Consumer Demand Doesn't Let Countries Ban Import Of Cheap Used Cars

Some vehicles recently seized by the Nigeria Customs Service (NCS) used by smugglers to smuggle frozen foods.

 *By Anumita Roychowdhury 

Policies to discourage polluting older vehicles will lead to crowding of the dumped vehicles in the international market. Policies to discourage polluting older vehicles will lead to crowding of the dumped vehicles in the international market.

Countries across Africa, South Asia and Latin America are waking up to the repercussions of used vehicles and are setting up import barriers to contain them. Outright ban on used vehicle import is not immediately possible in many African countries. Due to growing consumer demand for cheap used cars, governments are finding it tough to ban import of old cars or fix improved emissions standards even after adopting cleaner fuels. 

While four African countries—Egypt, Morocco, South Africa and Sudan—have banned used-vehicle imports, another 25 countries have imposed age restrictions on vehicles (see ‘Riding on old cars’,). Currently, age caps vary between 15 to three years. But the emerging opinion in the region is that age cap should not exceed four-five years. If such age cap is implemented along with the introduction of cleaner fuels of 50 PPM sulphur, the region can leapfrog to Euro IV emissions standards for vehicles. Such combined strategies are more evident in South Asian countries. Nepal, Sri Lanka and Bhutan have banned import of used vehicles. Nepal has adopted Euro III emissions standards and Bhutan Euro II emissions standards. Bangladesh has fixed the age of vehicles at five years to eliminate the dirty vehicles and combat dumping. 

Several countries are combining age restriction with tax measures to increase the cost of import of older vehicles. For instance, Kenya while restricting the age at eight years has also imposed incremental tax on older vehicles that has increased the overall cost. In Uganda, environment levy favours import of vehicles that are less than five years. Despite the initiatives, countries are still struggling to stave off cheap dumping.

“Current tax measures may not necessarily reduce import of used vehicles. This is a way to increase revenue to finance government programmes and not necessarily lead to any significant corresponding increase in purchase of new vehicles,” says Ronald Amanyire, secretary, National Road Safety Council, Ministry of Works and Transport, Uganda. This requires effective fiscal measures. In fact, Nathan Tumushabe, also from Uganda’s works and transport ministry, further reiterates, “Even though the environmental levy strategy has worked but it’s not a deterrent enough. Even if 100 per cent levy is imposed, an old vehicle still remains cheaper than a new one.” 

Mauritius took more advanced action while introducing age-caps. It started with CO2 emissions based rebate system for cars. But officials found it difficult to enforce this as it was challenging to compare international CO2 standards or verify emissions claims for the purpose of import. This ended up encouraging import of more used vehicles over new vehicles as certificates brought by dealers made dubious claims of fuel economy or CO2 emissions that could not be easily verified. Moreover, in practice, the rebate scheme ended up increasing used vehicle import over new vehicle import leading to exchequer losses. “This scheme had to be discontinued due to a number of operational and litigation issues and this was replaced with more transparent engine size-based excise tax system,” says Nassir Ally Khadun, former acting road transport commissioner of the country’s National Transport Authority. Taxes are now graded according to the engine size with higher taxes on bigger engines that guzzle more fuel. 

Regulations have also restrained the frequency at which an individual can buy a car. The Mauritian government has set up elaborate institutional process to establish the accountability of all car dealers and verification process to ensure imports of only roadworthy vehicles. 

Yet another unique but early trend is the growing interest in tighter action on imports of used vehicles especially in countries that are promoting local manufacturing of vehicles. This is evident in Nigeria, Ethiopia and Zimbabwe that are developing their vehicle-manufacturing and assembly base. Nigeria has ramped up tighter controls and import taxes on vehicles to build its own industry, and protect its balance of payment and improve energy security. Its industrial policy has encouraged tougher practice that has reduced imports substantially. 

As a result, in the last three years, vehicles imported from Europe, Asia and the US have reduced significantly. Some media reports have claimed significant reduction. Jelani Aliyu, director general, National Automotive Design and Development Council, Nigeria, has also made a public statement that at least 60 per cent of the vehicles in Nigeria should be locally produced. Nigeria has also banned polluting two-stroke engines and is in the process of notifying 50 PPM sulphur fuels. 

Ethiopia is also finalising its policy on import taxes to make them more stringent. In South Asia, India had taken the lead to clamp down on used vehicle import to build its own vehicle industry.

There are also strong worries in Africa following the dieselgate controversy in which diesel cars have been found to be emitting much higher in real world than what they are certified to emit. This has triggered strong policies in Europe to phaseout older diesel cars. This will lead to a huge heap of discarded diesel cars and SUVs that will get dumped in low-income countries. A recent study by German think tank Transport & Energy states that there are 43 million grossly polluting diesel cars on the roads of Europe and are still rising. Many of these cars are now being exported eastwards that will ultimately head to Africa. If Europe does not act now, high emitting diesel cars will be polluting the air of cities around the world for decades and, in the process, shortening human lives. Cheaper imports are already pushing markets towards bigger diesel engines in the car market of Africa and South Asia that do not have clean diesel. This requires a strategy to prevent dumping of discarded diesel cars with toxic emissions in low-income countries.

Nigeria has been progressive enough to price diesel fuel higher than petrol, which has prevented dieselisation. But other markets across Africa and South Asia are vulnerable. Côte d’Ivoire is another interesting example where the government has not only imposed additional fee for road safety, congestion and pollution on import of old vehicles, but has also equalised the price of diesel and petrol fuels since 2012. This has reduced the share of diesel cars.

Sri Lanka is also levying high taxes on diesel cars. It has been innovative enough to use its import policy to promote clean fuel and vehicle technology. “Due to our import tax policy, the share of diesel cars has dropped significantly, and has simultaneously increased the share of petrol, hybrid and electric cars,” says Thusitha Sugatapala, advisor to the government of Sri Lanka.

Karma Pemba, chief transport officer, Transport Development Division, Road Safety and Transport Authority, Ministry of Information and Communications, Bhutan, says Bhutan plans to design a low-carbon vehicle strategy, promote electric mobility and tap international climate finance to assist in its implementation. Nepal, on the other hand, while adopting Euro III standards for vehicle imports is also encouraging the import of electric and hybrid vehicles, says Ram Chandra Poudel, senior divisional engineer, Department of Transport Management, Ministry of Physical Infrastructure and Transport, Nepal. Both Bangladesh and Pakistan have curbed emissions from on-road fleet by promoting natural gas vehicle programmes.

A lot of regulatory efforts in these countries also get undermined by the grey market. Porous borders make it more challenging. “Most vehicles lack proper documentation as they are smuggled into the country through unapproved routes,” says Baba Bukari Musah, chief, customs division, Ghana Revenue Authority. Ghana faces the challenge of smuggled vehicles coming through unapproved routes. Also, the agreements under the Economic Community of West African States (ECOWAS), a regional organisation of 15 West African countries that was established in 1975 to promote economic integration among its members, allows temporary transit of used vehicles through countries. Under the ECOWAS agreements, Ghana allows used cars that are either originating from or going to the other 14 member countries, to operate in Ghana for 90 days after which they can either be returned to their country of origin or retained in Ghana after paying the customs duty. This has become a loophole.