The original fluid spec for the BW1356 was synthetic MERCON automatic transmission fluid. The MERCON spec is long defunct and was replaced by MERCON V many years ago. However, MERCON V ATF contains an additive that is NOT compatible with transfer cases, prompting Ford Motor Company to introduce a replacement fluid specifically for transfer cases that call for the old MERCON spec (Motorcraft XL-12, transfer case fluid). We've found Amsoil full synthetic ATF to be a great substitute with no compatibility issues. Do not attempt to lubricate a BW1356 with gear oil; it has an internal fluid pump that keeps the bearings lubricated, and the pump is NOT compatible with thick gear oils. Draining and replacing the fluid regularly will prolong the life of the transfer case and keep the 4 wheel drive engagement smooth, positive, and reliable.
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• The drain and fill plugs are both located on the back of the transfer case. The drain plug (lower of the two) is towards the driver side while the fill plug is located toward the passenger side (looking at the rear of the case). Both require a 3/8" square drive (socket wrench of small breaker bar) for removal/installation.
• Place an oil catch can below the drain plug.
• Remove the fill plug first! If you remove the drain plug first only to find out later that the fill plug is stuck and/or stripped, you've got a much bigger project on your hands. If the fill plug comes out without trouble, then remove the drain plug and drain the transfer case completely.
• Once the fluid has drained completely, reinstall the drain plug after cleaning it and applying a couple of wraps of oil resistant Teflon tape.
• Use a fluid pump to pump fluid into the transfer case through the fill hole until fluid begins to run out (the fill hole also acts as the fill line). Once the transfer case is full, replace the fill plug after cleaning it and applying a couple wraps of oil resistant Teflon tape.