The End of the Chicken Tax?
Imported Trucks and Vans May Soon Be Free From Import Tariff
According to Automotive News, the longstanding 25-percent tariff on pickups and commercial vans imported from outside the North American Free Trade Agreement (NAFTA) region may soon be repealed.
The outlet states that ongoing scrutiny of trade agreements with nations in the European Union and Pacific Rim has led Congress to pass a “fast-track” bill, giving President Barack Obama the authority to negotiate trade agreements and send them to Congress for approval without the need for an amendment. Such a system would allow for the chicken tax’s eventual death.
One of the consequences of the tax is the reduced availability of foreign light trucks in the United States. In order to avoid the heady tax (which would turn a $25,000 truck into a $31,000 truck), foreign manufacturers have been forced to build manufacturing facilities here, but the cost and risk of building factories for unproven, potentially unsuccessful light trucks has made the pickup and van market a largely American-produced segment.
However, the tax has even had a negative affect on some American vehicles. The previous-generation Ford Transit Connect, which was built in Turkey, was imported with rear seatbelts and windows to be classified as a passenger car, only to have those parts removed, shredded, and recycled to make way for cargo-van accouterments. The process added several hundred dollars of cost to the little van, but the chicken tax—which would have raised its base price by $5,000—was avoided. Other trucks have used similar tactics to avoid the tax; Subaru manufactured their BRAT compact truck with removable rear jump seats to classify it as a passenger car, while the stillborn Mahindra pickup project from the last decade was going to see those trucks imported as knockdown kits that would be assembled somewhere in the States.
With the suspension of the chicken tax, the American automobile market would be somewhat more accessible to foreign manufacturers. Fullsize trucks will likely always be a predominantly American game, as those large vehicles don’t make much sense on the rest of the world’s more compact roads, but with manufacturers like Volkswagen, Mahindra, and Mazda building midsize trucks, an end to the chicken tax would break down one of the barriers to selling those vehicles here.
Nothing is set in stone yet, as Automotive News reports that some politicians would like to see Japanese tariffs on American goods come down at the same time as the chicken tax. It also might take significant reengineering of those foreign-produced midsize trucks to allow them to meet safety, emissions, and other DOT standards for our nation. Other obstacles include market differences; in America, trucks can cost upward of $50,000 with the addition of a few luxury packages, while non-NAFTA nations tend to produce cheaper, frill-free work vehicles rather than Cowboy Cadillacs.
While the chicken tax protects the American marketplace in the one segment it unequivocally dominates, there is some good reason to advocate for its discontinuation. For this author, the most compelling of those arguments is the motivation it would provide American manufacturers to produce better vehicles. The idea of a rugged, compact pickup in the vein of the Ford Ranger or Dodge Dakota is compelling, and increased competition in the midsize marketplace could encourage American companies (other than GM) to recommit to that segment. Globally, Ford competes with the Ranger, while Volkswagen markets the Amarok; neither is available in the U.S., due in part to the tariff and in part to a robust fullsize truck market that leaves only a little room for compacts and midsizers.
Time will tell, but it could take up to 25 years for the pickup and van market to reflect any changes to the tax, so don’t be too worried about having to make any readjustments until then.
Source: Automotive News