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Customs: These Cars are Trucks

By Paul A. EisensteinSpecial to The Christian Science Monitor / January 12, 1989



DETROIT

JAPANESE automakers are bracing for the possible collapse of what had only recently been seen as a strong and growing market for imported minivans and sports-utility vehicles. A ruling by the United States Customs Service will mean a 10-fold increase in tariffs on these popular imported multipurpose vehicles, or MPVs. As a result, many industry analysts believe the Japanese may rush to find ways to produce the vehicles in the US.

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The ruling came last week at the behest of the Suzuki Motor Company, which produces several light truck models, including the recently introduced Tracker sports-utility vehicle. Until now, these Jeep-like vehicles and minivans have been classified by customs as passenger cars, and subject to a modest 2.5 percent tariff.

``To the extent that a vehicle is equally designed for the transport of goods and of persons, it cannot be classified as one that was principally designed for the transport of persons,'' the ruling stated. Under the new ruling, tariffs will immediately be increased from 2.5 percent to 25 percent, the level already in effect for pickups.

There is one potentially positive side effect, however, in that multipurpose vehicles will no longer be counted as cars under Japan's voluntary restraint agreement. Trucks are not covered by the agreement.

The Customs Service action came just as several Japanese manufacturers were unveiling new multipurpose vehicles at the recent Detroit Auto Show. They included a new four-wheel-drive version of the Mazda MPV minivan initially unveiled last fall.

So far, most of the importers are still trying to analyze the impact of the customs ruling and have declined, for the moment, to comment. However, Gilbert R. Bamford, corporate planning operations manager for Toyota Motor Sales, acknowledged his company's plans have been thrown in disarray.

Toyota markets several different product lines that will be facing higher tariffs, including a minivan and the 4Runner sports-utility vehicle. Mr. Bamford says the automaker was hoping that a new version of the MPV would have yielded as much as a 50 percent increase in sales in the next year. Last year, Toyota sold 28,000 4Runners.

Instead, Bamford says, the anticipated increase in the price of the affected vehicles could mean ``substantially reducing volumes, anywhere from 50 to 75 percent.''

Japanese automakers aren't the only ones affected by the ruling. Both the Chrysler Corporation and General Motors Corporation market Japanese-made multipurpose vehicles under domestic nameplates, such as the GEO Tracker, a version of the Suzuki sports-utility-vehicle marketed by Chevrolet. ``There is no way that will not reduce sales,'' said GM chairman Roger Smith.

Still, Mr. Smith believes that ``customs did the right thing. They've decided trucks are trucks and cars are cars.''

On the positive side, analysts say, the ruling could convince many potential buyers to switch to US-made MPVs. Another result of the increase in tariffs may be to increase Japanese motor vehicle production in the United States, said David Power, head of the California-based market research firm, J.D. Power and Associates.

``It may force faster movement to transplant activity,'' Mr. Power said. Japanese-owned assembly plants in the US are typically referred to as ``transplants.''