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Feds Watching: Ford’s Run Around on “Chicken Tax” Riles U.S. Customs Officials
SEPTEMBER 26, 2013 AT 2:33 PM BY CLIFFORD ATIYEH 47 COMMENTS
Marijuana smokers in decriminalized states know it best: You can light up in public and get away with it, but if they want, the Feds can crack down with alarming force. We don’t think Ford executives were high when they chose to import vans from Turkey, rush them off the boat to chop shops, and skirt federal laws in plain sight. But from the eyes of U.S. Customs and Border Protection officials, they’re wrong.
At issue is Ford’s Transit Connect, the compact, light-duty van that’s been on sale here since 2009. (The next-generation model, which goes on sale soon, is pictured here. If you want to gawk at a dead van rolling, here you go.) Like with most imports, Ford has to pay a tariff on each vehicle to clear customs. But instead of the normal 2.5-percent tariff levied on passenger vans, cargo vans are charged a heavy 25-percent tariff. (This so-called “chicken tax” was President Lyndon Johnson’s response to high West German and French tariffs on exported U.S. chicken, and was a retaliation that would destroy commercial sales of Volkswagen’s popular Microbus.)
So Ford, like many automakers before it, got creative. Even though most of its customers order the two-seat, stripped-out commercial model, Ford ships every Transit Connect to the Port of Baltimore in five-passenger Wagon trim. As soon as customs agents approve the vans, Ford whisks them offsite where a shipping contractor rips out backseats, flooring and rear windows. The brand-new parts then get sent to Ohio for recycling, and a new floor and metal stampings to cover the window openings go in place. Customs officials say it takes Ford less than 11 minutes to convert a Transit Connect from a people mover to a cargo van, and, while everyone knows Ford has been doing this for the past four years, the Feds have had enough.
“The product as entered is not a commercial reality; it exists only to manipulate the tariff schedule rather than for any manufacturing or commercial purpose,” wrote customs director Myles Harmon in an internal document (available here; downloads Word document). To prove his point, Harmon compared the conversions to similar moves by sugar and lumber companies, which modified their products immediately after arrival. He even referenced our own first drive review to demonstrate that the vehicle was really designed to carry cargo, not people.
The report, dated January 30, forced Ford to start paying the full 25-percent tariff. But the customs decision came to light only after Ford filed a complaint to the U.S. Court of International Trade on September 17. According to the filing, Ford alleged that officials incorrectly levied the tariff since the vans “have all of the features identified by these authorities as establishing that the vehicles are principally designed for the transport of persons.”
Since it began paying the higher tariff in March, Ford spokesman Said Deep says the company hasn’t changed its import practices—and won’t, not even when the new 2014 Transit Connect arrives from Spain next year. Ford doesn’t anticipate raising prices to fully compensate for the losses, he says.
“The tariff classifications are based on the condition as imported,” Deep says. “That’s based on centuries-old legal authority. What we’ve been doing has been known by customs and common knowledge,” he says, referencing a Wall Street Journal story first reporting on the company’s runarounds in September 2009.
While customs officials did not respond to requests for comment, other automakers have successfully beat the chicken tax. During the 1980s, Subaru put plastic seats in the beds of BRAT models so they wouldn’t be marked as pickup trucks. Before Mercedes opened a plant to build the Sprinter in 2007, it shipped the cargo vans as kits from Germany and assembled them in South Carolina. Mahindra, which ultimately never made it over, was planning to do the same with its pickup trucks.
Feature Test: 2010 Ford Transit Connect
Long-Term Road Test Wrap-Up: 2011 Honda Odyssey Touring Elite
Instrumented Test: 2013 Ford C-Max Energi Plug-In Hybrid
But while Ford protests in court, the company actually supports the tariff—along with Chrysler and General Motors—because it continues to obstruct sales of foreign-made pickups and vans from Japan, China, and other markets. In fact, a bipartisan majority of both houses of Congress are now telling President Obama to keep the tariffs, with the goal for Japan to adopt currency exchange rules and lift quantity restrictions on imported vehicles.
Any debate about the chicken tax is largely moot as its definition and enforcement are so liquid. All the Japanese automakers build trucks here, without tariffs, and while the government does have a strong case against Ford—including proof that Ford’s VIN labels show the vehicles originally tagged as cargo vans—this same government is no stranger to mislabeling vehicles. Besides its double standards for fuel-economy tests, the Environmental Protection Agency, in just one example, classifies the Ferrari California as a “minicompact,” the same size class as a Scion iQ.
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