This 61-Year-Old Tariff Is Why You Cannot Buy A Cheap Imported Truck Today, And Frozen Chicken Is To Blame

If you’re an enthusiast with your heart in cars in other countries, you’re almost certainly aware of the barriers America has set between you and your dream car. The most common hurdle is the so-called 25-Year Rule, which dictates that you can’t even import most cars until they’re at least 25 years old. Once your favorite vehicle is old enough, your pain might not be over yet. If your favorite vehicle is a truck, America says you have to cough up 25 percent of your truck’s value at importation time. This is the so-called Chicken Tax, and it’s been the bane of importers and automakers for 61 years, despite technically not having anything to do with trucks.

Back in early 2022, I wrote a story titled “The 25-Year Import Rule’s History Is More Complicated Than You Think” for Jalopnik. The Imported Vehicle Safety Compliance Act of 1988 is one of the most infamous pieces of car law in American history. In that story, I explained how Americans began saving oodles of cash on imported cars by bypassing official dealership sales channels and just importing their desired vehicles directly from their origin nation. Not only were these cars cheaper, but they sometimes had options that were never offered in America.

An often-told story is that the imports of these vehicles, many of which were desired European cars, pissed off the likes of Mercedes-Benz, which lobbied for strict importation rules to protect itself. Yet, the truth was far weirder. As I reported in my story, Mercedes-Benz’s own U.S. dealers were among those bypassing official channels and importing their own gray market vehicles to sell to customers at a discount.

These vehicles also needed to be converted to meet Environmental Protection Agency and Federal Motor Vehicle Safety Standards regulations. As my story reported, some of the importers of those days did shoddy, potentially unsafe conversion work.

I had always planned on following this story up with a story about the Chicken Tax, but that never happened. The Chicken Tax, which is a tariff of 25 percent on imported trucks, is sometimes misunderstood. In some ways, it’s also worse than the 25-Year Rule, and it’s arguably one reason why you cannot buy something like the $13,000 Toyota Hilux Champ here in America. Let’s dig into the madness.

The Chicken War

If we flip our calendars back to the early 1960s, we see a very different era of global trade than the one that we’re living in now. As Time magazine reported in November 1962, chicken used to be a delicacy in Europe. While post-World War II America had figured out how to mass-produce chicken products on an incredible scale, Europe hadn’t quite figured that out yet. Time reported that chicken was considered a rich person’s food in Europe, and the only time a poor worker might eat a chicken was when either the worker or the chicken was sick.

America saw a market here. See, America’s chicken farming prowess was so good that, despite the huge numbers of chickens consumed by America, there was still a large surplus. America began sending those chickens over to Europe, and as Time noted, the States were a large reason why chicken became common in Europe:

Much of the credit belongs to U.S. chicken farmers, who have brought down prices from Antwerp to Zurich by delivering frozen broilers to Europe at 30.5¢ a lb. Last year the intake of chicken rose 23% in West Germany alone. Demand for chicken expanded briskly in the rest of Europe, and U.S. farmers, with shipments worth $45 million, grabbed nearly half of the import market.

At first, this seemed like a win for everyone. America got to make money from surplus chickens, and chicken was no longer reserved for just the rich in Europe. Unfortunately, a new problem quickly arose, and it was that chicken farmers in Europe just couldn’t compete with the rock-bottom prices of chicken from America.

Europe began biting back, from Time:

That’s when the great chicken war began. The Dutch accused the U.S. of dumping chickens in Europe at prices below cost of production. In Bavaria and Westphalia, protectionist German farmers’ associations stormed that U.S. chickens are artificially fattened with arsenic and should be banned. The French government did ban U.S. chickens, using the excuse that they are fattened with estrogen. With typical Gallic concern, Frenchmen hinted that such hormones could have catastrophic effects on male virility.

The Common Market is making every effort to shoo away the U.S. chickens. A new rule effective last July fixes minimum prices on poultry entering the market, and each of the six member nations is also permitted to tack on a tax pegged to domestic poultry production costs. The minimum price set for U.S. broilers is 33.3¢ a lb., and the West German supplemental tax adds another 9.7¢. To make matters worse, the Common Market this month imposed an arbitrary surcharge of 2.8¢ on broilers. All this boosts delivery prices of U.S. chickens by as much as 50%. Since August, U.S. exporters have lost 25% of their chicken business in the Common Market.

Time continues that this 50 percent chicken tariff exploded into a full-blown poultry trade war. In one instance, Time wrote, Arkansas Senator J. William Fulbright interrupted a debate over nuclear weapons for NATO to protest Europe’s protectionist policies over chicken. As Time noted, this trade war was far larger than just tariffs on imported chickens:

The great chicken war is only the opening blast in a larger crisis in trade relations between the U.S. and the Common Market. The U.S. sells 10% of its farm produce abroad, and one-third of that total—or $1.1 billion worth —usually goes to Common Market nations. The Common Market has made no secret that it is moving toward broadly higher agricultural tariffs to protect small, inefficient European farmers. Last week a panel of U.S. economists reported to Congress that U.S. farm exports to Europe may shrink as much as 30% by 1970. Heaviest losses are expected to be in rice, wheat, feed grains—and poultry.

Time magazine never described what the six-member nations were, but a separate report in 1964 by the New York Times noted that the countries were Belgium, France, Italy, Luxembourg, the Netherlands, and West Germany.

The New York Times report noted that, at least at first, the tariffs weren’t meant to punish America, but encourage farmers in Europe to amp up their production so that Europe could become more self-sufficient in providing for its people. The tariff was supposed to give those farmers some breathing room before being wiped out by cheap American chicken.

The Broiler Heats Up

Unfortunately, things spun out of control quickly. By mid-1963, America’s chicken exports had fallen by at least 66 percent compared to the 271 million pounds of chicken shipped to Europe in 1962. The nations also couldn’t agree on the economic impact of the tariffs. Europe argued that the tariffs weren’t that big of a deal, and that they amounted to only $19 million in losses to America. Meanwhile, the U.S. government argued that the losses were far higher at $46 million. The American poultry industry reportedly claimed that its losses were even greater than that.

America’s farming industries also found themselves in a tough position. About a quarter of America’s agricultural products were sent to Europe, so reduced exports had the chance to deal major damage.

President John F. Kennedy had spent much of the so-called “Chicken War” trying to bring down the temperature in the room. He had constant contact with then-Chancellor of West Germany, Konrad Adenauer. Among his conversations with European partners, President Kennedy pleaded for reductions in tariffs.

President Kennedy was assassinated on November 22, 1963, leading to Vice President Lyndon B. Johnson being sworn in. President Johnson’s approach would be a bit more aggressive than President Kennedy’s. Europe eventually offered to lower its tariff by 10 percent, but as the New York Times reported, America had deemed that insufficient, perhaps a bit too little, too late.

Further, as the New York Times wrote, America was committed to making back the $46 million it claimed to have lost through retaliatory tariffs. On December 4, 1963, President Johnson made good on America’s word with Proclamation 3564—Proclamation Increasing Rates of Duty on Specified Articles. President Johnson’s proclamation claimed that Europe “maintains unreasonable import restrictions upon imports of poultry from the United States” and that “such unreasonable import restrictions directly and substantially burden United States commerce.”

The Chicken Tax Hits

At the bottom of the proclamation was America’s retaliation, which called for a 2.5¢ per pound duty on potato starch, a $5 per gallon duty on brandy worth more than $9 per gallon, a 3¢ per pound duty on dextrine and soluble or chemically treated starches, and finally, a 25 percent duty on trucks worth $1,000 or more.

Per the order, the retaliatory tariffs went live on January 7, 1964. The impact of the tariffs, which we call the “Chicken Tax” today, was immediate. The Volkswagen Type 2 van and truck were popular workhorses in America, but now they were subject to the tariff, making them unattractive imports. However, you’ll note that President Johnson’s proclamation did not single out European trucks. Instead, it was a tariff on all import trucks.

The impact of this was destructive to Japanese automakers like Datsun, Isuzu, Mazda, and Toyota, which had spent much of the 1950s and early 1960s exporting several compact work vehicle models to America. Many automakers ceased exporting these vehicles to America as the tariff ensured that these vehicles could no longer compete. In 1964, foreign truck imports plummeted by two-thirds.

But hold on, what do trucks have to do with chickens? A report from 1997 by the New York Times revealed there might have been some politics involved:

The official reason given for choosing light trucks was that American imports of Volkswagen vans from West Germany were close in dollar value to the lost American sales of chickens to Europe. But recently released audio tapes from the Johnson White House suggest that the President may have had another motive. The tapes show that in January 1964, President Johnson was trying to persuade Walter Reuther, the U.A.W.’s president, not to call a strike just before the 1964 election and to support the President’s civil rights agenda. The tapes also show that Mr. Reuther wanted President Johnson to respond to Volkswagen’s growing shipments to the United States, although the labor leader was more concerned with the Beetle than the vans.

Through three rounds of global trade negotiations since then, import fees on virtually every other manufactured good except clothing and textiles have been reduced to 2 percent or 3 percent or have been eliminated. But Detroit has lobbied effectively to protect the light-truck tariff.

So, if you’re charitable and believe the official explanation, then America set tariffs on trucks because of their value relative to chickens. However, there are potential holes in this logic. Again, the tariffs didn’t hit just trucks from Europe, but trucks from anywhere that wasn’t America. Likewise, the tariffs never went away, even six decades after the resolution of the chicken war.

Beating The Tariffs

While many automakers have simply decided against sending their more affordable trucks to America, others have tried to beat the tariffs through different methods. Toyota’s method was to build trucks that it thought Americans would want, first with the 1964 Stout 1900. The Stout was a failure, selling all of four units in its first year. Toyota came back swinging with the Hilux in 1969, but since that truck was still built outside of America, Detroit still had the upper hand.

Ultimately, Toyota learned that the best way to fight domestic trucks was to build its trucks here in America, which meant that they wouldn’t be subject to the truck tariffs.

Not everyone reached the same conclusion. Some automakers engaged in a practice known as “tariff engineering,” or building a vehicle to follow the letter of import law, but not the spirit. The term had been around since at least 1881 thanks to the U.S. Supreme Court case of Merritt v. Welsh. Back in those days, Customs determined grades of sugar based on the Dutch standard of color. Darker sugars were considered to be of lower quality and thus, subject to lower import duties. One importer found a clever hack around this by making high-grade sugar infused with molasses for a darker color. The Supreme Court ruled that while the importer might have cheated, the problem still fell on Congress, as the test for sugar quality was based solely on color rather than composition. So, the importer followed the letter of the law, but not the spirit of it.

The most hilarious example of this happening in the car world is the 1978 Subaru BRAT, which is an acronym for “Bi-drive Recreational All-terrain Transporter,” but that part isn’t important. The most famous part about the BRAT is its pair of jump seats that were welded into its bed. This was tariff engineering at work for all to see. See, by putting real seats in the bed of the BRAT, Subaru’s ute was no longer a truck, but a passenger vehicle.

Of course, it was up to you what to do with the seats after, and many folks cut them out and ditched them. Some of the coolest BRATs still on the road today still have those compliance seats. These seats meant that the BRAT was subject to only the normal 2.5 percent duty rather than the 25 percent Chicken Tax.

Another way to dodge the tax was to ship vehicles to America in an incomplete state. The Isuzu-built Chevrolet LUV rolled off the boat into America as a cab chassis, and the bed was grafted on after the fact. Doing so meant that the LUV was hit with only a four percent duty, and no jumpseat trickery was needed. This loophole closed in 1980.

The 2001 Mercedes-Benz Sprinter arrived in America using another method. The vans were assembled as knock-down kits in Düsseldorf, Germany, and then shipped to South Carolina, where they were put together using some American parts and badged as either Dodges or Freightliners. This satisfied America enough to dodge the 25 percent duty.

The most infamous case of tariff engineering was the Ford Transit Connect, and I’ll just let Automotive News take the wheel here:

Ford Motor will pay $365 million to resolve U.S. allegations it violated a federal tariff law by misclassifying and understating the value of hundreds of thousands of its Transit Connect vehicles. The Justice Department said the settlement resolves allegations that Ford devised a scheme to avoid higher duties by misclassifying cargo vans imported from Turkey from April 2009 to March 2013.

Customs and Border Protection ruled in 2013 that Transit Connects imported as passenger wagons and later converted into cargo vans were subject to the 25 percent duty applicable to cargo vehicles, rather than the 2.5 percent passenger vehicle duty. The Justice Department said Ford imported the vehicles “with sham rear seats and other temporary features to make the vans appear to be passenger vehicles. These temporary rear seats were never intended to be, and never were, used to carry passengers.”

Ford included these seats and features to avoid paying the 25 percent duty rate, the government said. After Customs clearance, the Transit Connect vehicles were immediately stripped of rear seats and returned to its original identity as a two-seat cargo van. “The government will not permit companies to evade duties by adding sham features to their products and then misclassifying them,” said Brian Boynton, head of the DOJ Civil Division.

In case you were curious, Ford allegedly did not ship the seats back to Turkey to be used in other vans heading to America. Instead, the seats were destroyed here in America. Despite the waste, Ford was estimated to have saved $250 million in import duties through its alleged tariff engineering. Reportedly, Ford feared the bill from the investigation was going to be $1.3 billion, but it instead paid out $365 million.

You Still Can’t Have That Tiny New Truck

The impacts of the Chicken Tax are still felt today. Back in 2009, Autobytel reports, India’s Global Vehicles wanted to export Mahindra compact pickup trucks to America. However, doing so was a non-starter due to the tariffs. The publication noted that Thailand had also fought against the Chicken Tax because it, just like India, has a nation full of cheap, compact trucks. However, building a factory to assemble those trucks in America or hitting them with a tariff would take their cost advantage away.

Until recently, the best alternative was the North American Free Trade Agreement (NAFTA), and the United States-Mexico-Canada Agreement (USMCA), which allowed automakers to set up plants in Mexico or Canada and ship trucks to the United States without getting hit by the tariff. However, even USMCA has been under threat with the present trade war.

The efficacy of the Chicken Tax remains hotly debated today, over six decades later. Some believe that it’s part of the reason why Americans cannot enjoy the awesome small trucks that the rest of the world does, while others believe that allowing in imported trucks could erode the Big Three.

Either way, this is the reason why that $500 Honda Acty that you just bought came with a seemingly pointless $125 charge to Uncle Sam. It’s also a major reason why your dreams of driving one of the cute pickups from Asia will have to wait at least 25 years. Your favorite trucks have to stay oceans away because several decades ago, Europe and America got into a chicken fight.

Top photo: Toyota/Depositphotos.com