The feds want their money.
This is one of those situations that's nearly impossible to make up. But first, some background. There's a 25 percent tariff on light cargo trucks imported to the US that originated from an old trade war involving frozen chicken dating back to 1964 and remains to this day. Automakers like Ford want nothing more than for it to be rescinded. Unfortunately, it's not happening and the Blue Oval is now facing up to $1.3 billion in penalties.
Reuters reports the problem is with the Ford Transit Connect Passenger van/wagon, which is built in Turkey. Ford began importing the vans to the US a few years ago with the understanding they qualified as passenger vehicles because they were equipped with rear seats. The tax for imported passenger vehicles is a far more reasonable 2.5 percent.
Automakers have sometimes managed to circumvent the "chicken tax" by adding rear seats, such as the case of the original Subaru Brat. For Ford, adding those seats enabled it to enter the highly lucrative passenger van market. However, the US Customs and Border Protection (CBP) determined in 2013 the Transit Connect is nothing more than a cargo van and is subject to the significantly higher tax.
The Justice Department agreed with this assessment, determining the vehicles have a "temporary, cheap rear seat that was designed to be immediately removed as soon as the vans cleared" Customs. The feds even pointed out the seats lacked head restraints "was upholstered with cost-reduced fabric that did not match that of the front seats."
Ford argues the vans' rear seats meet all federal safety standards, there are seat belts for every seating position, and anchors are there for the rear seats and seat belts. The Supreme Court declined to hear Ford's appeal last year to the Justice Department's decision even though it says it paid the duties plus interest for prior imports.
The CBP is not satisfied with that and now seeks additional duties of $181 million and a monetary penalty as much as $652 million to $1.3 billion. Ford says it'll vigorously defend its position and any penalty "would be based on our level of culpability as determined by the courts."