Automakers use loopholes to get around ‘chicken tax’
Tariffs have been headline news lately, what with the U.S. pulling out of the Trans-Pacific Partnership trade deal, and threats to renegotiate NAFTA. But there’s one tax that’s been around since 1963, originally levied over the price of chicken. And, oddly enough, it’s still slapped on some trucks and vans sold in the United States today.
It’s known as the “chicken tax,” and while it has never applied to Canada, it affects some of the work vans now sold in both countries. Over the years, it has also caused some manufacturers to become rather creative when importing their vehicles.
The roots of the tax goes back to the 1950s, when meat was scarce and expensive in parts of postwar Europe, particularly Germany. There was a lot of chicken in the United States, and poultry processors looked at this potential new market and liked what they saw. European consumers liked it too, when this cheaper chicken suddenly flooded the market. But European suppliers didn’t, because they couldn’t match the price. To protect them, the European Economic Community applied a stiff tariff on this imported chicken.
American companies didn’t want to lose the market, and the U.S. government tried to get the tax revoked. Europe wouldn’t budge. U.S. president Lyndon Johnson figured he’d fight fire with fire, and in December 1963, slapped a 25 per cent tax on several food products that Europe shipped to America, including potato starch, dextrin starch and brandy. Oh, and along with it, light-duty trucks.
That odd automotive addition was mostly a shot at Volkswagen, which had shipped just over 240,000 vehicles to the United States that year. The vast majority of them were Beetles, but there were vans in there as well, and these were starting to rise in popularity. The official story was that the value of the vans brought in was equal to that of the chicken sent out, but it’s likely there was some lobbying from domestic automakers and unions as well to protect their interests. Because the tariff was placed on imported trucks overall, it also hit Datsun and Toyota, which were also selling small numbers of their compact pickup trucks in the U.S.
Since automakers couldn’t get the tariff lifted, they looked into ways to get around it. Loopholes in the tax let them import just the cab and chassis at four rather than 25 per cent, since it wasn’t a complete vehicle. They’d then import the box separately and bolt them together.
Interestingly enough, some domestic automakers also got in on this action. They had overseas affiliates, and as these minitrucks became popular, especially with rising gas prices, it was cheaper to import the lightly taxed chassis-cabs and separate boxes from their Japanese partners than it was to engineer their own from scratch. These included the Isuzu-built Chevrolet LUV and the Mazda-made Ford Courier.
Subaru got even more creative. It built a little all-wheel-drive truck called the BRAT, for Bidrive Recreational All-terrain Transporter, introduced for 1978. It was actually based on a cut-down station wagon, but as far as the U.S. government was concerned, it was a tariff-qualifying truck. Subaru responded by putting in two rear-facing jump seats, with lap belts, in the bed. Under the law, it was now officially a passenger vehicle, and wasn’t subject to the chicken tax.
The tariffs on brandy and food starch were eventually lifted, but the truck tax remained, and is still here today. With the popularity of trucks and the profit to be made on them, Japanese automakers opened local plants to reach the market tariff-free, and the Toyota Tundra and Tacoma, Nissan Titan and Frontier, and the Honda Ridgeline are all built in the United States. In an odd twist, once trade barriers with Mexico were lifted, the American automakers shifted some of their pickup truck assembly to that country.
Several work vans are made in North America, including Ford’s large Transit, Ram’s full-sized ProMaster, Nissan’s NV and NV200, and GM’s Express and Savana vans. But some are still made overseas, and automakers are still finding ways to get around the chicken tax.
Ford’s small Transit Connect and Ram’s compact ProMaster City are sold as passenger or cargo vans, but all are imported to the United States with a full set of seats, since the passenger van is taxed at a lower rate. American workers then rip out the seats and install a cargo floor. If the customer has specified a windowless model, the rearward glass is replaced with metal panels.
Mercedes-Benz does it a little differently. It plans to build its next-generation Sprinter in South Carolina, but for now, the vans are completely built and tested in Germany, and then disassembled and shipped to America. To avoid the higher chicken tax, each van and its corresponding engine must travel on separate ships, to be reunited once they both arrive.
The Trans-Pacific Partnership deal might have ended the chicken tax, but with the Trump administration’s decision to withdraw, it doesn’t look likely to go away any time soon. At least for now, a long-ago brawl over birds continues to affect the tax on trucks.