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Ford is now paying a whopping 25% tax on each Transit Connect cargo van. If the ruling isn't overturned, this situation will continue with the new '14 model, which is built in Spain. This gives the Nissan NV200/Chevy City Express a huge advantage (as well as the Caravan C/V) because they're built in North America and not subject to the tax. With fleet buyers being very cost-conscious, this could give competitors an opportunity to cut prices -- the NV200 is already much cheaper than the Transit Connect -- and leave Ford hanging out to dry. The new Connect looks like a nice vehicle, but if it costs thousands more than competing models, will it still sell?

WASHINGTON -- Even without a free-trade pact, Ford Motor Co. has leaned on European models such as the Ford Fiesta and C-Max to extend its U.S. product line.

But that strategy can backfire.

This year, in a clear example of why Ford is pushing so hard for a trans-Atlantic treaty, the automaker had its hand slapped by the U.S. government for bringing cargo vans into the United States without paying the "chicken tax" -- a 50-year-old tax on imported trucks and vans, so named because it was imposed as payback for a German tariff on chicken.

In the little-noticed January ruling, officials at U.S. Customs and Border Protection took issue with how Ford was importing the Turkey-built Transit Connect, a commercial van popular in Europe that Ford launched in the U.S. market four years ago.

Ford chose to bring the Transit Connects to the United States equipped as passenger vans. Then, at a warehouse at the Port of Baltimore, a contractor would strip out seats and windows to prepare them for sale as cargo vans.

In doing so, Ford hoped to save thousands of dollars in tariffs per unit on the cargo version, which starts at $23,420, including shipping. Small passenger vans, like cars, face a 2.5 percent import tariff in the United States, compared with the 25 percent tariff on cargo vans.

In the Jan. 30 decision, U.S. customs officials told Ford to stop.

"It is clear that the Connect is a commercial vehicle first and foremost," said the 13-page ruling. Ford's strategy "serves no manufacturing or commercial purpose" other than to "manipulate the tariff schedule," the ruling added.

A Ford spokesman said the company is appealing the ruling, which it says contradicts previous decisions by the agency. In the meantime, it is still importing Transit Connects and paying the higher tariff.

Ford has announced plans to launch a redesigned Transit Connect at the end of 2013, to be built in Valencia, Spain, rather than Turkey. Those plans haven't changed, the spokesman said.

At the same time, Ford is lobbying Congress and U.S. trade negotiators to keep the chicken tax in place against Japanese automakers.

The American Automotive Policy Council, a trade group that represents the Detroit 3, says the chicken tax for Japanese trucks shouldn't be fully phased out for 25 or 30 years. Japan has no tariffs, but the group argues that because of other trade barriers, foreign brands can barely sell any vehicles in Japan.
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