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The $365 Million Ford Tariff Evasion Settlement: A Case Study on Integrity
On March 11th, the U.S. Department of Justice announced in a press release that Ford would pay $365 million in penalties to settle their tariff evasion case. Ford was accused of purposefully using incorrect classifications to avoid paying higher duties.
The misclassified item in question was the Transit Connect, a type of cargo vehicle. Ford classified this item under heading 8703 of the Harmonized Tariff Schedule (HTS), which covers “vehicles principally designed for the transport of persons.” However, being a cargo vehicle, the Transit Connect should have been classified under 8704, which covers “vehicles for the transport of goods.” While seemingly a small difference, the decision had major financial consequences. Ford was only paying 2.5% in fees instead of a hefty 25% duty required under 8704.
For four years, Ford avoided the 25% duty by importing Transit Connects from Turkey that had temporary rear seats installed, thereby qualifying them as passenger vehicles. But after the vehicles were declared to Customs, these seats were removed, reverting the item back to a cargo vehicle. Ford claimed they used the HTS code that accurately described the state of the vehicle as it was being imported. U.S. Customs and Border Protection (CBP) did not see it that way, defiantly stating that “the government will not permit companies to evade duties by adding sham features to their products and then misclassifying them.”
While Ford never outwardly admitted wrongdoing, the key takeaway from this case is the importance of integrity. Per Section 484 of the Tariff Act, CBP requires that all parties “exercise reasonable care” when importing goods into the United States. The ability to import goods into the U.S. is a privilege, not a right. Purposefully evading the regulations set forth by CBP can result in this privilege being revoked. No company or entity, regardless of their size or status, is above the law.
An importer can also demonstrate “reasonable care” by contracting with experts specializing in customs matters. Assisting importers in trade compliance matters is a core service of Allyn Interntional. In addition to expertise in import and export regulations, integrity is a core value at Allyn, and it acts as a framework that guides us in our mission to provide exceptional trade compliance services.
By: Julia Holston
Sources:
Office of Public Affairs. (2024, March 11). Ford Motor Company Agrees to Pay $365M to Settle Customs Civil Penalty Claims Relating to Misclassified and Under-Valued Vehicles. U.S. Department of Justice. https://www.justice.gov/opa/pr/ford-motor-company-agrees-pay-365m-settle-customs-civil-penalty-claims-relating
Shepardson, D. (2024, March 11). Ford to pay $365 million in US import tariff evasion case. Reuters. https://www.reuters.com/business/autos-transportation/ford-pay-365-million-us-import-tariff-evasion-case-2024-03-11/
Spangler, T. (2024, March 11). Ford settles with feds on Transit Connect import claims for $365 million. Detroit Free Press. https://www.freep.com/story/money/cars/ford/2024/03/11/ford-settles-feds-transit-connect-import-claims/72934504007/
The Harmonized Tariff Schedule of the United States. https://hts.usitc.gov/
U.S. Customs and Border Protection. (2020, February 26). Informed Compliance Publication. What Every Member of the Trade Community Should Know About: Reasonable Care. https://www.cbp.gov/document/publications/reasonable-care
Zacks Equity Research. (2024, March 12). Ford (F) Agrees to Pay $365M to Settle Tariff Act Breach. Yahoo! Finance. https://finance.yahoo.com/news/ford-f-agrees-pay-365m-130000515.html?guccounter=1&guce_referrer=aHR0cHM6Ly93d3cuZ29vZ2xlLmNvbS8&guce_referrer_sig=AQAAAGobASmFaTa_sRFdnGl-BUu7DR4FH5nDuXLrKVhB3koixiMrtYGGWJCntgHZ5nk_9u7YtijkqeMfzjWkoHR9CGlBVxBv2eyQJ28hAsK-X0wLSB3innfpoK8lODrIDJsEqW7NQ5oMnTtgm1T0FvwoLXDhBSKPmcehaonbe0If2QRb
About Allyn International
Allyn International provides high quality, customer-centric services and solutions for the global marketplace. Allyn's core products include transportation management, logistics sourcing, freight forwarding, supply chain consulting, tax management and global trade compliance. Allyn clients range from small local businesses to Fortune 500 firms. Allyn conducts business in more than 20 languages and has extensive experience in both developed and emerging markets. Highly trained experts are positioned throughout North and South America, Europe and Asia. Allyn’s regional headquarters are strategically located in Fort Myers, Florida, U.S.A., Shanghai, P.R. China and Prague, Czech Republic. For more information, visit www.allynintl.com