Fifty years ago, in a dispute over a German tariff on chicken imported from the United States, the U.S. government retaliated by slapping a 25% tax on imported trucks and vans, apparently to impact the then popular VW Bus. As sales of small trucks from Japan increased, the American automakers embraced the so-called Chicken Tax as a means of reducing competition. However, now that all three American based car companies sell vehicles that have been made outside the United States, the tariff has come back to haunt at least Ford. Automotive News reports that Ford is now appealing a ruling by U.S. Customs and Border Protection that the way the company imports the Transit Connect commercial vehicle makes it subject to the 25% tariff as opposed to the much smaller 2.5% duty charged on small passenger vans.
For the past four years Ford has imported the Transit Connect from it’s Otosan, Turkey plant equipped as passenger vans, paying the lower tariff, but at a contractors facility in the Port of Baltimore before the vans are distributed to dealers the seats are removed (and saved to be offered as an option) and the window glass is replaced with sheet metal. The $23,420 Transit Connect, an economical alternative for a lot of service business and those in the building trades, has found a niche in North American and it would be significantly more expensive with the higher tariff added in. Ford saves thousands of dollars on every Transit Connect by avoiding the Chicken Tax, even after accounting for the cost of building them as passenger vans and then removing the same equipment.
In the Jan. 30 decision USC&BP told Ford, “It is clear that the Connect is a commercial vehicle first and foremost,” in a 13-page ruling, that importing it as a passenger van it “serves no manufacturing or commercial purpose” and that Ford’s process was nothing other than an attempt to “manipulate the tariff schedule.”
In saying that the company is appealing the ruling, a Ford spokesman said it contradicts previous decisions by the agency. Ford will continue to import the Transit Connects as it is currently doing and while the appeal process is underway it will be paying the higher tariff. Some Transit Connects are imported already equipped and sold as taxicabs so presumably those still qualify for the lower rate.
The redesigned 2014 Transit Connect will be launched at the end of this year and production will be moved to Ford’s Valencia, Spain operations from Turkey. That’s perhaps one reason why Ford has been lobbying the U.S. government in favor of a free-trade treaty with the EU, of which Turkey is not a full member. Concurrently, Ford is part of an effort by the American Automotive Policy Council, a trade group that represents the Detroit 3 to lobby Congress and U.S. trade negotiators to keep the chicken tax in place against Japanese automakers, saying it should not be phased out for another two or three decades, because of alleged non-tariff barriers to foreign car brands in Japan.