International Trade Law News

Published by Jacobson Burton Kelley PLLC

Last week was an expensive one for Ford Motor Company as the U.S. Court of International Trade (CIT) issued two decisions that led to the imposition of more than $20 million in penalties on the company for violating U.S. customs laws.

In U.S. v. Ford Motor Co., Slip Op. 05-86 (July 20, 2005), Customs and Border Protection ("Customs") sought collection of a civil penalty and customs duties concerning entries of automotive dies made by Ford in 1989. Customs claimed that Ford committed fraud, or was grossly negligent or negligent by making material false statements and/or omissions in connection with the entry of the merchandise at issue. Customs sought $184,495 in unpaid duties from Ford. In addition Customs asked the CIT to impose civil penalties in the amount of $21,314,111 if Ford’s conduct was found to be fraudulent; $3,497,080 if Ford was grossly negligent; or $1,748,540 if Ford was negligent. Ford responded by claiming that the merchandise at issue was entered at the value known at the time of entry and thus the company did not violate any customs laws. Ford also counterclaimed that it was entitled to recoup any overpayment in duties it had tendered.

Senior Judge Tsoucalas disagreed with Ford and held that the company's conduct was grossly negligent in its entry of the merchandise since it had failed to include the engineering changes in price of the dies that it imported and failed to notify Customs that the price listed on the entry documents was not the full and final price of the dies through its provisional value policy. The Court also stated that Ford had demonstrated "a reckless disregard for its Customs obligations." As a result, the Court ordered Ford to pay $184,495 for unpaid duties and assessed a penalty of $3,000,000, plus interest.

In U.S. v. Ford Motor Co., Slip Op. 05-87 (July 21, 2005), Customs sought collection of a civil penalty and customs duties from Ford for entries of vehicles and vehicle components made between 1987 and 1992. Customs alleged that Ford was grossly negligent or negligent in making false statements or omissions in connection with the entry of the merchandise and sought civil penalties in the amount of $34,576,559 if Ford's conduct was found to be grossly negligent or $17,288,279 if such conduct was found to be negligent. Customs also requested the CIT to award it $68,178 for unpaid duties. Ford filed a counterclaime for a refund of all or part of the $8,575,961.80 it tendered for duties in connection with this matter plus interest.

After reviewing the evidence, Judge Tsoucalas found that Ford negligently violated various provisions of U.S. law by failing to advise Customs that the transaction values in the entry documents were not final. The judge also found that Ford violated U.S. law by failing to adhere to the requirements of the Reconciliation Agreement of reporting lump sum payments. As a result, Judge Tsoucalas assessed a civil penalty against Ford in the amount of $17,151,923.60, plus interest from the date of judgment. He also denied Customs' request for $68,178 for unpaid duties and dismissed Ford's counterclaim.