation of maritime transport costs, there is not a “one size fits all” shipping cost a buyer can use to estimate their return on investment. The methods of shipping, the type and the number of vehicles, and the destination port can all affect the cost of shipping.

When exporting a car from the United States there are two methods of shipping a vehicle by sea: in a container or ship via Roll On Roll Off (RORO).

RORO Shipping

RORO shipping is considered the simplest and cheapest method of shipping for vehicles. An RORO ship allows vehicles to be driven directly into the vessel and secured to multi-level car decks. Cars are secured inside the vessel, shielded from wind and water.

Comparatively, shipping a car by RORO comes with lower destination port charges due to the fact there are no charges for the use of port crane facilities to unload a container from the ship, and other container unloading services. For exporters, sending some vehicles RORO shipping can offer a more cost-effective option.

The only drawback with RORO shipping rests in the fact that most RORO shipper has limited geographical coverage. For that, some smaller countries may not have facilities able to accommodate international RORO transport.

RORO Ports in the United Sates

  • Baltimore, MD
  • Charleston, SC
  • Jacksonville, FL
  • New York, NY
  • Norfolk, VA
  • Galveston, TX
  • Port Hueneme, CA
  • Tacoma, WA

Container Shipping

Container shipping may provide a better solution given the limited number of RORO ports worldwide. For shippers who may extra goods to ship with the vehicle such as spare parts or may be sending two vehicles that can fit into a larger container this may be a more viable option.

Standard containers come in two sizes; 20′ and 40′ in length. A 20′ container is suitable for shipment of one vehicle  whereas a 40′ container provides sufficient space for two average size vehicles.

Container Ports in the United States

One of the more important considerations in planning an export strategy involves getting the vehicle from the site of purchase to the port for shipping. Obviously, the longer distance the car must travel to reach a cargo ship the more cost will be incurred. The following is a list of all container ship ports in the United States:

  • Port of Long Beach, California
  • Port of Los Angeles, California
  • Port of Oakland, California
  • Port of Seattle, Washington
  • Port of Tacoma, Washington
  • Port Miami, Miami, Florida
  • Port of Tampa, Florida
  • Port of New Orleans, Louisiana
  • Port of Boston, Massachusetts
  • Helen Delich Bentley Port of Baltimore, Maryland
  • Wilmington Marine Terminal, Delaware
  • Port of New York and New Jersey
    • Howland Hook Marine Terminal, Staten Island, New York
    • Port Jersey Marine Terminal, Jersey City, New Jersey
    • Port Newark-Elizabeth Marine Terminal, New Jersey
    • Red Hook Marine Terminal, Brooklyn, New York
  • Port of Savannah, Georgia
  • Port of Charleston, South Carolina
  • Port of Wilmington, North Carolina
  • Virginia Port Authority, Virginia
    • APM Terminals, Portsmouth, Virginia
    • Newport News Marine Terminal, Newport News, Virginia
    • Norfolk International Terminals, Norfolk, Virginia
    • Virginia Inland Port, Front Royal, Virginia
  • Port of Houston, Texas
    • Bayport Terminal, Houston, Texas
  • Port of Galveston, Texas
  • Port of Mobile, Alabama
  • Port of Anchorage, Alaska
  • Port of Honolulu, Hawaii
  • Port of San Juan, Puerto Rico

Shipping Costs

The actual costs of shipping can vary by carrier, how many vehicles being shipped, the mode of shipping (container/ RORO) and time of year. As such, it is difficult to provide accurate estimates for shipping costs. The best practice, in this case, involves checking with shippers to receive quotes.

Maritime Shipping and International Commercial Contracts Terminology

Here is a complete list of Maritime Shipping and International Commercial Contracts terminology.

Pre-shipment Inspections

When shipping a vehicle abroad it is likely an exporter may need a pre-shipping inspection. A pre-shipping inspection is a comprehensive inspection of goods, conducted by a customs agency or by a private firm. The inspector will look at invoices and other documentation to enable proper identification of goods being shipped. The scope of the inspection will look at the good’s quality. quantity, tariff classification, import eligibility, and export market price and/or valuation for customs purposes

This identification allows for the correct assessment of customs duties and taxes or the shipment value for foreign exchange control. Pre-shipment inspection is also key to helping governments maintain compliance with the WTO Agreement on Customs Valuation.

Although pre-shipment inspections (PSI) are not a direct cost, they can cause a delay in shipping or result in a vehicle not being able to leave the country of origin.

According to the U.S. Department of Commerce’s International Trade Administration the following countries currently require or request pre-shipment inspections:

Angola, Bangladesh, Benin, Burkina Faso, Burundi, Cambodia, Cameroon, Central African Republic, Comoros, Republic of Congo (Brazzaville), Democratic Republic of Congo (Kinshasa), Cote d’Ivoire, Ecuador, Ethiopia, Guinea, India (see note below), Indonesia (see note below), Iran, Kenya (under review), Kuwait (see note below), Liberia, Madagascar, Malawi, Mali, Mauritania, Mexico (see note below), Mozambique, Niger, Senegal, Sierra Leone, Togo, Uzbekistan. (2)

Most countries listed above require inspections for shipments above a certain value. However, in some countries inspections are required for all imported products, regardless of value.

Tariffs and Duties

Tariffs and duties can be significant costs when exporting and importing a vehicle for sale. First, it is important to clarify terminology. According to the International Trade Association:

“A tariff or duty (the words are used interchangeably) is a tax levied by governments on the value including freight and insurance of imported products. Different tariffs are applied on different products by different countries. National sales and local taxes, and in some instances customs fees, will often be charged in addition to the tariff. The tariff, along with the other assessments, is collected at the time of customs clearance in the foreign port.” (3)

Tariffs and duties increase investment cost and may affect your profit margin. Therefore, it is important to understand what your tariff and duty liability when calculating ROI on an investment vehicle. Furthermore, tariffs and duties are subject to change frequently as a way to protect domestic industries or encourage imports.

Tariffs and duties vary by country and are assessed based on the specific characteristics and value of an item being imported.

Cargo Insurance

Shipping valuable goods abroad can be a risky duty to the many types of liability cargo may be subjected to. Therefore, it is important to purchase shipping insurance on vehicles shipped abroad. This type of insurance coverage takes effect when the cargo leaves its place of origin and is in effect until the cargo is delivered to its destination.

 The following tips can provide guidance when selecting cargo insurance

  1. If shipping overseas, be certain that your cargo insurance provider has a history of providing coverage for multiple modes of transportation, customs brokerage, and moving goods internationally.
  2. Make sure your provider protects your goods in all modes of transportation
  3. Consider the differences between insuring shipments one container at a time or using an open policy which can provide cost savings.
  4. Will the vehicle(s) be covered while they are sitting in a warehouse and not in transit? If not, consider purchasing a policy which covers your goods through all phases of transit.
  5. Does the insurance carrier provide an all risk cargo insurance policy?
    An all-risk cargo insurance policy is the broadest form of shipping insurance and will cover any physical loss/damage from any external cause. An all-risk policy will list any exclusions that are not covered, which can be added on to the policy as an additional clause. The following types of loss are not covered by the “all risks” form:

    1. Loss of market or loss, damage or deterioration arising from delay.
    2. Loss or damage arising from strikes, riots, civil commotions. (This coverage may be and usually is added by endorsement.)
    3. Loss or damage arising from acts of war. (This is usually covered under a companion war risk policy.)
  6.  What is a marine cargo insurance buyer’s contingency policy? When the terms of sale include insurance coverage up to the title transfer of goods, the buyer may purchase additional insurance from an insurance provider known as a contingency policy. A contingency policy will provide insurance coverage for the goods once the title has transferred and the goods are no longer covered under the seller’s insurance policy.
  7. What does basis of valuation CIF + 10% or 110% valuation mean?
    The standard valuation for both annual volume reporting and payment of cargo insurance claims, unless otherwise requested, is 110%. This means that the total premium owed is calculated using the policy rate times 110% of the total cost of goods, and any covered losses are paid at 110% of the cost of goods, freight and insurance premium of the shipment, less deductible.
  8. What is a perils clause? This type of clause covers “perils of the seas” or  damage due to heavy weather, standing, collision, sinking, contact with seawater, etc. Other perils normally covered include:
    1. Fire: both direct and consequential damage whether from smoke or steam or efforts to extinguish a fire.
    2. Assailing thieves: the forcible taking of a shipment rather than mysterious disappearance or pilferage.
    3. Jettison: voluntary dumping overboard of cargo.
    4. Barratry: the fraudulent, criminal or wrongful act of the ship’s captain or crew that causes loss or damage to the ship or cargo.

9. What are average clauses? Total losses from conditions listed in the perils clause above are fully recoverable up to the policy limits, partial losses (other than general average) known as “particular average”, from these same perils are recoverable only as specified by the average clause. The Assured selects the average clause best suited to his circumstances. There are five principal average clauses:

  1. FPAAC (Free of Particular Average American Conditions): Limits recovery on partial losses to those directly caused by fire, stranding, sinking or collision of the vessel. This is the most limited average clause in general use today.
  2. FPAEC (Free of Particular Average English Conditions): Similar to FPAAC except it is not necessary that the damage to cargo be a direct result of a specified peril, is being sufficient that one of these has occurred.
  3. With Average if Amounting to 3%: Provides protection for partial loss from perils of the seas. The percentage is called a franchise and is the minimum amount of claim.
  4. Average Irrespective of Percentage: All partial losses due to perils of the seas are fully recoverable regardless of percentage.
  5. All Risks Conditions: Coverage against “all risks” of physical loss or damage from any external cause.

Measuring Demand in Overseas Markets

After considering all of the potential costs involved in shipping a vehicle abroad. It is important to conduct market research prior to purchasing a vehicle. This type of research should consider the demand for used cars in foreign markets and what type of vehicles consumers are purchasing.

From this information, a seller can tailor their investment strategy to meet demand. There are a number of resources online, which provide statistics concerning the number of used cars sold in a country and the types of cars that are in demand.

The following chart represents the most highly served markets for used cars

U.S. exports of used passenger vehicles, 2009–13, thousands of units

Country                                 2013   Increase (2009–13)
Mexico                                   115.6 99.1%
Nigeria                                   107.7 115.2%
United Arab Emirates        85.4 64.0%
Benin                                     61.4 88.6%
Jordan                                   36.2 27.1%
Other                                      419.5 -3.5%
Total                                      825.9 25.9%

Source: Author calculations based on USITC DataWeb/USDOC data (accessed August 14, 2014).

When looking at market conditions abroad think in terms of growth drivers and growth barriers. An example of growth drivers are the following:

Increased Demand. Increased demand due to higher incomes that allow for big ticket item spending. For example, the USITC notes that the “demand for used-vehicle imports is likely higher in developing countries because of the quality, variety, and low initial cost of U.S. used vehicles compared with the limited availability and costliness of new vehicles in those markets. Developing countries’ lower labor costs also mean that repairs are less expensive in those markets, placing the cost of maintaining an older used vehicle well below that in the United States.” (4)

Look for Underserved Markets. USITC notes that one cannot always assume growth in new cars sales will result in the same for used cars. For example, “Used passenger vehicles are often exported to developing countries because they offer luxury options at lower prices, are not available new in those countries, or match or exceed the quality of locally available new vehicles.” (5) Demand for new cars may wane and be replaced for lower-priced used cars.

Look for Developing Markets USITC REPORTS. “Demand for used-vehicle imports is likely higher in developing countries because of the quality, variety, and low initial cost of U.S. used vehicles compared with the limited availability and costliness of new vehicles in those markets. Developing countries’ lower labor costs also mean that repairs are less expensive in those markets, placing the cost of maintaining an older used vehicle well below that in the United States.” (6)

Be Mindful of Currency Exchange Rates: Selling vehicles in countries whose currency exchange is unfavorable against the dollar can present challenges due to a reduced buying power among destination market consumers.  However, some emerging markets may have a strong currency that would provide the perfect combination of spending power among consumers and market conditions that may be conducive to purchasing used cars.

Geography Matters:  How close a market is to your shipping point or the type of terrain and roads a country has will dictate the demand for cars in the market. For example, a country with bad roads or that is mountainous may not have a high demand for low profile sports cars due to the obvious fact these cars simply will not be able to be used in these conditions. Also, extremely hot or cold climates will dictate what type of car will be in demand. A car with a bad record of performance in hot conditions or a bad air conditioning system will likely not be a hot seller in the UAE where temperatures regularly crest 100 degrees Fahrenheit.

Barriers to market growth can include regulations and tax schemes used to make importation of used vehicles cost prohibitive. USITC notes that among the top used car overseas markets  “While geographic proximity is probably the primary reason Mexico is the top destination for U.S. used-vehicle exports, the North American Free Trade Agreement likely contributes. Under this agreement, Mexico agreed to remove its barriers to the import of used passenger vehicles.

Benin’s imports are likely primarily destined for Nigeria, a much larger market. Nigeria has high tariffs on used vehicles and bans imports of vehicles older than 10 years, while Benin does not. Reports suggest this has led to significant transshipment through Benin to Nigeria.

Many countries fully or partially bar the import of used vehicles. This likely occurs for three reasons: (1) to protect the domestic market for new vehicles, (2) to protect the environment from the (usually) higher emissions of older vehicles, and (3) to prevent the import of what they see as “junk” from developed countries. As of 2011, at least 23 countries had a full or partial ban on the import of used vehicles.” (7)

Market Overviews by Country

If you want to find more detailed information on some specific markets, the following countries have further assessments available.


(4, 5, 6, 7)