Bush drops plans to raise tax on foreign minivans

March 21, 1992|By Michael Arndt | Michael Arndt,Chicago Tribune Kim Clark of The Sun's business staff contributed to this article.

WASHINGTON -- Afraid of angering Japan and Europe, the Bush administration has dropped a plan to boost by 10 times the import tax on foreign minivans and Jeep-like multipurpose vehicles, which would have added $2,000 to $6,000 to the sticker price of the popular vehicles.

The elevated tariff, to 25 percent of a vehicle's wholesale price from the current 2.5 percent, was opposed by many automobile dealers and some consumer advocates, who predicted domestic companies would take advantage of higher prices on imports to raise prices on their own products.

"We oppose the change," said Carla A. Hills, the U.S. trade

representative, who has been credited with persuading fellow Cabinet members to shelve the tariff plan.

Nonetheless, the Big Three automakers still might get more trade protection. Members of Congress have introduced at least three bills that would require the U.S. Customs Service to reclassify minivans and utility vehicles as trucks, subjecting them to the 25 percent tax.

Talk of higher import duties already might have achieved some results. The Japanese government Thursday ordered a 5 percent reduction in auto exports to the United States this year.

General Motors Corp. officials said they were disappointed their competition did not have to pay the higher tariff. GM is closing a Tarrytown, N.Y., minivan plant.

And Rodney Trump, president of the Baltimore-area autoworkers local, said he disagreed with the administration's move, but local autoworkers would not be hurt by it.

"There's not much President Bush does that I agree with," he said. But the Broening Highway GM plant, which makes passenger vans, has been working overtime to meet strong demand, he said. "Our vans do not need protection."

GM said that sales of the Baltimore-built Astro and Safari vans were up 4.2 percent from last year's models.

Minivans and multipurpose vehicles are best sellers, accounting for 17.3 percent of the 12.3 million cars and light trucks sold in the nation last year. For Chrysler Corp., the smallest of the Big Three, the share is even bigger: Nearly 40 percent of its 1991 sales were Dodge and Plymouth minivans or Jeeps.

The domestic carmakers -- General Motors Corp., Ford Motor Co. and Chrysler -- still dominate these segments, but imports from Japan are encroaching. Toyota Motor Corp. sold nearly 100,000 Previa minivans and 4-Runner utility vehicles in the United States last year, up from a fraction of that a few years earlier.

And with the U.S. companies already losing record amounts of money and firing record numbers of workers, the industry's congressional allies foresee another bloodbath if Japanese minivans and sport utility vehicles aren't priced out of U.S. markets through higher import duties.

Lawmakers also see their reclassifying plan as correcting contradictory treatment of imported mini-vans and multipurpose vehicles. At their ports of entry, these vehicles are labeled cars, allowing importers to pay only the 2.5 percent tariff on assembled automobiles.

But when it comes to environmental, safety and tax regulations, foreign companies consider these products to be trucks, subject to more lenient rules than cars.

In 1989, the U.S. Customs Service proposed reclassifying the vehicles as trucks. But after vigorous lobbying by Japanese manufacturers, Treasury Secretary Nicholas Brady overruled the Customs Service.

This year, however, Mr. Brady signaled Congress he was reconsidering. He cited no reason, but members of Congress speculated the administration wanted to help the beleaguered U.S. auto industry, especially during campaign season.

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