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U.S. bound Ford Transit Connect: pieces of its interior are shredded — immediately upon importation — to circumvent the 1963 Chicken Tax — which imposes a 25% tariff on imported light trucks.

Ford imports all Transit Connects as passenger vehicles with rear windows, rear seats and rear seatbelts.[1] The vehicles are exported from Turkey, arrive in Baltimore, and are converted into light trucks: rear windows are replaced with metal panels and rear seats removed.[1]

The process exploits a loophole in the customs definition of a commercial vehicle. As cargo doesn't need seats with seat belts or rear windows, mere presence of those items exempts the vehicle from light truck status. The conversion process costs Ford only hundreds of dollars per van, but saves thousands in taxes.[1]

A loophole is a weakness or exception that allows a system, such as a law or security, to be circumvented or otherwise avoided. Loopholes are searched for and used strategically in a variety of circumstances, including taxes, elections, politics, the criminal justice system, or in breaches of security.

A loophole in a law often contravenes the intent of the law without technically breaking it. For example, in some places, one may avoid paying taxes to the jurisdiction by forming a second residence in another location, or a commercial property can be built in a residential zone if it is made also for residential use.

In a security system, the one who breaches the system (such as an inmate escaping from prison or a terrorist) exploits the loophole during breach. Such weaknesses are often studied in advance by the violator, who spends time observing and learning the routine of the system and sometimes conducts surreptitious tests until such a loophole can be found.

An example of a legal loophole:

  • In 2005, Wal-Mart planned a store in Calvert County, Maryland. While a law in the county restricted the size of a retail store to 75,000 square feet, Wal-Mart considered a plan that would dodge this restriction by building two separate smaller stores. Though Wal-Mart later withdrew this controversial plan[2], the plan highlighted a legal loophole.

See also

References

  1. ^ a b c "To Outfox the Chicken Tax, Ford Strips Its Own Vans". The Wall Street Journal, Matthew Dolan, September 22, 2009. http://online.wsj.com/article/SB125357990638429655.html.  
  2. ^ Wal-Mart Drops Plan for Side-by-Side Calvert Stores







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