CAFC Rules Customs' Failure to Issue Regulation Voids Penalty Against Ford, Etc. (Ford I)
In U.S. v. Ford Motor Company (Ford I), the Court of Appeals for the Federal Circuit (CAFC) addressed Ford's practices related to providing information to Customs regarding post-importation adjustments to declared values of merchandise. The case concerned both "assists" (items incorporated into the imported merchandise which are provided by the buyer of the merchandise at reduced or no cost) and "direct" or "lump-sum" payments by the buyer (such as amounts paid pursuant to variable pricing agreements), all of which are dutiable.
Sign up for a free preview to unlock the rest of this article
Timely, relevant coverage of court proceedings and agency rulings involving tariffs, classification, valuation, origin and antidumping and countervailing duties. Each day, Trade Law Daily subscribers receive a daily headline email, in-depth PDF edition and access to all relevant documents via our trade law source document library and website.
Ford had appealed a decision of the Court of International Trade (CIT), where Ford had been determined to be in violation of 19 USC 1484 and 1485, for failing to declare assists at entry and not reporting post-importation value changes to Customs. The CIT concluded that Ford violated Section 1484 by making false statements or omissions in its entry documents relating to tooling assists. In addition, it stated that Ford knew, or should have known, that it had incurred these expenses prior to importation, and therefore should have disclosed on entry that the transaction values were provisional. Further, the CIT ruled that Ford was in violation of Section 1485 by failing to report tooling assists "at once," and that Ford also failed to report lump sum payments in the manner provided in its agreement with Customs (the "Reconciliation Agreement"), and was thus also in violation of that agreement and, by extension, Section 1485, again with penalty.
The CAFC affirmed the decision of the CIT that Section 1484 requires importers to disclose changes in entered values, stating that this section requires importers to disclose not only the declared value of the entered merchandise, but also any other information as is necessary to "... properly assess duties on the merchandise."
The CAFC reversed the CIT's ruling, however, in its imposition of penalties for negligence, finding that the failure of Customs to promulgate regulations or an established practice specifically identifying anticipated price changes on entry violated importers' rights to due process under the Fifth Amendment to the Constitution. The CAFC also specifically declined to rule that the existence of an internal compliance program at Ford, which appeared to have required disclosure of provisional pricing, could be used to constitute evidence that Ford had knowledge that such provisional pricing must be disclosed. The CAFC stated that "To hold otherwise-at least in the absence of other evidence of actual knowledge-would effectively require the courts to punish companies for establishing internal procedures that are more robust than the law requires."
The CAFC affirmed the decision of the CIT that Ford had negligently failed to disclose assists and lump-sum payments in accordance with the applicable provisions of its Reconciliation Agreement or Section 1485.
CAFC 05-1584 (dated 08/30/06) available at http://www.fedcir.gov/opinions/05-1584.pdf