The Department of Justice announced that Ford Motor Company agreed to pay the U.S. government $365 million to resolve allegations of Tariff Act of 1930 violations. According to the DOJ, the American automaker misclassified and understated the value of hundreds of thousands of its Transit Connect cargo vans.
U.S. Customs and Border Protection (CBP) official Troy A. Miller called the settlement one of the largest customs penalties in recent history.
U.S. law imposes a 25% duty rate on vehicles classified as “motor vehicles for the transport of goods.” There is also a 2.5% duty rate for vehicles “principally designed for the transport of persons.”
The justice department alleged that, from 2009 to 2013, Ford attempted to avoid the 25% duty rate for its Transit Connect cargo vans imported from Turkey. The DOJ also accused Ford of under-declaring the value of some Transit Connect vehicles to avoid paying import duties.
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The automaker allegedly disguised its imported Transit Connect cargo vans as passenger vehicles by implementing fake rear seats before presenting them to CBP. According to the settlement, the vehicles presented multiple features that indicated they were never intended to transport passengers.
For example, the rear seats lacked headrests and certain wires that are used to provide lumbar support. The rear seats were also covered with reduced-cost fabric that did not match the covering on the front seats. Other giveaways included the lack of a cargo mat and no side airbags, speakers, handholds or vents behind the front seats. Rear doors for cargo loading ease and an exposed metal floor in the back area also raised suspicion.
According to the justice department, Ford’s entry papers submitted to CBP declared the cargo vehicles as “motor cars and other motor vehicles principally designed for the transport of persons.” The passenger vehicle classification meant Ford would only have to pay the 2.5% duty rate.
However, once the vehicles passed customs clearance, the DOJ alleged that Ford removed the deceptive rear seats, effectively making the vehicles two-seat cargo vans.
IEN reached out to Ford, and the company’s director of corporate and public policy communications, T.R. Reid, responded with the following statement:
“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.”
