chicken tax

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One columnist for Atlantic Monthly bemoaned the effect of industrialized chicken production on the quality of the chicken that the U.S. was exporting, calling it a "battery-bred, chemically fed, sanitized, porcelain-finished, money-back-if-you-can-taste-it bird". A cartoon accompanying the column portrays chicken being fed into a machine—the "Instofreezo Automatic Food Processor, Packager & Deflavorizer, A Product of the U.S.A." A production executive stands atop the machine as it pumps out cubes of generic chicken food product, which threaten to engulf the globe.{{cite journal |title=Big Dixie Chicken Goes Global: Exports and the Rise of the North Georgia Poultry Industry |journal=Business and Economic History |volume=1 |first1=Carl |last1=Weinburg |year=2003 |pages=1–32 |url=http://www.thebhc.org/sites/default/files/Weinberg_0.pdf |archive-url=https://web.archive.org/web/20080807130149/http://www.thebhc.org/publications/BEHonline/2003/Weinberg.pdf |archive-date=2008-08-07 }}

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Largely because of post–World War II intensive chicken farming and accompanying price reductions, chicken, once internationally synonymous with luxury, became a staple food in the U.S.{{cite journal | title = Democratizing Luxury and the Contentious 'Invention of the Technological Chicken' in Britain| journal = Business History Review |volume=83 |issue=2|first1=Andrew |last1=Godley |first2=Bridget |last2=Williams| date = July 28, 2009 | pages = 267–290 | doi = 10.1017/S0007680500000520 | ssrn = 1440355| s2cid = 153833716 }} Before the early 1960s, not only had chicken remained prohibitively expensive in Europe, but it had also remained a delicacy.{{cite magazine|date=30 November 1962|title=Western Europe: Nobody But Their Chickens|magazine=Time|url=https://content.time.com/time/subscriber/article/0,33009,829587,00.html|access-date=20 May 2021}} With imports of inexpensive chicken from the U.S., chicken prices fell quickly and sharply across Europe, radically affecting European chicken consumption. In 1961, per capita chicken consumption rose up to 23% in West Germany. U.S. chicken captured nearly half of the imported European chicken market.

Subsequently, the Dutch accused the U.S. of dumping chickens at prices below cost of production. The French government banned U.S. chicken and raised concerns that hormones could affect male virility. German farmers' associations accused U.S. poultry firms of fattening chicken artificially with arsenic.

Coming on the heels of a "crisis in trade relations between the U.S. and the Common Market," Europe moved ahead with tariffs, intending that they would encourage Europe's postwar agricultural self-sufficiency.{{cite magazine| title = Common Market: Ruffled Feathers| magazine = Time| url = http://www.time.com/time/magazine/article0,9171,894606,00.html| date = 16 August 1963| access-date = 28 April 2010}}{{dead link|date=July 2021|bot=medic}}{{cbignore|bot=medic}} European markets began setting chicken price controls. France introduced the higher tariff first, persuading West Germany to join them—even while the French hoped to win a larger share of the profitable West German chicken market after excluding U.S. chicken. Europe adopted the Common Agricultural Policy, imposing minimum import prices on all imported chicken and nullifying prior tariff bindings and concessions.

Beginning in 1962, the U.S. accused Europe's Common Market of unfairly restricting imports of American poultry. By August 1962, U.S. exporters had lost 25% of their European chicken sales. Losses to the U.S. poultry industry were estimated at {{US$|26|long=no}}{{mdash}}{{US$|28|long=no}}{{nbsp}}million (equivalent to ${{Inflation|US|26|1962|r=2}}{{mdash}}${{Inflation|US|28|1962|r=2}} million in {{Inflation/year|US}}).

Senator J. William Fulbright, chairman of the Senate Foreign Relations Committee and Democratic Senator from Arkansas, a chief U.S. poultry-producing state, interrupted a NATO debate on nuclear armament to protest trade sanctions on U.S. chicken, going so far as to threaten cutting U.S. troops in NATO. Konrad Adenauer, then Chancellor of West Germany, later reported that President John F. Kennedy and he had a great deal of correspondence over a period of two years, about Berlin, Laos, the Bay of Pigs Invasion, "and I guess that about half of it has been about chickens."

File:Kombi Pick Up Aço.jpg vans in pickup and commercial configurations were curtailed by the Chicken Tax.]]

Diplomacy failed after 18 months,{{cite web| title = The Big Three's Shameful Secret| website= Cato Institute |first=Daniel J. |last=Ikenson |date=6 July 2003| url = http://www.cato.org/pub_display.php?pub_id=3155}} and on December 4, 1963, President Johnson imposed a 25% tax (almost 10 times the average U.S. tariff) by executive order (Proclamation 3564){{cite web| title = Lyndon B. Johnson: Proclamation 3564 – Proclamation Increasing Rates of Duty on Specified Articles| website= American Presidency Project, UCSB| url = http://www.presidency.ucsb.edu/ws/index.php?pid=75178}} on potato starch, dextrin, brandy, and light trucks, effective from 7 January 1964.

With Johnson's proclamation, the U.S. had invoked its right under the General Agreement on Tariffs and Trade (GATT), whereby an offended nation may increase tariffs by an amount equal to losses from discriminating tariffs. Officially, the tax targeted items imported from Europe approximating the value of lost American chicken sales to Europe.

In retrospect, audio tapes from the Johnson White House revealed a quid pro quo unrelated to chicken. In January 1964, President Johnson attempted to convince United Auto Workers' president Walter Reuther not to initiate a strike just before the 1964 election and to support the president's civil-rights platform. Reuther, in turn, wanted Johnson to respond to Volkswagen's increased shipments to the United States.

The Chicken Tax directly curtailed importation of West German-built Volkswagen Type 2s in configurations that qualified them as light trucks, that is, commercial vans and pickups.{{cite news| title = Light Trucks Increase Profits But Foul Air More than Cars| work = New York Times |first1=Keith |last1=Bradsher|url = https://www.nytimes.com/1997/11/30/business/license-pollute-special-report-light-trucks-increase-profits-but-foul-air-more.html?sec=&spon=&pagewanted=all| date=30 November 1997| access-date=28 April 2010}}

In 1964, U.S. imports of "automobile trucks" from West Germany declined to a value of {{US$|5.7}}{{nbsp}}million—about one-third the value imported in the previous year (equivalent to ${{Inflation|US|5.7|1964|r=2}} million in {{Inflation/year|US}}). Soon after, Volkswagen cargo vans and pickup trucks, the intended targets, "practically disappeared from the U.S. market."

VW Type 2s were not the only vehicle line affected. As a direct result of the Chicken Tax, Japanese automakers Toyota (with its Publica, Crown, and Corona coupe utes), Datsun (Sunny truck), Isuzu (Wasp), and Mazda (Familia), which were selling pickup trucks, coupe utility vehicles, and panel deliveries in the US at the time, pulled these models out of the North American and Caribbean markets and did not bring over many models sold elsewhere.

File:Chevrolet LUV ver2.JPG: imported from 1972 to 1980 in chassis-cab configuration (less truck bed) to circumvent the Chicken Tax]]

File:Ford Transit Connect -- 08-25-2009.jpg: pieces of its interior were shredded to circumvent the Chicken Tax]]

The tariff affected any country seeking to bring light trucks into the U.S. and effectively "squeezed smaller Asian truck companies out of the American pickup market."{{cite web |last=Hunting |first=Benjamin |date=2009-03-10 |title=Global Vehicles and Thailand Argue Against 'Chicken Tax' On Imported Pickups |url=http://www.autobytel.com/auto-news/global-vehicles-and-thailand-argue-against-chicken-tax-on-imported-pickups-105325/ |url-status=dead |archive-url=https://web.archive.org/web/20120516131132/http://www.autobytel.com/auto-news/global-vehicles-and-thailand-argue-against-chicken-tax-on-imported-pickups-105325/ |archive-date=May 16, 2012 |website=Autobytel}} Over the intervening years, Detroit lobbied to protect the light-truck tariff, thereby reducing pressure on Detroit to introduce vehicles that polluted less and that offered increased fuel economy.

{{As of|2023|3}}, the 1964 tariff of 25% remains levied on imported light trucks.{{cite news |last1=Levin |first1=Doron |title=Want To Sink Detroit Automakers? Make A Trade Deal That Weakens U.S. Tariff Protecting Pickups |url=https://www.forbes.com/sites/doronlevin/2018/03/27/want-to-sink-detroit-automakers-make-a-trade-deal-that-weakens-tariff-protecting-pickups/#2b50effb1cf2 |access-date=10 June 2018 |work=Forbes |date=2018-03-28}} Robert Z. Lawrence, professor of international trade and investment at Harvard University, contends the tax crippled the U.S. automobile industry by insulating it from real competition in light trucks for 40 years.{{cite web| title = Frozen Chickens Killed Detroit. Discuss| website = Green Car Reports| date = 7 May 2009| url = http://www.greencarreports.com/blog/1020516_frozen-chickens-killed-detroit-discuss| access-date = 24 September 2009| archive-url = https://web.archive.org/web/20090511002105/http://www.greencarreports.com/blog/1020516_frozen-chickens-killed-detroit-discuss| archive-date = 11 May 2009| url-status = dead}}{{Unreliable source?|date=November 2011}}

{{see also|Tariff engineering}}

Japanese manufacturers initially found they could export "chassis cab" configurations (which included the entire light truck, less the cargo box or truck bed) with only a 4% tariff. A truck bed would subsequently be attached to the chassis in the United States and the vehicle could be sold as a light truck. Examples included the Chevrolet LUV and Ford Courier. The "chassis-cab" loophole was closed in 1980. From 1978 to 1987, the Subaru BRAT carried two rear-facing seats (with seatbelts and carpeting) in its rear bed to meet classification as a "passenger vehicle" and not a light truck.

The U.S. Customs Service changed vehicle classifications in 1989, automatically relegating two-door SUVs to light-truck status. Toyota, Nissan, Suzuki (through a joint venture with GM), and Honda eventually built assembly plants in the U.S. and Canada in response to the tariff.

From 2001 to 2006, cargo van versions of the Mercedes and Dodge Sprinter were manufactured in assembly kit form in Düsseldorf, Germany, then shipped to a factory in Gaffney, South Carolina, for final assembly with a proportion of locally sourced parts complementing the imported components.{{cite web| title = New Sprinter van plant to be built |website=Edmunds |date=28 November 2005 |url = http://blogs.edmunds.com/straightline/2005/11/new-sprinter-van-plant-to-be-built.html }}{{dead link|date=August 2017 |bot=InternetArchiveBot |fix-attempted=yes }}{{Unreliable source?|date=November 2011}} The cargo versions would have been subject to the tax if imported as complete units, thus the importation in knock-down kit form for U.S. assembly.{{cite news| title = By Any Name, It's the Mercedes of Cargo Vans| work= The New York Times |author=Noran S. Mayersohn|date=2 December 2001| url = https://www.nytimes.com/2001/12/02/automobiles/by-any-name-it-s-the-mercedes-of-cargo-vans.html| access-date=April 28, 2010}}

Ford imported all of its first-generation Ford Transit Connect models as "passenger vehicles" by including rear windows, rear seats, and rear seat belts. The vehicles were exported from Turkey on ships owned by Wallenius Wilhelmsen Logistics (WWL), arrived in Baltimore, and were converted back into light trucks at WWL's Vehicle Services Americas, Inc. facility by replacing rear windows with metal panels and removing the rear seats and seat belts. The removed parts were not shipped back to Turkey for reuse, but shredded and recycled in Ohio. The process exploited the loophole in the customs definition of a light truck; as cargo does not need seats with seat belts or rear windows, presence of those items automatically qualified the vehicle as a "passenger vehicle" and exempted the vehicle from "light truck" status. The process cost Ford hundreds of dollars per van, but saved thousands in taxes. U.S. Customs and Border Protection estimated that, between 2002 and 2018, the practice saved Ford {{US$|250|long=no}}{{nbsp}}million in tariffs.{{cite news|url=https://www.bbc.com/news/business-45875405|title=When's a van a van and when's it a car?|first=Szu Ping|last=Chan|publisher=BBC News|date=18 October 2018|access-date=18 October 2018}}

Customs and Border Protection (CBP) ruled in 2013 that Transit Connects imported by Ford as passenger wagons and later converted into cargo vans should be subject to the 25% duty rate applicable to vans and not to the 2.5% rate applicable to passenger vehicles. Ford sued and finally, in 2020, the Supreme Court declined to hear the case which confirmed the position of CBP.{{Cite news|url=https://www.reuters.com/business/autos-transportation/ford-says-it-could-face-13-billion-new-penalties-after-court-ruling-2021-06-03/|title = Ford says it could face $1.3 billion in new penalties in Transit imports|newspaper = Reuters|date = June 3, 2021|last1 = Shepardson|first1 = David}} In 2024, Ford reached a settlement with the United States Department of Justice, agreeing to pay {{US$|365|long=no}}{{nbsp}}million in tariffs and penalties.{{cite web | title=Ford Motor Company Agrees to Pay $365M to Settle Customs Civil Penalty Claims Relating to Misclassified and Under-Valued Vehicles | publisher=United States Department of Justice | date=2024-03-11 | url=https://www.justice.gov/opa/pr/ford-motor-company-agrees-pay-365m-settle-customs-civil-penalty-claims-relating | access-date=2025-01-02}}

Chrysler introduced the Ram ProMaster City, an Americanized version of the Fiat Doblò, in 2015—building the vehicle at the Tofaş plant in Turkey, importing only passenger configurations and subsequently converting cargo configurations.

In 2009, Mahindra & Mahindra Limited announced that it would export pickup trucks from India in knock-down kit form, again to circumvent the tax. These were complete vehicles that could be assembled in the U.S. from kits of parts shipped in crates.{{cite news|title=Killing the 'Chicken Tax' on Trucks Will Promote Innovation|work= Engineering News Record|date=2009-06-03|url=http://enr.construction.com/opinions/editorials/2009/0603-PromoteInnovation.asp}} The export plans were later cancelled.

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Nissan avoided the 25% Chicken Tax by producing its popular NV200 small front-wheel-drive cargo van in its Cuernevaca assembly plant in Mexico in 2013 for the North American market; Chevrolet sold a rebadged version as the "City Express" for the 2015–2018 model years. NV200 production ended in summer 2021. Pricing was considerably less than its main rival, the Ford Transit, which was imported from Turkey and later Spain assembly plants, as they were subject to the 25% Chicken Tax.

{{reflist}}

• {{cite book |title=The Chicken War: an International Trade Conflict Between the United States and the European Economic Community, 1961–64 |last=Talbot |first=Ross B. |year=1978 |publisher=Iowa State University Press |location=Ames|isbn=978-0-8138-0265-7 |url=https://books.google.com/books?id=iB00AAAAMAAJ}}
• Walker, Herman (1964). "Dispute Settlement: The Chicken War". American Journal of International Law. 58 (3): 671–685.

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