Gregg M Hoss - taking on Caterpillar

A leading US heavy equipment vendor is calling for industry backing in a battle against the giant Caterpillar Inc. corporation.

Texas-based Hoss Equipment Company, a leading independent global dealer of new and used heavy construction and mining equipment, is waging a campaign asserting that Cat is "subverting the US government into unwittingly restraining free trade".

And Hoss is not on its own. The Washington office of national law firm Bryan Cave LLP is handling a legal defence for Hoss Equipment, together with Alex Lyon Auctioneers, Yoder and Frey Auctioneers, World Tractor and Equipment and Worldwide Machinery.

According to Hoss president Gregg Hoss, the dispute centres on an action brought by Caterpillar in 2006 seeking to stamp out parallel importation of its products.

The Independent Equipment Distributors Association (IEDA), a trade association dedicated to issues affecting independent equipment dealers, has been closely monitoring the action.

It notes that Caterpillar Inc. filed a complaint under Section 337 of the Tariff Act of 1930 with the US International Trade Commission in Washington DC, seeking to halt all future imports of used "grey market" Caterpillar hydraulic excavators that are not imported by Caterpillar itself.

The terms "grey market" or "parallel import" refer to the practice of importing items from a source other than their distributor in the local market. The complaint also seeks to prevent the respondents from future sales of used Caterpillar excavators that have already been imported into the US.

The request for a ban stated that the used excavators imported by the likes of Hoss were "materially different than US-built units and cause confusion and pose safety issues to the consumer", even though Hoss points out that they have EPA-certified engines.

The used equipment dealers reject the safety argument, asserting that the ban is solely intended to control the distribution chain for Caterpillar's products, and they believe the action will spread to eventually cover all "foreign-built Caterpillar products".

This argument is supported by Hoss' claim that Caterpillar, through Caterpillar Remarketing Services and its authorised dealers, has been the largest single importer of these units.

"It seems now that they want the whole pie, not just the lion's share," Hoss says in a letter to the industry, seeking financial backing for the court case.

To date, he claims to have spent in excess of USD2.5 million in legal expenses to fight this matter, and estimates that the challenge could cost another USD2 million.

Initially, a far larger group of dealers was targeted. However, 13 have settled with Caterpillar, while three others have "failed to properly participate in the proceedings".

The hearing has been beset by delays, the first of which was triggered by the resignation of the assigned judge just six days before the trial was scheduled to begin. There have also been evidentiary hearings and Luis Mocete, a spokesman for law firm Bryan Cave, expects the matter to finally go to court on June 9.

The vendors are still trying to get their hands on vital correspondence between Caterpillar and its lawyers, and while Mocete claims the courts have ordered the giant to hand over documents, "Caterpillar still refuses to hand it over".

"So, we have filed another complaint with the judge who should be ruling shortly," he says, adding that details of the complaint are confidential and can't be discussed.

Caterpillar was approached for comment for this story, but has not responded.

Forkliftaction.com News has gained some insight into the issues surrounding the case by speaking with an equipment exporter in Japan.

He blames the dispute on Caterpillar's international pricing policy, under which different retail and wholesale prices are applied in different markets for the same products.

"You cannot have a standard 30 tonne Cat 330DL excavator with a list price in Japan for around JPY22 million (USD210,000) and basically a very similar machine in the US listed for around USD350,000," he says.

The exporter, who asked to remain anonymous, notes corresponding discrepancies in prices for used equipment which have prompted Caterpillar to attempt to regulate exports out of Japan.

"Caterpillar Remarketing Services almost certainly would be the largest single importer of Japanese-built Shin Caterpillar Mitsubishi Products," he explains. "There is a directive in Japan that any used Caterpillar seeking a boat ride and owned by Shin Caterpillar Mitsubishi or its dealer network must be offered first to Caterpillar Remarketing Services."

The exporter claims that after the product has been held in stock for six months, it is then able to be exported outside of the Caterpillar system.

"I know quite a number of independent Japanese dealers who are furious that they cannot get their hands on some of this stock," he adds.
Equipment dealers fear a court decision in favour of Caterpillar may encourage the manufacturer to ban imports of all its products, and encourage other manufacturers to clamp down on grey imports.

The peak industry association for the sector in the United States, the Association of Equipment Manufacturers (AEM) vocally supports free trade.

The Association will not comment on individual cases, but Washington spokesman Nick Yaksich tells Forkliftaction.com News "trade is not meaningful unless it's free and fair".

"AEM member companies are very much aware of the effects of liberalised trade and open markets and are responding through an aggressive trade strategy which includes new products and thinking globally," he adds.

The IEDA has set up a fund to collect donations to help Hoss Equipment and the other respondents defray the mounting legal costs. More information can be found on the group's website, www.iedagroup.com.