Issued on 12/20/2012
Posted by NHTSA 2/7/2013
The National Salvage Vehicle Reporting Program (NSVRP) is a leading not‐for‐profit law enforcement support organization dedicated to reducing auto theft, title fraud and abuse, and to helping to control criminal activities related to the exportation of stolen and fraudulently obtained vehicles. NSVRP works closely with the US Department of Justice (USDOJ), the FBI, U.S. Customs and Border Protection and other parties to help further these objectives. In addition, USDOJ has applauded NSVRP for developing reporting standards for NMVTIS reporting and has strongly encouraged the operator to adopt these standards as suggested voluntary compliance standards, the National Motor Vehicle Title Information System (NMVTIS) which was created as a result of the Anti‐Car Theft Acts of 1992 and 1996. NSVRP's board is comprised of representatives of local and national law enforcement organizations.
Each year, consumers buy nearly 40 million used cars in transactions exceeding $300 billion. Unfortunately, criminals have found relatively easy and extremely lucrative ways to exploit the multi-billion dollar market in used and salvage automobiles for illicit ventures ranging from small-scale criminal activity and domestic organized crime to international organized crime and trade based money laundering. While many used cars are sold through dealers operating under local, state and federal regulations, many are sold through salvage and used automobile auctions. In fact, one auction company reported handling nearly 8 million used vehicle transactions that exceeded $50 billion in value in 2011 alone. In addition, approximately 3.5 million salvage vehicles are sold through salvage auctions annually.
These auction transactions represent vast sums of money and yet are poorly regulated and poorly monitored. Increasingly, the transactions take place over the Internet and on a global scale, making use of brokers, agents and fictitious entities to mask the commerce.
In 2008, it was noted that during a 6 month period there were 185 thousand vehicles with branded titles that had been reassigned clean titles through the transfer of these titles between jurisdictions taking advantage of loopholes in the process to ‘wash’ these titles. That is the rate of 370 thousand vehicles per year. These washed titles represent a risk for undisclosed sales at a financial loss or risk to public safety.
The Department of Justice cites salvage pools as “one of the most significant sources used by criminal groups as a source of paperwork and as a way to fund their operations.” While it is apparent that global direct access to U.S. used and salvage auto auctions is facilitating domestic and international crime and trade based money laundering in addition to domestic consumer fraud, this activity is not very well understood and it is very difficult to trace. Each year there are many millions of vehicle sales, transfers and scrappages. Furthermore, there are 51 different state jurisdictions (including Washington, D.C. and excluding U.S. territories) with many different and conflicting rules governing titling and branding.
To make matters more complicated, while the National Motor Vehicle Title Information System (NMVTIS) does provide a record of transactions for salvage vehicles when the sellers conduct the proper reporting, there is no consolidated reporting requirement or central recording mechanism for millions of used automobiles that are sold at auction to either domestic buyers for resale in the U.S. or to overseas buyers buying vehicles which are not normally retitled in the U.S. Furthermore, many of the intermediate ownership title transfers are not reported unless the buyer retitles or registers those vehicles in a jurisdiction for their own road use.
Lightly regulated or monitored Internet-based used and salvage auction environments make it easy for criminals to perpetrate crimes – up to and including large scale money laundering by terrorist groups – that are extremely difficult for federal and state law enforcement agencies to detect and prosecute due to a lack of resources in our export control system, artificial firewalls between the agencies, and loopholes and confusion in our domestic branding and titling regulations.
Another important issue that a great many states have failed to address is the potential for large scale sales and transfer tax avoidance that can surround the sale of used and salvage vehicles to parties that do not qualify for the sales tax exemptions since they are not licensed to engage in the commerce of these automobiles and are therefore should not qualify for exemptions reserved for commercial entities that resell and then collect such taxes to later forward to the appropriate jurisdictions. In NSVRP's opinion, in cases where salvage auctions sell vehicles to such non-exempt parties, the auctions ought to be obligated to collect such taxes and fees and forward them to the appropriate collection agencies. Millions of dollars are lost each year to the states based upon this regulation failure. Please see attached a current legislative and regulatory solution as recently implemented in California.
NSVRP has prepared a policy overview document including links to statutory and regulatory recommendations at the state level for branding, titling, registration and reporting of salvage and non-repairable vehicles. Click here for a link to this Best Practices policy document. NSVRP has also included in this document a section for recommendations to the states for best practice language to improve branding and total loss standards. This is a new addendum to the NSVRP standard. NSVRP is an independent third party voluntary standards body for NMVTIS as noted in the 2009 NMVTIS rule published in the Federal Register. This section includes recommendations for the States as well as examples of categories of abuses that are addressed by implementation of this standard. Click here for the NSVRP Best Practices Standard for Titling & Branding. NSVRP has also included statutory and regulatory recommendations at the state level to protect consumers and to provide revenue opportunities for jurisdictions through the enforcement of NMVTIS provisions and for effective collection of state taxes and transfer fees on all appropriate salvage vehicle transactions. Click here for the NSVRP Best Practices Standard for Titling & Branding Document.
 Department of Justice, Final Rule, National Motor Vehicle Information System (NMVTIS) (Federal Register, January 30, 2009), p. 5759.
 Experian Automotive.