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Ford (F) Agrees to Pay $365M to Settle Tariff Act Breach
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Ford Motor Company (F - Free Report) has agreed to pay $365 million to resolve the claim that it breached the Tariff Act of 1930. Per the U.S. Justice Department, the automaker deliberately misclassified and understated the value of hundreds of thousands of imported Transit Connect vehicles to evade higher tariff payments.
Ford contested the Justice Department's longstanding claim and released a statement in which it admitted no liability but agreed to settle this intricate and decade-long dispute.
Per the allegations made by the U.S. Customs and Border Protection (“CBP”) and federal prosecutors, from 2009 to 2013, Ford imported Transit Connect vans from Turkey with sham rear seats and other temporary features to make them appear like passenger vehicles instead of cargo vehicles. Due to this misclassification, the company paid an import tax of a mere 2.5% rather than the 25% duty applicable to cargo vehicles.
The higher tax on cargo vehicles, also known as the chicken tax, was introduced in the 1960s to nullify the effect of European countries’ higher tariffs on American chicken exports.
In a news release, the government alleged that Ford additionally provided documentation to Customs calling the vans vehicles that are designed for the transportation of humans. After getting clearance from Customs, each of these Transit Connect vans underwent immediate removal of its rear seats, bringing them back to their original identity as two-seat cargo vans.
The Custom brought the case against Ford into light in 2013. The automaker has since been trying to defend the allegation saying that the tariffs traditionally applied to vehicles depending on their importation condition and not on the later modifications. F added that the removable rear seat satisfied the U.S. safety criteria upon importation, making them passenger vehicles.
Per the Justice Department, out of the total $365 million settlement, $183,000 constitutes lost import duties and the remaining amount represents penalties. This fine stands as one of the most significant customs penalty settlements achieved on behalf of the agency recently.
Per Benjamin Mizer, acting associate attorney general, the companies that misclassify imports to evade applicable tariffs will be held accountable. He added that this settlement is a triumph for the American taxpayers and agencies’ efforts to prevent fraud and ensure compliance with U.S. trade laws. The alliance between CBP and the Justice Department plays a pivotal role in safeguarding the revenues of the United States.
The Justice Department has devised a Trade Fraud Task Force to prevent trade fraud, including avoidance of import duties. The Task Force works with CBP and other law enforcement agencies to ensure compliance with U.S. trade laws.
Ford could have been in a more dire situation, as it earlier disclosed in a Security and Exchange Commission filing, indicating a probable penalty of an extra $1.3 billion over the $196 million already paid.
As part of the settlement, the company withdrew a lawsuit against the government, claiming Customs' violation of its earlier import standards. Additionally, the agreement specifies that Ford would request Customs to provide tariff classification rulings for particular vehicles not previously imported into the United States.
The Zacks Consensus Estimate for MOD’s 2024 sales and earnings per share (EPS) suggests year-over-year growth of 4% and 67.2%, respectively. The EPS estimates for 2024 have improved 22 cents in the past 60 days. The EPS estimates for 2025 have improved 12 cents in the past 30 days.
The Zacks Consensus Estimate for TM’s 2024 sales and earnings suggests year-over-year growth of 10% and 73.6%, respectively. The EPS estimates for 2024 and 2025 have improved 86 cents and $1.01, respectively, in the past seven days.
The Zacks Consensus Estimate for ALSN’s 2024 sales and earnings suggests year-over-year growth of 2.1% and 3.2%, respectively. The EPS estimates for 2024 and 2025 have improved 67 cents and 71 cents, respectively, in the past 30 days.
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Ford (F) Agrees to Pay $365M to Settle Tariff Act Breach
Ford Motor Company (F - Free Report) has agreed to pay $365 million to resolve the claim that it breached the Tariff Act of 1930. Per the U.S. Justice Department, the automaker deliberately misclassified and understated the value of hundreds of thousands of imported Transit Connect vehicles to evade higher tariff payments.
Ford contested the Justice Department's longstanding claim and released a statement in which it admitted no liability but agreed to settle this intricate and decade-long dispute.
Per the allegations made by the U.S. Customs and Border Protection (“CBP”) and federal prosecutors, from 2009 to 2013, Ford imported Transit Connect vans from Turkey with sham rear seats and other temporary features to make them appear like passenger vehicles instead of cargo vehicles. Due to this misclassification, the company paid an import tax of a mere 2.5% rather than the 25% duty applicable to cargo vehicles.
The higher tax on cargo vehicles, also known as the chicken tax, was introduced in the 1960s to nullify the effect of European countries’ higher tariffs on American chicken exports.
In a news release, the government alleged that Ford additionally provided documentation to Customs calling the vans vehicles that are designed for the transportation of humans. After getting clearance from Customs, each of these Transit Connect vans underwent immediate removal of its rear seats, bringing them back to their original identity as two-seat cargo vans.
The Custom brought the case against Ford into light in 2013. The automaker has since been trying to defend the allegation saying that the tariffs traditionally applied to vehicles depending on their importation condition and not on the later modifications. F added that the removable rear seat satisfied the U.S. safety criteria upon importation, making them passenger vehicles.
Per the Justice Department, out of the total $365 million settlement, $183,000 constitutes lost import duties and the remaining amount represents penalties. This fine stands as one of the most significant customs penalty settlements achieved on behalf of the agency recently.
Per Benjamin Mizer, acting associate attorney general, the companies that misclassify imports to evade applicable tariffs will be held accountable. He added that this settlement is a triumph for the American taxpayers and agencies’ efforts to prevent fraud and ensure compliance with U.S. trade laws. The alliance between CBP and the Justice Department plays a pivotal role in safeguarding the revenues of the United States.
The Justice Department has devised a Trade Fraud Task Force to prevent trade fraud, including avoidance of import duties. The Task Force works with CBP and other law enforcement agencies to ensure compliance with U.S. trade laws.
Ford could have been in a more dire situation, as it earlier disclosed in a Security and Exchange Commission filing, indicating a probable penalty of an extra $1.3 billion over the $196 million already paid.
As part of the settlement, the company withdrew a lawsuit against the government, claiming Customs' violation of its earlier import standards. Additionally, the agreement specifies that Ford would request Customs to provide tariff classification rulings for particular vehicles not previously imported into the United States.
Zacks Rank & Other Key Picks
F currently carries a Zacks Rank #2 (Buy).
Some other top-ranked players in the auto space are Modine Manufacturing Company (MOD - Free Report) , Toyota Motor Corporation (TM - Free Report) and Allison Transmission Holdings, Inc. (ALSN - Free Report) , each sporting a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for MOD’s 2024 sales and earnings per share (EPS) suggests year-over-year growth of 4% and 67.2%, respectively. The EPS estimates for 2024 have improved 22 cents in the past 60 days. The EPS estimates for 2025 have improved 12 cents in the past 30 days.
The Zacks Consensus Estimate for TM’s 2024 sales and earnings suggests year-over-year growth of 10% and 73.6%, respectively. The EPS estimates for 2024 and 2025 have improved 86 cents and $1.01, respectively, in the past seven days.
The Zacks Consensus Estimate for ALSN’s 2024 sales and earnings suggests year-over-year growth of 2.1% and 3.2%, respectively. The EPS estimates for 2024 and 2025 have improved 67 cents and 71 cents, respectively, in the past 30 days.