Chicken tax

U.S. intensive chicken farming led to the 1961–1964 "Chicken War" with Europe.

The Chicken Tax is a 25 percent tariff on light trucks (and originally on potato starch, dextrin, and brandy) imposed in 1964 by the United States under President Lyndon B. Johnson in response to tariffs placed by France and West Germany on importation of U.S. chicken.[1] The period from 1961 to 1964[2] of tensions and negotiations surrounding the issue was known as the "Chicken War", taking place at the height of Cold War politics.[3]

Eventually, the tariffs on potato starch, dextrin, and brandy were lifted,[4] but since 1964 this form of protectionism has remained in place to give US domestic automakers an advantage over imported competitors.[5] Though concern remains about its repeal,[6][7] a 2003 Cato Institute study called the tariff "a policy in search of a rationale."[4]

As an unintended consequence, several importers of light trucks have circumvented the tariff via loopholes, known as tariff engineering. For example, Ford, which was one of the main beneficiaries of the tax, also evaded it by manufacturing first-generation Transit Connect light trucks for the US market in Turkey; these Transits were fitted-out as passenger vehicles, which allowed Ford to evade the Chicken Tax when the vehicles passed customs in the US. The Transits were stripped pre-sale of their rear seats and seatbelts, at a Ford warehouse near Baltimore.[1] In 2020, after an exhaustive battle between Customs and Border Protection (CBP) and Ford, Ford's appeal to the Supreme Court of the United States to hear arguments stemming from a June 7, 2019[8] reversal of a Court of International Trade decision was denied, and Ford was ordered to pay the deficient duties and almost $1.3 billion USD in penalties.[9] Similarly, to import cargo vans built in Germany, Mercedes disassembled fully-completed vehicles and shipped the components to "a small kit assembly building" in South Carolina, where they were reassembled.[10] The resulting vehicles emerged as locally manufactured, free from the tariff.

  1. ^ a b Dolan, Matthew (September 23, 2009). "To Outfox the Chicken Tax, Ford Strips Its Own Vans". Wall Street Journal.
  2. ^ "Common Market: End of the Chicken War". Time. November 29, 1963. Archived from the original on December 22, 2008. Retrieved April 28, 2010.
  3. ^ "Common Market: The Chicken War". Time. June 14, 1963. Archived from the original on December 22, 2008. Retrieved April 28, 2010.
  4. ^ a b Ikenson, Daniel (June 18, 2003). "Ending the 'Chicken War': The Case for Abolishing the 25 Percent Truck Tariff". The Cato Institute. Archived from the original on September 21, 2011. Retrieved November 29, 2011.
  5. ^ Kong, Benson (June 1, 2009). "Mahindra Planning Kit Assembly of Diesel Pickups To Avoid Chicken Tax". Motor Trend. Archived from the original on June 15, 2013. Retrieved September 22, 2009.
  6. ^ Bob Holland (February 24, 2006). "Should the US keep the Chicken Tax?". Edmunds. Archived from the original on February 3, 2007.
  7. ^ Spinelli, Mike (February 24, 2006). "The Free Trade Boys Are Clucking: Repeal the Chicken Tax??". Jalopnik.
  8. ^ "Ford Motor Co. v. United States, No. 18-1018 (Fed. Cir. 2019)". Justia Law. Retrieved June 29, 2023.
  9. ^ Shepardson, David (June 3, 2021). "Ford says it could face $1.3 billion in new penalties in Transit imports". Reuters. Retrieved June 29, 2023.
  10. ^ Jim Henry (December 3, 2016). "M-B finds a better way around the 'chicken tax': M-B Vans picks a more normal production setup". Automotive News.