Simanaitis Says

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WHEN IS A CHICKEN NOT A CHICKEN?

FORD MIGHT have thought U.S. Customs forgot about the “chicken tax”—but, if so, Ford was wrong. I hadn’t thought of the chicken tax in years, but I refreshed my memory today.

EUFlagChicken

In 1962, the European Economic Community raised the tariff on imported chicken. U.S. suppliers, the EEC claimed, were dumping their poultry at below cost. What’s more, German farmers accused their U.S. counterparts of fattening chickens with arsenic (which was true) and the French banned U.S. chickens outright, with claims that growth hormones could affect male virility. Zut grand alors!

The U.S. retaliated in 1963 by imposing a 25-percent tariff on imported potato starch, dextrin, brandy—and light trucks.

Why light trucks?

Documents later revealed a deal between President Lyndon B. Johnson and the United Auto Workers’ President Walter Reuther: Impose the tariff on the Volkswagen Bus’s commercial and pickup versions, and there’d be no politically detrimental UAW strike just before the 1964 election. (See other recent sausage-making at www.wp.me/p2ETap-1EA.)

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Sales of the VW Type 2 (aka Bus) commercial, left, and pickup, right, went soft with the 1963 chicken tax.

The 1963 chicken tax certainly worked. Importation of German light trucks dropped by a third compared with that of the previous year. Also affected were Toyota and Nissan mini pickup sales.

The tariffs on potato starch, dextrin and brandy are long-gone. But the 25-percent light-truck chicken tax remains. A decade ago, the Cato Institute called it “a policy in search of a rationale.” (See http://goo.gl/qo8lUY).

Over the years, automakers have tried various scams. From 2001 to 2006, for example, Dodge (née Mercedes-Benz) Sprinters were manufactured in Dusseldorf, Germany, then partially disassembled and shipped to South Carolina for reassembly.

Ford’s latest brouhaha with its Transit Connect is along similar lines. Succinctly, there are two forms of this tidy two-box shape: one clearly a passenger car with windows all around and rear seats, the other a panel van sans rear seats and windows.

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Will the real tax scam please stand up? On the left, the Ford Transit Connect panel van; on the right, the Ford Transit Connect passenger car.

All Ford Transit Connects are produced in Turkey as passenger vehicles with full rear glass, rear seats, seatbelts, the works. Being passenger vehicles, they all evade the 25-percent chicken tax on importation to the U.S.

But here’s the kicker: Some of these Transit Connects arriving at the shipper’s Baltimore facility are converted to commercial versions: Their rear seats and seat belts are removed. The rear glass is swapped for metal panels.

It would seem fitting to ship these components back to Turkey for reinstallation into other Transit Connects. But, instead, the faux-passenger stuff is shipped to Ohio, shredded and recycled.

According to The Wall Street Journal, September 23, 2009, the process costs Ford hundreds of dollars per panel van but saves thousands in taxes.

Until now.

In a January 30, 2013, decision, U.S. Customs told Ford to stop. Ford is currently appealing the decision—while at the same time still lobbying Congress and U.S. trade negotiators to keep the chicken tax as retaliation against Japan’s not buying more U.S. vehicles.

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Might Japan be protecting its home market against the Ford F-150 SuperCrew?

The next time I’m in Tokyo, shall I try tooling around in a Ford F-150 XLT SuperCrew? ds

© Dennis Simanaitis, SimanaitisSays.com, 2013.

3 comments on “WHEN IS A CHICKEN NOT A CHICKEN?

  1. Bill Urban
    October 31, 2013

    In 1979, on the 50th anniversary of the Great Crash, a number of renowned investors were interviewed. They were among the few that got out of the market before October 1929 and saved their fortunes. Why did they do it? They all referenced the Smoot Hawley Tariff Act, that was moving through Congress in ’29 . . . and gathering steam.

  2. William Rabel
    November 1, 2013

    I recall the early Japanese-built compact pickup trucks. They came in as cab and chassis, and the beds were built in the US and added here, side-stepping the chicken tax. In the same time period, Japanese-built forklifts for the US market had mast and fork assemblies added in the US that were built here. This may have been a result of the same chicken-****-tax.

    • simanaitissays
      November 1, 2013

      Yes, the cab/chassis loophole got closed after a while.
      I liked the Subaru pickup with cheap plastic seats bolted in the bed.

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