In 1963, France and West Germany placed a tariff on the importation of chicken. For the United States this was a significant tax — chickens were a large American export at the time, and exports of the poultry fell dramatically soon after. (A Time magazine article from the time suggests that the drop-off was as much as 67%.) The Lyndon B. Johnson administration responded in kind, placing a 25% tariff on brandy, light trucks, potato starch, and some other goods. Over time, all but one of these tariffs would fall off the books, with only the tax on light trucks — those with payloads of 4,000 pounds or under — remaining. The reason? Simply to protect American car companies, such as Ford, from overseas competition. The tax still remains today.
Which is why Ford now — as part of its manufacturing process — destroys their own vehicles.
Well, only the Ford Transit Connect, pictured above. The Transit Connect is a van — an award-winning one at that — and is therefore appropriately categorized as a light truck. But because the van’s main market is Europe, Ford manufactures the Transit Connect in Turkey. Bringing some of the vehicles into the United States for sale makes those imported subject to the chicken tax-fighting tariff. So Ford skirts the rules.
When produced in Turkey, the Transit Connect’s payload comes with features one would not need — nor want — for their cargo: rear windows, and rear seats replete with seat belts. The former allows any passerby to see what the van is carrying, making the vehicle more prone to break-in or theft. The latter simply takes up space which would be better served by boxes or equipment or, quite literally, almost anything else. In fact, these features make the van more appropriate for passengers than for cargo — which is exactly the point.
When the vans arrive in the United States, they do so with these rear windows and seats, and U.S. Customs treats them like the passenger cars they are designed to be. Passenger cars do not come with the same huge levy attached, so Ford avoids paying the 25% surcharge. Of course, Ford is then left with cargo vans unsuitable for cargo. We know that the Transit Connect arrives at the car dealership as the van seen above, and not as this oddly built passenger vehicle. What happens?
As the Wall Street Journal reported, Ford came up with an inelegant, yet effective solution: they route the Transit Connects to a warehouse in Baltimore, where they unceremoniously rip out the back seat and windows. And from there, finally, it goes to the showroom floor — a van and a tax dodge, weaved into one.
Bonus fact: In 2004, Oprah Winfrey gave away 276 cars (Pontiac G-Sixes), one to each member of her studio audience during a specific taping. Unfortunately, each of these guests also got a bit of a surprise — a tax bill, as high as $7,000 (for a car worth about $28,000), leading some to forfeit the gift. (In subsequent years, Oprah and/or her production company would pay for the tax burden.)
From the Archives: Add Gas, Get Cash Back: How the paper industry added fossil fuels to their production cycle — in order to get a large tax rebate for having greener processes.
Related: A Matchbox version of the Ford Transit Connect (as a taxi). Only $7.50 — so even if it gets hit by the 25% import tax for some reason, it’s still affordable.
This month, Now I Know is also brought to you by:
|More than 5 million people use MailChimp to design and send email marketing campaigns. Join them today.|
|uBiome is a startup that wants to help you to learn more about your microbiome. Discover how the trillions of bacteria in your body are keeping you healthy.|
|Listen to a best selling book today. Monthly memberships start at $7.95.|
Thank you to this month's sponsors!