REUTERS

Ford Motor Co (F.N) said Thursday it could face up to $1.3 billion in penalties in a long-running dispute over import duties paid on Ford Transit Connect vehicles.

The No. 2 U.S. automaker said after the Supreme Court declined to hear its appeal in 2020 that it paid increased duties for some prior imports, plus interest. U.S Customs and Border Protection (CBP) is now seeking additional duties of $181 million and is considering seeking a monetary penalty of "as much as $652 million to $1.3 billion," Ford said. The automaker added that it would vigorously defend its actions and noted any penalty "would be based on our level of culpability as determined by the courts."

CBP ruled in 2013 that Transit Connects imported as passenger wagons and later converted into cargo vans were subject to the 25% duty applicable to cargo vehicles, rather than the 2.5% passenger vehicle duty.

The vans were assembled in Turkey.

The Justice Department said Ford "designed, marketed, sold, and delivered the van to consumers exclusively as a two-person cargo van. But to avoid the higher rate of duty that applies to cargo vans as compared to vans principally designed for passenger transport, petitioner imported each Transit Connect ... with a temporary, cheap rear seat that was designed to be immediately removed as soon as the van cleared" Customs.

The government noted the seats lacked head restraints and "was upholstered with cost-reduced fabric that did not match that of the front seats."

Ford argued the rear passenger seat met all federal safety standards, had seat belts for every seating position, and anchors for the rear seats and seat belts and were "street-legal passenger vehicles."

The 25% tariff stems from a 1960s trade war involving frozen chicken, and the larger tariff on cargo vehicles is known as the "chicken tax."