US equipment giant Caterpillar Corporation has backed down from its attempt to ban grey imports of used equipment into the United States.

Earlier this year, Forkliftaction.com News reported on a complaint filed by Caterpillar with the US International Trade Commission (ITC) under Section 337 of the Tariff Act of 1930.

Caterpillar was attempting to prevent a number of equipment dealers, including Hoss Equipment Co., Worldwide Machinery Inc. and World Tractor and Equipment Company LLC, from importing Caterpillar hydraulic excavator models that are not imported by Caterpillar itself. The complaint also sought to enjoin the named respondents from future sales of used Caterpillar excavators that have already been imported into the US.

However, the machinery manufacturer settled the matter before it went to court, backing down on its attempt to halt the imports. Instead, Caterpillar has agreed to allow the dealers to continue to import Caterpillar hydraulic excavators if certain safety issues are addressed.

The dealers are required to ensure that all imports are modified within 45 days of their importation to include:
a. English warning/instruction labels;
b. English operation and maintenance manuals;
c. Lift table stickers (where applicable);
d. Travel alarms;
e. Seatbelts; and
f. Up-to-date, product improvement program (safety only).

Hoss CEO Gregg M Hoss tells Forkliftaction.com News that "all of these six items are repairs and retrofits that have been done by Hoss Equipment, Worldwide Equipment and World Tractor before reselling or renting imported units to end-user customers in the United States in the normal course of their business".

"A Caterpillar representative acknowledged that Caterpillar was aware of the fact that the three remaining respondents had been performing these repairs and retrofits before the complaint was lodged with the ITC," he pointa out.

The three dealers and Caterpillar's authorised dealers will not be subject to any ITC bans on the importation of Caterpillar hydraulic excavators.

However, Caterpillar says it will request that the US Customs and Border Protection service requests foreign dealers' certification prior to allowing any importation of Caterpillar hydraulic excavators that are not being imported by the named respondents, Caterpillar's authorised dealers or Caterpillar itself.

According to the Independent Equipment Distributors Association (IEDA), a trade association dedicated to issues affecting independent equipment dealers, the ITC has not yet definitively ruled on Caterpillar's request and there is still some chance Caterpillar will not receive the conditions it is requesting.

In any event, a complete ban on importation of Caterpillar hydraulic excavators has been averted.

However, safety-related considerations, which many independent distributors already comply with, will be mandatory with respect to imports, IEDA points out.

When Caterpillar began the action, the dealers claimed the ban was intended to control the distribution chain for Caterpillar's products, with fears the action would spread to eventually cover "all foreign-built Caterpillar products".

The main respondent, Hoss Equipment Co, claimed that Caterpillar, through Caterpillar Remarketing Services and its authorised dealers, was the largest single importer of these units and was intent on controlling "the whole pie, not just the lion's share".

Caterpillar countered by arguing it was seeking the ban on safety grounds.

Hoss is relieved his legal ordeal is over. "After two years of litigation and over USD3 million in legal fees by all the respondents to Caterpillar's complaint, Hoss Equipment Co., Worldwide Machinery and World Tractor will be allowed to continue operation of their import business in the same manner in which they had been before the Caterpillar complaint," he says.

"If the original complaint was solely safety-based, and had Caterpillar contacted the respondents prior to lodging this complaint, Hoss Equipment and the other respondents would have voluntarily joined with Caterpillar in seeking regulatory measures to ensure the safety of its end-user customers," he adds.

Hoss describes the complaint as "ill-advised": "Had the same money and time been dedicated to an informational campaign instead of a fair trade complaint, all parties (including Caterpillar's shareholders) would have been better served."

The terms "grey market" or "grey imports" refer to the practice of importing items from a source other than their distributor in the local market.