Ford Motor has agreed to pay $365 million to settle the US government's allegations that it violated a federal tariff law by incorrectly classifying and undervaluing hundreds of thousands of its Transit Connect vehicles. 

Alleged Misclassified Cargo Vans of Ford

According to the Justice Department, Ford was accused of implementing a scheme to evade higher duties by misclassifying cargo vans imported from Turkey between April 2009 and March 2013.

Reuters reported that the settlement, which is deemed one of the largest customs penalty settlements in recent times, resolves these allegations.

A Ford spokesperson told Reuters that the company "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 spokesperson added.

READ NEXT: Ford CEO Jim Farley Urges Wall Street to Forget Tesla, Says Ford's 'Pro' Business Is the Auto Industry's Future

Transit Connect Vehicles of Ford

The issue revolves around Transit Connect vehicles initially imported as passenger wagons but later converted into cargo vans. In 2013, Customs and Border Protection determined that these vehicles were subject to a 25% duty applicable to cargo vehicles instead of the 2.5% duty for passenger vehicles.

The Justice Department alleged that Ford equipped the vehicles with temporary rear seats and other features to create the appearance of passenger vehicles, thereby avoiding the higher duty rate.

However, these features were never intended for passenger use and were promptly removed after customs clearance. Brian Boynton, head of the DOJ Civil Division, emphasized that the government would not tolerate companies attempting to circumvent duties through deceptive practices.

This settlement comes amid a long-standing dispute between Ford and the government over import duties for Transit Connect vehicles. 

Ford had previously said that it could face penalties amounting to $1.3 billion following a Supreme Court decision in 2020 that declined to hear its appeal regarding paying increased duties for some prior imports. 

According to Reuters, the 25% tariff stemmed from a 1960s trade war involving frozen chicken, and the bigger tariff on cargo vehicles is commonly referred to as the "chicken tax."

READ MORE: Tesla, Nissan, GM and Other EV Models Lose US Tax Credits