Ford Motor to Pay $365 Million in Customs Penalty Settlement
Ford Motor has agreed to pay $365 million to resolve allegations made by the U.S. Justice Department that the company violated federal tariff laws. The allegations state that Ford misclassified and understated the value of hundreds of thousands of its Transit Connect vehicles, which were imported from Turkey between April 2009 and March 2013.
**Settlement of Allegations**
The Department of Justice stated that Ford had devised a scheme to avoid higher duties by misclassifying cargo vans as passenger wagons. This misclassification allowed Ford to pay a lower duty rate. The settlement of $365 million is among the largest customs penalty settlements in recent history. Ford denies liability in the matter but has chosen to settle in order to move on from the decade-old dispute.
**Misclassification Scheme**
Ford imported the Transit Connect vehicles with temporary rear seats and other features that made the vans appear to be passenger vehicles. These temporary features were never intended to be used to carry passengers but were included to avoid the higher duty rate applicable to cargo vehicles. After receiving Customs clearance, the vehicles were immediately stripped of the rear seats and converted back into cargo vans.
**Government Response**
The government has emphasized that it will not allow companies to evade duties by adding sham features to their products and misclassifying them for duty purposes. Brian Boynton, head of the DOJ Civil Division, stated that companies will be held accountable for such actions.
**Potential Penalties**
In 2021, Ford announced that it could face penalties of up to $1.3 billion in the ongoing dispute over import duties paid on Ford Transit Connect vehicles. The Supreme Court declined to hear Ford’s appeal in 2020, which led to increased duties for some prior imports. The 25% tariff on cargo vehicles, known as the “chicken tax,” originated from a trade war in the 1960s involving frozen chicken.
**Impact on Ford**
Following the settlement announcement, Ford’s shares fell by 0.5%. Ford’s decision to settle the allegations and pay a substantial penalty reflects the company’s commitment to resolving the dispute and moving forward. Despite the financial impact of the settlement, Ford aims to put the matter behind it and focus on its operations.
In conclusion, Ford Motor’s agreement to pay $365 million to settle allegations of tariff law violations underscores the importance of compliance with Customs regulations. The company’s actions highlight the potential consequences of misclassifying imported goods and the need for transparency in international trade practices. The settlement serves as a reminder to companies to accurately report the value and classification of their imported products to avoid penalties and legal issues.