In a resolution to a decade-old dispute, Ford Motor will pay a substantial sum of $365 million to settle allegations brought forth by the US Justice Department.
The government accused Ford of violating federal tariff laws by misclassifying and undervaluing hundreds of thousands of its Transit Connect vehicles imported from Turkey.
This settlement, one of the most substantial customs penalty settlements in recent history, addresses allegations that Ford utilized a scheme to bypass higher duties by mislabeling cargo vans from April 2009 to March 2013.
A spokesperson for Ford, as reported by Reuters, stated, “Ford strongly disagrees with many of the characterizations in the DOJ’s statement and admits no liability in this matter. But in the interest of moving on from this complex, decade-old dispute, we have agreed to settle the matter once and for all.”
The Justice Department disclosed that Ford had imported the vehicles with fake rear seats and temporary features to make them resemble passenger vehicles.
These seats, never intended for use by passengers, were added to avoid the 25 percent duty rate applicable to cargo vehicles and were subsequently removed after Customs clearance.
In 2013, Customs and Border Protection determined that Transit Connects imported as passenger wagons and later converted into cargo vans should be subject to the 25 percent duty applicable to cargo vehicles, rather than the 2.5 percent duty for passenger vehicles.
Brian Boynton, the head of the DOJ Civil Division, as cited by Reuters, stated, “The government will not permit companies to evade duties by adding sham features to their products and then misclassifying them.”
Ford’s decision to settle represents the culmination of a protracted legal battle, and the company had previously acknowledged the potential of facing penalties of up to $1.3 billion in 2021.
The 25 percent tariff, commonly known as the “chicken tax,” originated from a 1960s trade conflict involving frozen chicken. This tax, initially imposed on imported light trucks, has since been expanded to include cargo vehicles.
Despite the settlement, Ford shares experienced a 0.5 percent decline following the resolution of the case.
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