Arizona will remove a wall of shipping containers along the state’s 370-mile border with Mexico following a lawsuit filed by the US government against the state that claimed that the makeshift wall is being illegally built on federal lands.

According to an agreement reached late Wednesday between federal and state authorities, Arizona will dismantle the wall, along with all related equipment by the beginning of next year.

“By January 4, 2023, to the extent feasible and so as not to cause damage to United States’ lands, properties, and natural resources, Arizona will remove all previously installed shipping containers and associated equipment, materials, vehicles,” said the agreement.

In August, Arizona’s Republican governor, Doug Ducey, signed an executive order that directed a state agency to close the gaps in the border, saying: “Arizona has had enough … The Biden administration’s lack of urgency on border security is a dereliction of duty.”

“Our border communities are being used as the entryway to the United States, overwhelming law enforcement, hospitals, nonprofits and residents. It’s our responsibility to protect our citizens and law enforcement from this unprecedented crisis,” he added.

Wednesday’s agreement comes two weeks before Arizona’s Democratic governor-elect, Katie Hobbs, is scheduled to take office. Hobbs has criticized the wall’s construction, saying: “I am very concerned about the liability to the state of Arizona for those shipping containers that they’re putting on federal land. There’s pictures of people climbing on top of them. I think that’s a huge liability and risk.”

Last week, the federal government filed a lawsuit against Ducey and the rest of the state, requesting for the removal of the containers in remote San Rafael valley in the state’s easternmost Cochise county.

“Officials from Reclamation and the Forest Service have notified Arizona that it is trespassing on federal lands,” said the complaint, adding, “This action also seeks damages for Arizona’s trespasses, to compensate the United States for any actions it needs to take to undo Arizona’s actions and to remediate – to the extent possible – any injuries to the United States’ properties and interests.”

The complaint, filed by the justice department on behalf of the Bureau of Reclamation, Department of Agriculture and the Forest Services, went on to cite the federal government’s operational and environmental concerns towards the makeshift wall. The $95m project of placing up to 3,000 containers along the border is approximately a third complete.

The US agriculture secretary, Tom Vilsack, criticized the project, saying that it “is not an effective barrier, it poses safety hazards to both the public and those working in the area and has significantly damaged public land”.

“We need serious solutions at our border, with input from local leaders and communities. Stacking shipping containers is not a productive solution,” he added.

In a statement released on Thursday and reported by CNN, Ducey spokesperson CJ Karamargin said: “Finally, after the situation on our border has turned into a full blown crisis, they’ve decided to act. Better late than never. We’re working with the federal government to ensure they can begin construction of this barrier with the urgency this problem demands.”