What Is the Chicken Tax on Trucks?

Did you know that a decades-old dispute over chickens is the reason why importing a foreign pickup truck into the U.S. now costs significantly more? A little-known tariff, known colloquially as the “Chicken Tax,” has shaped the American truck market for over sixty years now, making it impossible to import certain vehicles without paying an additional 25% fee.

Join us as we find out more about what the Chicken Tax is, what vehicles it applies to, and why it still matters today.

What Is the Chicken Tax and Why Does it Matter?

The Chicken Tax is a 25% tariff on imported light trucks that was first introduced in the United States in 1964 via an executive order from President Lyndon Johnson. President Johnson imposed the tariff as a retaliatory measure against European tariffs on imported chicken from the U.S. This policy not only reshaped trade relations but also bolstered domestic auto production, a move strongly supported by labor unions such as the United Auto Workers. Since its introduction in the 1960s, the rules of the Chicken Tax tariff have remained largely unchanged.

In the aftermath of World War II, Europe’s recovering economy saw a surge in demand for affordable food, including American chicken. However, by the early 1960s, several European countries, including West Germany and France, imposed tariffs on American chicken imports, citing unfair competition for European farmers. These chicken price controls were introduced in a bid to stabilize their domestic poultry market and combat foreign competition, however, they escalated tensions between countries, leading to a trade dispute with the U.S after diplomatic talks with the involved European nations failed. In response, America enacted the Chicken Tax, imposing a 25% tariff on European light trucks and other goods, including potato starch, dextrin, and brandy. Over time, these other items were removed, but the tax remained for light trucks.

The American Chicken Tax was originally designed to protect domestic manufacturers from the growing influx of foreign-manufactured vehicles, including the Volkswagen Type 2 and certain Japanese pickups, which were gaining popularity in the U.S. during the 1960s. However, instead of keeping foreign competition at bay, the tariff led to creative strategies by foreign manufacturers. To avoid the hefty 25% tax, automakers began assembling vehicles in the U.S. from imported parts, thus circumventing the tax while still capitalizing on the American market.

What Types of Vehicles Are Affected by the Chicken Tax?

The Chicken Tax applies to imported light trucks and there are several vehicles that fall into the light truck category. This includes:

Pickup Trucks

Any pickup trucks or automobile trucks, regardless of size, that are imported into the U.S from a foreign country will be subject to the 25% Chicken Tax. This includes compact, mid-size, and full-sized vehicles.

Cargo Vans

Vans configured primarily for hauling goods, typically without rear passenger seats or extensive side windows, will also fall into this category if imported.

Chassis Cabs

This refers to imported vehicles comprising the cab and frame but lacking a rear body (like a cargo box or flatbed), intended for upfitting after import. While historically exploited as a loophole, US Customs and Border Protection now often classifies these based on their likely final configuration, potentially subjecting them to the 25% tariff.

Certain Utility Vehicles

In earlier decades, some two-door SUVs built on traditional truck frames were classified as light trucks and thus subject to the tariff. However, as the SUV market evolved towards car-based platforms, most modern SUVs are now classified as passenger vehicles instead.

Conversely, the Chicken Tax generally does not apply to:

• Passenger Cars
• Most SUVs and Crossovers
• Heavy Duty Trucks and Larger Commercial Vehicles

How Does the Chicken Tax Affect Imported Pickup Trucks and Vans?

The Chicken Tax has a significant impact on the cost and availability of importing pickup trucks and vans into the United States.

Here are some of the ways that it affects the auto industry:

Significantly Increased Consumer Costs

The 25% tariff on imported light trucks significantly raises their price. Manufacturers pass these costs on to consumers, making foreign-made pickup trucks and vans much more expensive than their domestically produced counterparts.

Limited Availability of Certain Imported Trucks

A major consequence of the Chicken Tax is the restricted selection of light trucks available to U.S. consumers. Many popular global light trucks remain absent from the U.S. market because the Chicken Tax tariff makes importing them unprofitable for manufacturers. This limits consumer options and reduces access to innovative, fuel-efficient vehicles that are available in other markets. Some of the key vehicles that have been affected by the Chicken Tax include the Toyota Hilux and the Volkswagen Amarok, both of which are no longer sold in the U.S market.

Dominance of Domestic Light Truck Brands

By artificially inflating the cost of direct light truck imports, the Chicken Tax has protected domestic manufacturers selling pickup trucks from foreign competition for decades, allowing U.S.-made trucks, such as those produced by Ford, Chevrolet, Ram and GMC, to dominate the market.

Impact On Businesses

For businesses relying on importing pickup trucks and vans into the U.S, the Chicken Tax adds a substantial cost to the total import price. This impacts pricing strategies, profit margins, and the overall cost of doing business, particularly for companies within the automotive industry.

Why Does the Chicken Tax Still Exist?

The Chicken Tax remains relevant today because it continues to shape U.S trade policy and the automotive market. The primary reason for its continued existence is its impact on protecting domestic production and American manufacturing jobs, which has resulted in strong lobbying efforts from Auto Industry workers and American automakers.

The United Auto Workers (UAW) has consistently been one of the staunchest defenders of the tariff. Viewing it as crucial protection for American manufacturing jobs within the highly profitable light truck market. American automakers such as Ford, GM, and Ram continue to benefit from the protection afforded by the Chicken Tax, maintaining their dominance in the space without the same level of competition from foreign automakers.

The continued impact of the Chicken Tax goes some way to explaining why American-made trucks continue to dominate the market to this day and show no signs of slowing down.

Can You Import a Foreign Light Truck Without Paying the Chicken Tax?

The steep 25% Chicken Tax is a significant hurdle for anybody looking to import a foreign light truck into the United States.

Here are some of the potential ways that this substantial tariff may be avoided, but it’s important to remember that some of these methods could carry significant legal and financial risk:

Free Trade Agreements

Certain countries have free trade agreements with the United States that exempt vehicles manufactured within their borders from the Chicken Tax. In particular, the United States-Mexico-Canada Agreement (USMCA), which replaced NAFTA (the North American Free Trade Agreement), enables trucks built in Canada or Mexico to be imported into the United States without incurring the 25% tariff. These agreements make it easier for automakers to produce vehicles closer to the U.S. market and avoid the tax. USMCA has encouraged automakers to build manufacturing plants in Canada and Mexico, avoiding the tariff while maintaining access to the U.S. market.

Creative Loopholes

Some manufacturers have found creative loopholes to avoid the Chicken Tax by shipping trucks in pieces and assembling them in the U.S. For example, there was an old workaround where manufacturers imported a truck into the country as a chassis cab (which is basically a cab and chassis without a truck bed). This configuration wasn’t classified as a “light truck” under the Chicken Tax rules, so it circumvented the 25% tariff, and then the bed was installed separately when it arrived in the U.S. However, customs authorities eventually closed this loophole, recognizing that manufacturers were using it to sidestep the tax. Now, even chassis cabs can be subject to the tariff, depending on how they are classified.

There have also been cases of trucks being imported into the U.S as passenger vehicles and then later modified to meet light truck specifications. However, this can prove risky as customs officials have strict guidelines about imported vehicles, and misclassification could lead to significant penalties.

The 25-Year Rule for Classic Vehicles

It’s worth noting that vehicles older than 25 years are generally exempt from Environmental Protection Agency (EPA) and Department of Transportation (DOT) standards under the 25-Year Rule and can therefore be imported into the U.S more easily. While this doesn’t bypass the Chicken Tax specifically if applicable at the time of manufacture, it allows enthusiasts to import older, classic foreign light trucks that were never officially sold in the US, long after their original production run. This doesn’t help with new vehicle imports but is relevant for the classic car market.

The Future of the Chicken Tax

Moving forwards, as the relevance of the Chicken Tax wanes, are we likely to see it repealed or reformed?

In short, the future of the Chicken Tax remains uncertain. Critics argue that repealing or reforming the tariff could open the market to greater competition and consumer choice. However, proponents point out that any change could undermine domestic vehicle production and disrupt established labor arrangements.

Ultimately, the trajectory of the Chicken Tax will depend on the trade and economic policies prioritized by future administrations, as well as their willingness to balance domestic interests with global trade dynamics.

Should the Chicken Tax be repealed, the question then becomes: what could replace it? It’s possible that new tariffs or taxes could be implemented to support domestic production, particularly as the auto industry evolves with the rise of electric vehicles. Alternatively, policymakers might shift focus away from traditional tariffs and explore other methods of incentivizing innovation, such as offering tax credits or subsidies for domestic manufacturers producing electric vehicles or advanced technology.

Navigate the Chicken Tax and Vehicle Imports with CFR Classic

Are you looking to import a foreign-made light truck into the U.S.? Navigating potential hurdles like the 25% Chicken Tax, customs regulations, and international shipping logistics requires expertise. At CFR Classic, we can help to simplify this entire process, drawing on our decades of international car shipping experience to manage these complexities for you.

Contact us today to discuss your international car shipping needs with one of our experienced shipping specialists. We’ll be happy to provide a free, no-obligation quote and answer your questions about making your vehicle import a success.