Which came first? The Chicken Tax, the Sprinter or the Egg?
A lesson in tariffs and international trade
By Mike Sokol
This is not a political article, and I’m not taking sides. However, I believe that “Those who cannot learn from history are doomed to repeat it.” This is the story of how a cheap chicken in the 1960s changed international trade and how your Sprinter van is currently built. And it’s also a warning that every tariff has repercussions, some good, some bad, and some reaching 50 years into the future in unpredictable ways.
OK, that makes sense since the 25% import duty would help protect the French chicken industry. But in 1964, President Johnson retaliated by placing a 25% tariff on light trucks, potato starch, dextrin, and brandy imported from Europe into the United States.
But what does that have to do with my Sprinter van? Glad you asked. Since the Sprinter cargo van qualifies as a light truck, when they decided to import it into the U.S. under the Dodge and Freightliner badges, there should have been an extra 25% tariff imposed on it, a substantial tax on a $40,000 vehicle. So the Germans did the only logical thing and found a loophole in the law. While a completely assembled Sprinter van would be taxed at 25%, a Sprinter van “kit” would not be. So every Sprinter cargo van that’s imported into the U.S. is first assembled completely in Germany. Then the engine, transmission and axles are pulled and it’s all put in a box for shipping to the U.S. “unassembled”. The Sprinter kit arrives at a small plant in South Carolina where the process is reversed and the engine, transmission and axles are reinstalled. And voila, instant Sprinter from a box mix.
Think that’s crazy, then consider the Transit Connect Van. They’re the cute little mini-Sprinter delivery trucks you see all over the place. To avoid the 25% Chicken Tax, every one of them starts out as a passenger van when they’re built in Turkey. They have rear windows, a rear seat with seatbelts, and interior padding sufficient to meet U.S. safety laws. But as soon as they arrive in the United States as “passenger” vans, the side windows are replaced with solid panels, the interior padding is shredded, the rear seats are removed to be shipped back to Turkey for recycling into the next Transit Connect Van.
Eventually the tariff on potato starch, dextrin and brandy imported into the U.S. was lifted, but nobody ever got around to reversing the tariff on light trucks imported here.
So which came first? I would say the Chicken Tax, then came the Sprinter vans, followed by the politicians laying an egg.
Read the rest of the story on the Chicken Tax on Wikipedia.