WASHINGTON, March 11 (Reuters) - Ford Motor ( F ) will

pay $365 million to resolve U.S. allegations it violated a

federal tariff law by misclassifying and understating the value

of hundreds of thousands of its Transit Connect vehicles.

The Justice Department said the settlement resolves

allegations that Ford devised a scheme to avoid higher duties by

misclassifying cargo vans imported from Turkey from April 2009

to March 2013.

The government said the settlement is one of the largest

customs penalty settlements in recent history.

"Ford strongly disagrees with many of the characterizations

in the DOJ's statement and admits no liability in this matter,"

a Ford spokesperson said. "But in the interest of moving on from

this complex, decade-old dispute, we have agreed to settle the

matter once and for all."

Customs and Border Protection 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 Justice Department said Ford imported the vehicles "with

sham rear seats and other temporary features to make the vans

appear to be passenger vehicles. These temporary rear seats were

never intended to be, and never were, used to carry passengers."

Ford included these seats and features to avoid paying the

25% duty rate, the government said.

After Customs clearance, the Transit Connect vehicles were

immediately stripped of rear seats and returned to its original

identity as a two-seat cargo van.

"The government will not permit companies to evade duties by

adding sham features to their products and then misclassifying

them," said Brian Boynton, head of the DOJ Civil Division.

Ford said in 2021 it could face up to $1.3 billion in

penalties in a long-running dispute over import duties paid on

Ford Transit Connect vehicles after the Supreme Court declined

to hear its appeal in 2020 that it paid increased duties for

some prior imports.

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."

Ford shares were down 0.5%.