Learning "GREY MARKET" the hard way.

[Pettiboner]

PART 1

The Grey Market truth.

So, a few years back I posted a question about the value of actually importing some grey machines from China for selling here in Canada to make profit enough to net a free machine for myself. I got some very good advice on here telling me this was a very bad idea. This advice I did not follow, to my own peril.

Being such a polite Canadian, with the typical inclusive Canadian value system I was sure that the advice I received at the time was born more of racial stereotyping than of actual fact. More of conjecture than real world experience. I have never been more wrong! The talk is real. The dealers in Shanghai...... well, I dont want to get censored here so I will stick to JUST the facts.

So here is my story. This is my actual experience being shared for anyone who may be thinking this is a good business to get into. It is also my "MIA CULPA" and an opportunity for all to say, "I TOLD YOU SO" and "IT SERVES YOU RIGHT TURKEY" and "DUMBASS" etc etc. I cam take it. Hell, I deserve it!! Perhaps reading this though, some other ambitious fellow will be warned enough to avoid the many pitfalls I was forced to dig my way out of in this colossal mess I created for myself.

In the months before covid was unleashed on our world, I located and contacted a couple of used equipment dealers in Shanghai. I struck a deal with Shanghai Steady Equipment to purchase 2 machines, a Komatsu PC40 and a Hitachi ZX50. These machines were advertised as having 2300 hours and 2800 hours and to be in good condition with no issues. That was the first big lie. Upon final arrival I found the Hitachi to have 10,300 hours, and the Komatsu meter to read 2800 hours but very clearly this is a high hour machine, 8000 plus, with pump issues and bad leaks from the pattern changer and from one final drive. They both have nice paint though!....

But I am getting ahead of myself. While shopping in Shanghai, I insisted on Japanese made machines and I insisted on seeing the manufacturers tag. One dealer told me they remove the tags for painting as they are usually smeared by rubbing against objects anyway. He kindly showed me the new tags they replace the old tags with before I told him I would not be buying any machines from him...ever.

A clearly stipulated condition of the agreement was that the machines had to be "cleaned and free of any soil, dirt, dust, grease and oil". This I was assured of prior to loading my machines into a 40' container and onto a ship in Shanghai heading for Canada. 1/2 payment up front, other half on arrival in Canada. 2 machines, the 40' container, shipping and terminal costs around $30,000 usd. Not bad I am thinking. This is gonna be great!!

The shipment arrived as scheduled, so far so good. My freight forwarder advised that customs had cleared the container to enter the country so 2nd half payment was advanced to Shanghai Steady. Within hours of second half payment being sent, my freight forwarder called to advise that my container status had changed, and that it was being seized for secondary examination by Canada Customs. This little privilege would cost me $3,000.00 for trucking to and from the examination facility and handling while there. Customs however, inspects the actual container free of charge! Such a deal.
I am not worried one bit. Everything is legit and I am a law abiding honest hardworking dumbass so I should be ok. Just another tax to pay Right?? Not.

About a week later I get a call from Customs. "Your machines are not suitable for entry into Canada. There is too much soil on the tracks and too much dirt and dust in the cabin. While they were inspecting the machines, a fair amount of disassembly occurred as far as panels etc which was left for me to deal with later.

The big takeaway here is the importation of foreign soil. Not allowed. Here or in the USA. Strictly forbidden in fact. My can was seized and ordered OUT of Canada at my expense, within 10 days.

The soil, according to international agreements must be returned to "country of origin". No other country signatory to this agreement will accept the soil, and the machines can not be cleaned here. The seller, Shanghai Steady refuses to accept return shipment so it cant go back to Shanghai. He says that because they are Japanese made machines, they are subject to a 30% duty to get back into China again. My freight forwarder has no clue what to do and drops me like a hot rock.

To be continued.....

 

[skata]

Wow.

 

[JLarson]

That's a lot of damage.

 

[Pettiboner]

Part 2

Well now the trap is fully sprung. My can is seized, I have no access to it. My choice is to surrender the shipment to the crown for disposal at my expense, or find a new forwarder to untie this gordian knot.

The seller, Leo Chen, advised me at this point to "give the customs officer a couple thousand dollars". I actually had to explain to him that here in the west, that gets a man put in jail.

Fortunately, there was a Chinese speaking forwarder willing to take this mess on for me. I had to apply for an time extension from Customs. They inserted themselves directly into the dealings with the forwarder and soon a plan was hatched to ship the container to Hong Kong for then machines to be cleaned. As Hong Kong is not part of mainland China, duty did not apply so it seemed a reasonable option. And so, for payment of $10,500 usd in advance, my container was on the next ship bound for Hong Kong. This included ocean freight one way, trucking to the vendor in Hong Kong, destuffing, cleaning, restuffing, and trucking back to the port.

After the can was on it's way I got a bill for demurrage from the export terminal for $150 usd per day while my can sat on the dock waiting for 17 days for the ship to arrive to take my can away. 3 days were free time though so $1,600 usd more into the fire.

Then the cleaning vendor in Hong Kong demanded more money because the PC40 was stuck in the can as it was too tall. The Shanghai supplier had literally jammed it in there by stretching the door over the cab. Once inside it wasnt coming out without removing the tracks. At this point I simply said no. The deal was fixed price in advance and they had already quoted high AND had already completed all this without my knowledge. So they reluctantly sent my can back to the dock for shipment BACK to Canada again. In some kind of retaliatory move or message they positioned a dead frog on the engine cover of the machine just inside the door. Presumably so in case Customs inspected the container again it would be refused AGAIN for biological contamination. Fortunately THIS did not happen.

By now, its been 8 months since I first ordered and paid for the first 1/2 of this shipment and it's still in China. Freight rates have shot up with covid now driving consumption in the west making it now $5300usd now to get my container back to Canada and then another $1,000 terminal costs and trucking to FINALLY get the can on the ground at home.

Shanghai Steady would not contribute to ANY of these costs even though admitting their failure to uphold our agreement to clean the machines. Once they had my money, they were keeping it.

So now the machines are finally here.
In addition to the previously outlined deficiencies of machine hours being completely misrepresented the ZX50 engine has a hole cut with a torch through the intake manifold to enable the starting fluid to be injected to get the thing to start. It smokes like a coal powered boiler and blows the dipstick out of the hole at revs.

The wedge style quick coupler I ordered was not supplied. Instead a pin grabber style was included that simply is too small to release from the pins. The thumbs I had installed were completely misaligned and had to be cut off again and repositioned.

All this to be able to say, with the authority that comes from personal experience, Chinese equipment dealers are a bunch untrustworthy dishonorable thieves. Bait and switch, half truths and outright lies are standard operating practices for these people. They will tell you ANYTHING you want to hear, and back it up with garbage. Do not trust these wolves. Be aware. Be VERY AWARE.

My greed cost me about $70,000 and about 200 hours of my time to buy two old worn out pieces of junk that can not be relied on for a full days work. It will cost me another $7500 to get them up to decent standard or fire sale then out.

Dont get caught my fellow iron enthusiasts.

Beat regards,
Pettiboner

 

[Vetech63]

Well, hindsight is 20/20 they say. Had you known all this was going to come into play, you could have saved alot of money just paying at freight ship worker $1000.00 to push the container into the ocean on its way back !

 

[CM1995]

The Chinese and other scammers breed on your greed. If something is too good to be true..

Thanks for sharing. Next time someone asks about importing grey market equipment I'll refer to this thread.

 

[Pettiboner]

Well, hindsight is 20/20 they say. Had you known all this was going to come into play, you could have saved alot of money just paying at freight ship worker $1000.00 to push the container into the ocean on its way back !

That would have been a great solution for sure! Had I known the container was full of garbage I would have been looking for an exit for sure.
It's interesting to note that until you actually have access to your cargo, you really have no idea what is coming. Without being on the ground in China to supervise loading, you are at the mercy of thieves.

 

[Nige]

Sorry to hear about your experiences.
As CM pointed out, like Bernie Madoff's investment schemes, if it sounds too good to be true walk away. Better still, run.

Applicable conditions such as used machinery having to be clean when imported used are generally found on the Customs website of the country in question. It's the same reason that lumber used for the manufacture of cribbing or packing cases has to be treated with pesticides, to prevent the transmission of bugs & germs.

There are any number of reputable international inspection agencies with operations in China that will inspect & certify machine condition prior to purchase for a fee. SGS (Société Générale de Surveillance, a Swiss company) is one organization I know of, there will be lots of others. I'm sure that probably all these "dodgy sellers" such as the one you dealt with would run a mile if you told them that SGS or a similar company would be at their yard to inspect the machines at such-and-such a time on a certain date, to observe the loading into the shipping container, and to seal the container on your behalf. In the case of whatever is delivered not being exactly what you paid for and had inspected by your agent, you have a claim against the inspection company.

 

[Pettiboner]

That is excellent info Nige. Thank you. That would cover the customs issues for sure. The machine condition and hours would be still a big variable. Unless I can actually see the goods for myself before dropping the cash, this is not happening again. That would mean international travel AND the prospect of being arrested and thrown in a Chinese prison like our two Canadian Michaels being used as political prisoners for Meng Wanzhou

 

[lantraxco]

I've bought a lot of machines from Japan, with very little trouble, but here's my take on it:
ALL used Japanese machines have the hour meter reset, an employee of a manufacturer I was friends with said it was a legal and accepted practice there.

Cleaning? You have to pay for it before loading, usually it does get done. Doesn't matter, because the brother in law of the customs inspector does the cleaning at the port for machines coming in RORO. Customs selects random containers for inspection, intensive inspection, or X-ray, in any case, you're hooped. I have a contact in BC that is licensed to clean, so I'm pretty sure the story about not allowing foreign soil to be cleaned in Canada is most likely a money making scam somehow, but it's your story so I may be all wet. Not as big a problem in the US unless something has changed recently.

In the US emissions is the big hangup, and brother, if you do get something in, and later the EPA decides the CBP made a mistake allowing entry, you're on the hook for huge fines AND re-exporting the machine out of the US.

There's money to be made in importing machines, but it's less than you think, always a gamble, and works best if you're big enough to do dozens a year, that way the odd lemon won't kill you.

 

[Nige]

The machine condition and hours would be still a big variable.

Hence my suggestion above of using an inspection company that has an international reputation to look at the machinery in the seller's yard before shipment.

 

[Pettiboner]

I've bought a lot of machines from Japan, with very little trouble, but here's my take on it:
ALL used Japanese machines have the hour meter reset, an employee of a manufacturer I was friends with said it was a legal and accepted practice there.

Cleaning? You have to pay for it before loading, usually it does get done. Doesn't matter, because the brother in law of the customs inspector does the cleaning at the port for machines coming in RORO. Customs selects random containers for inspection, intensive inspection, or X-ray, in any case, you're hooped. I have a contact in BC that is licensed to clean, so I'm pretty sure the story about not allowing foreign soil to be cleaned in Canada is most likely a money making scam somehow, but it's your story so I may be all wet. Not as big a problem in the US unless something has changed recently.

In the US emissions is the big hangup, and brother, if you do get something in, and later the EPA decides the CBP made a mistake allowing entry, you're on the hook for huge fines AND re-exporting the machine out of the US.

There's money to be made in importing machines, but it's less than you think, always a gamble, and works best if you're big enough to do dozens a year, that way the odd lemon won't kill you.

Its the "Plant Protection Act" I was quoted by Customs. I was advised that Yes, in the USA there are facilities that will do the cleaning BUT, I could not export to the USA from Canada because the cargo was KNOWN to be soiled with foreign soil. Ergo, back to China was the only allowable option.

 

[Jonas302]

All I can say is that sounds like a horrible experience and thanks for being brave enough to post so that others thinking of grabbing a single machine or two know what to watch for

 

[Pettiboner]

All I can say is that sounds like a horrible experience and thanks for being brave enough to post so that others thinking of grabbing a single machine or two know what to watch for

That really is the goal here. This site has been a gold mine for me for getting great information. I am delighted to be able to give something back. Gives at least a measure of value to the whole experience!!

 

[Pettiboner]

I've bought a lot of machines from Japan, with very little trouble, but here's my take on it:
ALL used Japanese machines have the hour meter reset, an employee of a manufacturer I was friends with said it was a legal and accepted practice there.

Cleaning? You have to pay for it before loading, usually it does get done. Doesn't matter, because the brother in law of the customs inspector does the cleaning at the port for machines coming in RORO. Customs selects random containers for inspection, intensive inspection, or X-ray, in any case, you're hooped. I have a contact in BC that is licensed to clean, so I'm pretty sure the story about not allowing foreign soil to be cleaned in Canada is most likely a money making scam somehow, but it's your story so I may be all wet. Not as big a problem in the US unless something has changed recently.

In the US emissions is the big hangup, and brother, if you do get something in, and later the EPA decides the CBP made a mistake allowing entry, you're on the hook for huge fines AND re-exporting the machine out of the US.

There's money to be made in importing machines, but it's less than you think, always a gamble, and works best if you're big enough to do dozens a year, that way the odd lemon won't kill you.

ALSO.....
I would Love to talk to your contact for cleaning in BC. If customs was just sticking it to me, that would be very interesting to know. Is there a chance you could pm me his info?

 

[Pettiboner]

Hence my suggestion above of using an inspection company that has an international reputation to look at the machinery in the seller's yard before shipment.

If anyone knows of such an agency I would love to hear about it. I know there's a buck or two here if its done right. as intaxco says though, and as I have learned, not nearly as much as one might think.

 

[Delmer]

If anyone knows of such an agency I would love to hear about it. I know there's a buck or two here if its done right. as intaxco says though, and as I have learned, not nearly as much as one might think.

Are you out of your mind? Never mind the first time, but why would you even consider importing anything used or high dollar from China after that experience? I've used alibaba or aliexpress, knowing it's ebay without the stellar, stand up sellers and bend over backwards protection through paypal *(sarcasm). I can't imagine even spending $100 on something direct from China though.

Just think about the economics, why would used machines be cheaper in a country where labor standards are at the bottom of the barrel? Occasionally the US and Canada currencies favor equipment moving one direction or the other. There was a period when Japan was in recession, Japan has long been a quality manufacturing export economy with high labor standards, so there were lots of exports from Japan. I'd rather buy a used toyota minivan from Congo, or a used school bus from Ecuador than buy a used excavator from China.

 

[Pettiboner]

Posted reply to Delmer here in error

 

[Pettiboner]

Are you out of your mind? Never mind the first time, but why would you even consider importing anything used or high dollar from China after that experience? I've used alibaba or aliexpress, knowing it's ebay without the stellar, stand up sellers and bend over backwards protection through paypal *(sarcasm). I can't imagine even spending $100 on something direct from China though.

Just think about the economics, why would used machines be cheaper in a country where labor standards are at the bottom of the barrel? Occasionally the US and Canada currencies favor equipment moving one direction or the other. There was a period when Japan was in recession, Japan has long been a quality manufacturing export economy with high labor standards, so there were lots of exports from Japan. I'd rather buy a used toyota minivan from Congo, or a used school bus from Ecuador than buy a used excavator from China.

I would NEVER buy a Chinese made machine. Japanese machines that have been to China can be a bargain with the right supplier and the right controls in place though. (Such as an agent on the ground there)
The scale of these dealers in Shanghai is mind boggling. I asked one guy if he had any PC55s, he answered 6, how many do you want? Its like picking daisies in a field there. The point is, its all junk. Dont get fooled by the low hour ads and the pretty paint. That said, there is a market for that junk, particularly here in Canada. I can unload the ZX50 tomorrow for $20k with the blown engine, and being totally honest about hours and history. Straight up.
Were it not for all the hassles of shipping back and forth and cleaning etc, there would have been a few thousand dollars profit in that can.
Am I outta my mind? Maybe. A lot of people think so!!

 

[skata]

You'd be nuts to do this again unless you go over to China and see the equipment in person.