Recent CIT Decisions on $17 Million Negligence Penalty, Dismissing All Pending HMT Cases

$17 Million Negligence Penalty,

Dismissing All Pending HMT Cases

CIT assesses $17 million 1592 penalty for negligence in reporting transaction prices, lump sum payments, etc. In U.S. v. Ford Motor Company, the Court of International Trade (CIT) assessed a 1592 civil penalty against Ford in the amount of two times the loss of revenue (the maximum penalty for negligence under 19 USC 1592(a)(3)). The CIT's ruling resulted in a penalty of $17,151.923.60 plus interest, regarding vehicles, vehicle components, tooling, and related materials entered into the U.S. between January 1, 1987 through December 31, 1992, as Ford failed to demonstrate that it exercised reasonable care regarding certain assists and lump sum payments.

According to the CIT, these goods were entered under five import programs, and this civil action was the result of Operation Hat Trick, a Customs trade enforcement initiative meant to subject certain Big Three import programs to scrutiny to identify undeclared assists (items provided by the buyer to the seller either free or at a reduced cost for the design, development or production of merchandise imported into the U.S.) and indirect payments (i.e., payments that impact the final price paid, including lump sum payments for engineering and manufacturing expenses, retroactive price adjustments, and volume price adjustments).

The CIT ruled that for tooling assists made between 1987 - 1992, Ford failed to declare them on its entry documents or "at once" in accordance with 19 USC 1485, and instead provided the information well after entry. The CIT also ruled that Ford failed to state on its entry documents that the values stated therein were not final (due to its obligation to make lump sum payments (post-importation price adjustments)) to certain foreign vendors after entry). In addition, Ford failed to report these lump sum payments "at once" pursuant to 19 USC 1485 or its Reconciliation Agreement that required it to report and reconcile lump sum payments on an annual basis within a specified time period. (Slip Op. 05-87, dated 07/21/05, available at http://www.cit.uscourts.gov/slip_op/Slip_op05/05-87.pdf)

CIT rules that all pending HMF cases should be dismissed. In U.S. Shoe Corp. vs. U.S., the CIT agreed with the U.S. and ordered that all Harbor Maintenance Tax (HMT) actions pending after December 1, 2005 be dismissed. However, those who believe their action should not be dismissed should file a motion by September 26, 2005 to stay the dismissal of their action. In addition, the CIT ruled that any plaintiff whose action also contains a non-HMT claim, and who intends to pursue that claim, should file a motion to sever the non-HMT claim into a new case by September 26, 2005.

The U.S. had argued that all HMT issues have been resolved and all HMT claims have been paid pursuant to U.S. vs. US Shoe Corp or Swisher Int'l Inc. vs. U.S. (Slip Op. 05-89, dated 07/27/05, available at http://www.cit.uscourts.gov/slip_op/Slip_op05/05-89.pdf)

(Note that the HMT is also referred to as the HMF (Harbor Maintenance Fee).)

BP Note on HMT Decision

According to the CIT Judge's clerk for this case, this U.S. Shoe order relates to all HMT claims (export, import, FTZ, etc.) due to the language of the order and the fact that all HMT cases "were driven by U.S. Shoe."

This BP summary of the HMT case is a corrected version of two earlier versions sent by email. This BP summary replaces the email version in ITT's 08/02/05 news, 05080220 and the email version in ITT's 08/01/05 news, 05080130.