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How Ford Avoids Chicken Tax on Transit


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How Ford Avoids the Chicken Tax on the Transit Connect

Back in 1963, West Germany slapped a tarriff on frozen chicken exported from the U.S., and the Johnson administration retaliated by slapping a 25-percent tariff on all pickups and cargo vans imported into the U.S. (take that, VW Transporter!). The chicken tax, as it's called, lives on today, and it's the reason Toyota and Nissan assemble all their pickups in the United States -- there'd be no profit otherwise

How then does Ford make money on cargo versions of its Transit Connect minivan, which is built in Turkey? A news feature in today's Wall Street Journal explains how Ford avoids the tax.

Evidently, a load of Transit Connect Wagons (Ford doesn't call them "Vans," and this is key) arrives in Baltimore. They're finished vehicles with seats, carpeting and side/rear window glass. A few will go straight on to Ford dealerships and be sold as passenger vans. But most head to a warehouse, where said seats, carpeting and glass are stripped out. This leaves a few holes in the floor (where the seat bolts were), so each van gets a new floor panel. The conversion takes about 5 minutes, and then the Transit Connect is ready to be sold as a "Cargo Van." But now it's only subject to a 2.5-percent import tax, instead of the 25-percent hit.

You might think the seats could be shipped back to Turkey for use in the next U.S.-bound batch, but Ford says it's more cost-effective to shred the seat cloth and foam for landfill cover and recycle the steel. --Thanks to Bob Holland for the tip.

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