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Wow. I hope the government loses their lawsuit here. Customs & Border Protection should have absolutely no jurisdiction over what an item is used for once it

Wow. I hope the government loses their lawsuit here. Customs & Border Protection should have absolutely no jurisdiction over what an item is used for once it enters the country.

RC_ITR 5y ago
It also goes to show how corrupt the import tax system is. Why SHOULD a cargo van have higher import taxes than a passenger van, other than to serve the needs of some random private company? Even moreso, I wouldn’t be surprised if Ford lobbied FOR those laws before changing its mind in where to produce a particular sku
- nickff 5y ago
  >"Why SHOULD a cargo van have higher import taxes than a passenger van, other than to serve the needs of some random private company?" Have you read a tariff schedule? They're full of this stuff, which seem to be protections or favors for specific industries. Anti-dumping protections seem similar.
  - RC_ITR 5y ago
    >It also goes to show how corrupt the import tax system is.
    - nickff 5y ago
      I am not sure it is 'corrupt', though that may be a question of semantics. I didn't mean to disagree with you, just point out how rampant the issue was.
      - secabeen 5y ago
        I don't think it's corrupt exactly, often these details are worked out in deals between the various countries or as retaliation for other unilateral increases. We lower your rate on rice to 6% if you lower our rate on chicken; if you raise your rate on our machine parts to 25%, we'll raise our rate on your cargo vans to 25%. Etc. It's part of the negotiations, and it often has nothing to do with the specifics of the items being tarriffed.
- colejohnson66 5y ago
  No lobbying involved. It’s the remnants of a tariff war with France and Germany: https://en.wikipedia.org/wiki/Chicken_tax https://en.wikipedia.org/wiki/Chicken_tax
  - RC_ITR 5y ago
    The Chicken Wars brought the powerful agricultural lobby in France into direct conflict with the powerful agricultural lobby in the United States. Not surprisingly, France, the largest poultry producer in the EEC, was unwilling to embrace a free trade policy whose benefits would be spread among consumers throughout Europe. The benefits of protectionism were concentrated in France and the costs were borne by consumers throughout Europe. Indeed, the stakes were sufficiently high that France might have quit the EEC had not French agricultural interests been appeased. That's from the 'further reading' link on Wikipedia.
    - colejohnson66 5y ago
      Yes, but I meant lobbying from Ford for said tariff as you suggested.
      - RC_ITR 5y ago
        At the same time, the U.S. auto industry was suffering its own trade crisis due to competition from growingly popular foreign cars and trucks. During the early 1960s, sales of Volkswagens surged as America’s love affair with the iconic VW “Bug” coupe and Type 2 van shifted into overdrive. By 1963, the situation got so bad that Walter Reuther, president of the United Automobile Workers Union (U.A.W.), threatened a strike that would have halted all U.S. auto production just before the 1964 presidential election. Running for reelection and aware of the influence the U.A.W. had in Congress and in the minds of voters, President Johnson looked for a way to persuade Reuther’s union not to strike and to support his “Great Society” civil rights agenda. Johnson succeeded on both counts by agreeing to include light trucks in the Chicken Tax. While U.S. tariffs on other Chicken Tax items have since been rescinded, lobbying efforts by the U.A.W. have kept the tariff on light trucks and utility vans alive. As a result, American-made trucks still dominate sales in the U.S., and some very desirable trucks, like the high-end Australian-made Volkswagen Amorak, are not sold in the United States. https://www.thoughtco.com/chicken-tax-4159747 https://www.thoughtco.com/chicken-tax-4159747
- jrockway 5y ago
  It sounds like the age-old market segmentation thing. People driving their kids to soccer practice don't make money with their vans, so they'll notice the higher price (and if they find out their congresscritter was responsible, they'll vote for a different one). Meanwhile, cargo vans are used to make money, so the users can bear the extra cost. There's also overtones of taxation without representation going on here; individuals can vote, and so they have lower taxes than businesses, which can't vote. (It's too bad that Ford doesn't dump the seats they take out of the van into Boston Harbor! Someone would probably still get the reference.) It's the same game that SaaS companies play. Everything is free until you want SSO, then it's $30,000 a year. If you need SSO, you can afford it. Personally, I hate this in both cases. I think we could save everyone a lot of time if every vendor you did business with just grabbed you by the ankles and flipped you upside down and took whatever money fell out of your pocket. Why tiptoe around what they really want...
  - titusjohnson 5y ago
    > There's also overtones of taxation without representation going on here; individuals can vote, and so they have lower taxes than businesses, which can't vote. I'm confused about this statement. Businesses are comprised of individuals, and those individuals (if citizens) can vote. So the business has a vote through the voice of its employees and representation in government through the people employees at a business. Or are you saying the legal fiction of business personhood should give the business a ... vote? That just sounds like business owners (individuals) getting 2 or more votes then...
    - slt2021 5y ago
      maybe businesses can't vote, but they can buy votes of the congressmen directly. why go through the hassle of voting and deal with uncertainty whether you voted a right person, when you can just buy with cash whatever law/regulation you need
    - NoboruWataya 5y ago
      > Or are you saying the legal fiction of business personhood should give the business a ... vote? That just sounds like business owners (individuals) getting 2 or more votes then... I believe the more common proposal is to resolve the contradiction the other way: remove taxes on corporations, as the individuals comprising the corporations generally already pay taxes. That would be politically quite unpopular, but there is a certain logic to it and it would also make taxes easier to administer and more difficult to avoid. And it doesn't need to be as pro-rich as it sounds - you could just replace corporation taxes with other taxes targeting wealthy individuals, such as a wealth tax or higher income taxes.
colejohnson66 5y ago
Ford lost in 2019. An appeal to the Supreme Court was denied.[0] My non-lawyer understand of the issue wasn’t so much that they were avoiding a tariff (“tariff engineering”), but that they were removing the seats upon entry. In contrast with the BRAT where the dummy seats were still there when sold. [0]: https://www.autoblog.com/2021/06/03/ford-transit-connect-import-penalties-chicken-tax-tariff/ https://www.autoblog.com/2021/06/03/ford-transit-connect-imp...
- nathanvanfleet 5y ago
  So in your view they just felt like adding seats and then removing them later?
  - harles 5y ago
    I’d expect some were also sold with the seats, they just changed the default config. I wonder what the ratio was though.
- etskinner 5y ago
  I wonder if they could, in theory, sell you the car for 150% of it's final price (so that they seats are there when sold), then buy back the seats immediately for 50% of its price. The invoice would say something like: Car with passenger seats: $15,000; Passenger seat buyback: $5,000; Total after buyback: $10,000. That way everyone gets what they want, and they've technically sold it with the seats still installed.
  - kentonv 5y ago
    Law isn't interpreted by computers, it is interpreted by human judges, who generally aren't impressed by such hacks (though you might get lucky).
    - dragonwriter 5y ago
      Yeah, when the law allows additional sanction for willful/knowing violation, courts will not only often see through your “clever hack”, but also see it as evidence of deliberate wrongdoing.
khuey 5y ago
Why? Borders are full of rules of the form "X can cross for purpose A but not for purpose B" for both people and goods.
- jrockway 5y ago
  How long does the rule apply for? If someone removes seats from their van, is that tax evasion? What if it's temporary? If an individual can do it, why not Ford? The problem I have here is how easy it is to avoid the tax. CBP shouldn't have any jurisdiction over car modifications and repairs; that responsibility falls to different agencies.
  - fredoralive 5y ago
    It seems that the issue was that Ford, the importer, changed the class of vehicle between import and being sold inside the US. Presumably if you aren't the importer you can go wild (IANAL).
    - beerandt 5y ago
      No- the norm is for things to be imported, then combined or modified and sold as a new product, without paying the import tax based on the new product. If import tax on a cpu is x, and motherboard is y, should you have to pay computer import tax z if you build and sell PCs? After all, what imported cpus and motherboards aren't destined to be assembled computers?
      - fredoralive 5y ago
        I was more talking about this particular case, where it seems it was judged that Ford didn't make a new product out of imported parts, but importing a finished vehicle as one thing, and selling it as another after minor modification. It is a more normal way around these sorts of tariffs to import a vehicle as a kit of parts (CKD / "Complete knocked down"), and perform some level of final assembly in the end country. The sort of rules you talk about apply then, you pay the car parts import rate on the kit, not the (presumably higher) rate for a complete car[1]. [1] Or otherwise avoid whatever other protectionist measures mean you can't just import a fully built car.
tshaddox 5y ago
> Customs & Border Protection should have absolutely no jurisdiction over what an item is used for once it enters the country. I mean, that's the whole point of the import tariff law, so if the CBP has jurisdiction to enforce tariff law, surely how the item is used (or at least how the item is intended to be used or how the item can reasonably be expected to be used) is the primary factor to consider.
mc32 5y ago
It was pretty transparent that they did that to circumvent regulation. Imagine Coca-Cola getting clearance for importing coca leaves for flavoring but then instead sells it to a third party who processes it for something else.
- notch656a 5y ago
  Am I the only one that sees no problem with that? Why the hell should coca-cola be responsible for what someone else does with coca leaves?
  - JohnBooty 5y ago
    I mean, we (ideally) pass laws to benefit society. I'm not somebody who really loves rules and regulations and I'll be the first person to say that America's "war on drugs" has been an utter disaster in multiple ways. But, generally speaking, flooding a country with cocaine is not what most of us would call beneficial to society. If you don't think that we should have a society and/or laws, cool, that's another discussion. But if you accept the premise that we should have laws, controlling the flow of industrial quantities of coca leaves seems like the good kind of law. I mean, I guess we could just let Coca-Cola import metric tons of coca leaves, sell them to whoever the fuck they want, and then just... prosecute the people who do bad things with them? I think we would find that orders of magnitude more work and orders of magnitude less effective. There would be a large cost to society, and nobody wins except Coca-Cola, really.
    - vba616 5y ago
      >I mean, I guess we could just let Coca-Cola import metric tons of coca leaves, sell them to whoever the fuck they want, and then just... prosecute the people who do bad things with them? Yes? Basically? (1988) "Workers at the Stepan Co. plant, the nation’s only legal importer of cocaine, must undergo strict background checks, and agents from the federal Drug Enforcement Agency frequently visit, said plant manager John O’Brien. DEA spokesman Milton Smilek in Newark said there haven’t been any security problems at the plant just west of New York City. He said it processes hundreds of tons of cocaine each year." This is where Coca-Cola is said to get its flavoring from.
gamblor956 5y ago
The issue was that the seats were only added for the purposes of evading tax, and the tax evasive purpose was established by Ford systematically removing the seats prior to sale. Ford would have been fine if they had kept the seats in the car until they were sold and left it up to the customer to remove the seats. (This would not have affected the customer, tax-wise, since the import duty is paid by Ford, and by the time the customer has removed the seats, they have already paid the sales tax on the vehicle.)
throwawaylinux 5y ago
I've always been lead to believe the intent of a law or regulation is what matters in the eyes of a court. The Subaru case probably violates the intent as well but maybe that would be a lot harder to prove. But the Ford case they clearly conspired to violate the intent. Which, if "intent" really is the important thing, I suppose should have lead to criminal charges too. I suppose intent probably matters a bit more when it's the little guy on the receiving end of it.
friedturkey 5y ago
I sincerely hope Ford gets hit hard and pays back all the profits they made from their tax dodging scheme plus penalties. I'm beyond tired of massive corporations sending jobs to other countries, pretending to care about their own country and lying about being made locally, and dodging taxes. Ford hit all three here.

Wow. I hope the government loses their lawsuit here. Customs & Border Protection should have absolutely no jurisdiction over what an item is used for once it enters the country.

RC_ITR 5y ago

It also goes to show how corrupt the import tax system is. Why SHOULD a cargo van have higher import taxes than a passenger van, other than to serve the needs of some random private company? Even moreso, I wouldn’t be surprised if Ford lobbied FOR those laws before changing its mind in where to produce a particular sku

nickff 5y ago
>"Why SHOULD a cargo van have higher import taxes than a passenger van, other than to serve the needs of some random private company?" Have you read a tariff schedule? They're full of this stuff, which seem to be protections or favors for specific industries. Anti-dumping protections seem similar.
- RC_ITR 5y ago
  >It also goes to show how corrupt the import tax system is.
  - nickff 5y ago
    I am not sure it is 'corrupt', though that may be a question of semantics. I didn't mean to disagree with you, just point out how rampant the issue was.
    - secabeen 5y ago
      I don't think it's corrupt exactly, often these details are worked out in deals between the various countries or as retaliation for other unilateral increases. We lower your rate on rice to 6% if you lower our rate on chicken; if you raise your rate on our machine parts to 25%, we'll raise our rate on your cargo vans to 25%. Etc. It's part of the negotiations, and it often has nothing to do with the specifics of the items being tarriffed.
colejohnson66 5y ago
No lobbying involved. It’s the remnants of a tariff war with France and Germany: https://en.wikipedia.org/wiki/Chicken_tax https://en.wikipedia.org/wiki/Chicken_tax
- RC_ITR 5y ago
  The Chicken Wars brought the powerful agricultural lobby in France into direct conflict with the powerful agricultural lobby in the United States. Not surprisingly, France, the largest poultry producer in the EEC, was unwilling to embrace a free trade policy whose benefits would be spread among consumers throughout Europe. The benefits of protectionism were concentrated in France and the costs were borne by consumers throughout Europe. Indeed, the stakes were sufficiently high that France might have quit the EEC had not French agricultural interests been appeased. That's from the 'further reading' link on Wikipedia.
  - colejohnson66 5y ago
    Yes, but I meant lobbying from Ford for said tariff as you suggested.
    - RC_ITR 5y ago
      At the same time, the U.S. auto industry was suffering its own trade crisis due to competition from growingly popular foreign cars and trucks. During the early 1960s, sales of Volkswagens surged as America’s love affair with the iconic VW “Bug” coupe and Type 2 van shifted into overdrive. By 1963, the situation got so bad that Walter Reuther, president of the United Automobile Workers Union (U.A.W.), threatened a strike that would have halted all U.S. auto production just before the 1964 presidential election. Running for reelection and aware of the influence the U.A.W. had in Congress and in the minds of voters, President Johnson looked for a way to persuade Reuther’s union not to strike and to support his “Great Society” civil rights agenda. Johnson succeeded on both counts by agreeing to include light trucks in the Chicken Tax. While U.S. tariffs on other Chicken Tax items have since been rescinded, lobbying efforts by the U.A.W. have kept the tariff on light trucks and utility vans alive. As a result, American-made trucks still dominate sales in the U.S., and some very desirable trucks, like the high-end Australian-made Volkswagen Amorak, are not sold in the United States. https://www.thoughtco.com/chicken-tax-4159747 https://www.thoughtco.com/chicken-tax-4159747
jrockway 5y ago
It sounds like the age-old market segmentation thing. People driving their kids to soccer practice don't make money with their vans, so they'll notice the higher price (and if they find out their congresscritter was responsible, they'll vote for a different one). Meanwhile, cargo vans are used to make money, so the users can bear the extra cost. There's also overtones of taxation without representation going on here; individuals can vote, and so they have lower taxes than businesses, which can't vote. (It's too bad that Ford doesn't dump the seats they take out of the van into Boston Harbor! Someone would probably still get the reference.) It's the same game that SaaS companies play. Everything is free until you want SSO, then it's $30,000 a year. If you need SSO, you can afford it. Personally, I hate this in both cases. I think we could save everyone a lot of time if every vendor you did business with just grabbed you by the ankles and flipped you upside down and took whatever money fell out of your pocket. Why tiptoe around what they really want...
- titusjohnson 5y ago
  > There's also overtones of taxation without representation going on here; individuals can vote, and so they have lower taxes than businesses, which can't vote. I'm confused about this statement. Businesses are comprised of individuals, and those individuals (if citizens) can vote. So the business has a vote through the voice of its employees and representation in government through the people employees at a business. Or are you saying the legal fiction of business personhood should give the business a ... vote? That just sounds like business owners (individuals) getting 2 or more votes then...
  - slt2021 5y ago
    maybe businesses can't vote, but they can buy votes of the congressmen directly. why go through the hassle of voting and deal with uncertainty whether you voted a right person, when you can just buy with cash whatever law/regulation you need
  - NoboruWataya 5y ago
    > Or are you saying the legal fiction of business personhood should give the business a ... vote? That just sounds like business owners (individuals) getting 2 or more votes then... I believe the more common proposal is to resolve the contradiction the other way: remove taxes on corporations, as the individuals comprising the corporations generally already pay taxes. That would be politically quite unpopular, but there is a certain logic to it and it would also make taxes easier to administer and more difficult to avoid. And it doesn't need to be as pro-rich as it sounds - you could just replace corporation taxes with other taxes targeting wealthy individuals, such as a wealth tax or higher income taxes.

colejohnson66 5y ago

Ford lost in 2019. An appeal to the Supreme Court was denied.[0] My non-lawyer understand of the issue wasn’t so much that they were avoiding a tariff (“tariff engineering”), but that they were removing the seats upon entry. In contrast with the BRAT where the dummy seats were still there when sold. [0]: https://www.autoblog.com/2021/06/03/ford-transit-connect-import-penalties-chicken-tax-tariff/ https://www.autoblog.com/2021/06/03/ford-transit-connect-imp...

nathanvanfleet 5y ago
So in your view they just felt like adding seats and then removing them later?
- harles 5y ago
  I’d expect some were also sold with the seats, they just changed the default config. I wonder what the ratio was though.
etskinner 5y ago
I wonder if they could, in theory, sell you the car for 150% of it's final price (so that they seats are there when sold), then buy back the seats immediately for 50% of its price. The invoice would say something like: Car with passenger seats: $15,000; Passenger seat buyback: $5,000; Total after buyback: $10,000. That way everyone gets what they want, and they've technically sold it with the seats still installed.
- kentonv 5y ago
  Law isn't interpreted by computers, it is interpreted by human judges, who generally aren't impressed by such hacks (though you might get lucky).
  - dragonwriter 5y ago
    Yeah, when the law allows additional sanction for willful/knowing violation, courts will not only often see through your “clever hack”, but also see it as evidence of deliberate wrongdoing.

khuey 5y ago

Why? Borders are full of rules of the form "X can cross for purpose A but not for purpose B" for both people and goods.

jrockway 5y ago
How long does the rule apply for? If someone removes seats from their van, is that tax evasion? What if it's temporary? If an individual can do it, why not Ford? The problem I have here is how easy it is to avoid the tax. CBP shouldn't have any jurisdiction over car modifications and repairs; that responsibility falls to different agencies.
- fredoralive 5y ago
  It seems that the issue was that Ford, the importer, changed the class of vehicle between import and being sold inside the US. Presumably if you aren't the importer you can go wild (IANAL).
  - beerandt 5y ago
    No- the norm is for things to be imported, then combined or modified and sold as a new product, without paying the import tax based on the new product. If import tax on a cpu is x, and motherboard is y, should you have to pay computer import tax z if you build and sell PCs? After all, what imported cpus and motherboards aren't destined to be assembled computers?
    - fredoralive 5y ago
      I was more talking about this particular case, where it seems it was judged that Ford didn't make a new product out of imported parts, but importing a finished vehicle as one thing, and selling it as another after minor modification. It is a more normal way around these sorts of tariffs to import a vehicle as a kit of parts (CKD / "Complete knocked down"), and perform some level of final assembly in the end country. The sort of rules you talk about apply then, you pay the car parts import rate on the kit, not the (presumably higher) rate for a complete car[1]. [1] Or otherwise avoid whatever other protectionist measures mean you can't just import a fully built car.

tshaddox 5y ago

> Customs & Border Protection should have absolutely no jurisdiction over what an item is used for once it enters the country. I mean, that's the whole point of the import tariff law, so if the CBP has jurisdiction to enforce tariff law, surely how the item is used (or at least how the item is intended to be used or how the item can reasonably be expected to be used) is the primary factor to consider.

mc32 5y ago

It was pretty transparent that they did that to circumvent regulation. Imagine Coca-Cola getting clearance for importing coca leaves for flavoring but then instead sells it to a third party who processes it for something else.

notch656a 5y ago
Am I the only one that sees no problem with that? Why the hell should coca-cola be responsible for what someone else does with coca leaves?
- JohnBooty 5y ago
  I mean, we (ideally) pass laws to benefit society. I'm not somebody who really loves rules and regulations and I'll be the first person to say that America's "war on drugs" has been an utter disaster in multiple ways. But, generally speaking, flooding a country with cocaine is not what most of us would call beneficial to society. If you don't think that we should have a society and/or laws, cool, that's another discussion. But if you accept the premise that we should have laws, controlling the flow of industrial quantities of coca leaves seems like the good kind of law. I mean, I guess we could just let Coca-Cola import metric tons of coca leaves, sell them to whoever the fuck they want, and then just... prosecute the people who do bad things with them? I think we would find that orders of magnitude more work and orders of magnitude less effective. There would be a large cost to society, and nobody wins except Coca-Cola, really.
  - vba616 5y ago
    >I mean, I guess we could just let Coca-Cola import metric tons of coca leaves, sell them to whoever the fuck they want, and then just... prosecute the people who do bad things with them? Yes? Basically? (1988) "Workers at the Stepan Co. plant, the nation’s only legal importer of cocaine, must undergo strict background checks, and agents from the federal Drug Enforcement Agency frequently visit, said plant manager John O’Brien. DEA spokesman Milton Smilek in Newark said there haven’t been any security problems at the plant just west of New York City. He said it processes hundreds of tons of cocaine each year." This is where Coca-Cola is said to get its flavoring from.

gamblor956 5y ago

The issue was that the seats were only added for the purposes of evading tax, and the tax evasive purpose was established by Ford systematically removing the seats prior to sale. Ford would have been fine if they had kept the seats in the car until they were sold and left it up to the customer to remove the seats. (This would not have affected the customer, tax-wise, since the import duty is paid by Ford, and by the time the customer has removed the seats, they have already paid the sales tax on the vehicle.)

throwawaylinux 5y ago

I've always been lead to believe the intent of a law or regulation is what matters in the eyes of a court. The Subaru case probably violates the intent as well but maybe that would be a lot harder to prove. But the Ford case they clearly conspired to violate the intent. Which, if "intent" really is the important thing, I suppose should have lead to criminal charges too. I suppose intent probably matters a bit more when it's the little guy on the receiving end of it.

friedturkey 5y ago

I sincerely hope Ford gets hit hard and pays back all the profits they made from their tax dodging scheme plus penalties. I'm beyond tired of massive corporations sending jobs to other countries, pretending to care about their own country and lying about being made locally, and dodging taxes. Ford hit all three here.