Ford Motor has agreed to pay USD 365 million to settle allegations by the U.S. government that it violated federal tariff laws by misclassifying and understating the value of its Transit Connect vehicles. This settlement resolves a decade-old dispute between Ford and the Justice Department.
Allegations and settlement
The Justice Department accused Ford of devising a scheme to avoid higher duties by misclassifying cargo vans imported from Turkey between April 2009 and March 2013. Ford strongly disagreed with many of the characterizations but agreed to settle the matter to move on from the complex dispute.
Customs ruling and scheme
Customs and Border Protection ruled in 2013 that Transit Connects imported as passenger wagons, later converted into cargo vans, should be subject to the 25% duty for cargo vehicles, not the 2.5% duty for passenger vehicles. Ford imported the vehicles with temporary features to appear as passenger vehicles, avoiding the higher duty rate.
Government’s response
The Justice Department highlighted that Ford included these temporary features, like rear seats, solely to avoid paying the 25% duty rate. The government asserted that it would not permit companies to evade duties by misclassifying their products.
Previous dispute and tariff origins
In 2021, Ford warned of potential penalties up to USD 1.3 billion in a long-standing dispute over import duties paid on Ford Transit Connect vehicles. The dispute traces back to a 1960s trade war involving frozen chicken, resulting in the imposition of a 25% tariff, known as the “chicken tax,” on cargo vehicles.
Market response
Ford’s settlement of USD 365 million brings closure to a contentious legal battle, allowing the company to move forward. Following the news, Ford shares experienced a slight decline of 0.5%.
The settlement signifies Ford’s commitment to resolving regulatory issues and underscores the importance of compliance with tariff laws in international trade.