Slip Op. 06-7

UNITED STATES COURT OF INTERNATIONAL TRADE

BEFORE: SENIOR JUDGE NICHOLAS TSOUCALAS

________________________________________

:

UNITED STATES OF AMERICA, :

:

Plaintiff, :

:

v. : Court No. 05-00284

:

FORD MOTOR COMPANY, :

:

Defendant. :

________________________________________:

[Defendant’s Motion to Dismiss is granted. Case dismissed.]

Peter D. Keisler, Assistant Attorney General; David M. Cohen,

Director, Patricia M. McCarthy, Assistant Director, Commercial

Litigation Branch, Civil Division, United States Department of

Justice, (David A. Levitt); of counsel: Kathleen Bucholtz, United

States Customs and Border Protection, for the United States,

plaintiff.

Grunfeld, Desiderio, Lebowitz, Silverman & Klestadt LLP

(Robert B. Silverman, David M. Murphy, Steven P. Florsheim, Robert

F. Seely, and Frances P. Hadfield); of counsel: Paulsen K.

Vandevert, for Ford Motor Company, defendant.

January 13, 2006

OPINION

TSOUCALAS, Senior Judge: Ford Motor Company, (“Ford”),

defendant, moves for dismissal pursuant to USCIT R. 12(b) on the

grounds that (1) issue preclusion prevents the Bureau of Customs

and Border Protection of the Department of Homeland Security
Court No. 05-00284 Page 2

1 The United States Customs Service was renamed the Bureau

of Customs and Border Protection of the Department of Homeland

Security, effective March 1, 2003. See Homeland Security Act of

2002, Pub. L. No. 107-296, § 1502, 116 Stat. 2135 (2002);

Reorganization Plan for the Department of Homeland Security, H.R.

Doc. No. 108-32 (2003).

(“Customs”)1, plaintiff, from litigating the current action and (2)

the statute of limitations has run on Customs’ claims before the

present action was initiated. Specifically, Ford contends that

Customs is barred from litigating the present action under the

doctrine of issue preclusion as they are disregarding previous

court findings on the same issues, factual findings and

conclusions. Ford further asserts that the statute of limitations

bars Customs from seeking penalties and duties as no valid waiver

was in place when Customs commenced the present action. Customs

responds that the litigation is not barred under the doctrine of

issue preclusion as previous court findings do not settle the

present question of penalties. Customs further responds that a

valid waiver of the statute of limitations did exist when it filed

the case at bar.

JURISDICTION

The Court has jurisdiction over this matter pursuant to 28

U.S.C. § 1582 (2000).
Court No. 05-00284 Page 3

STANDARD OF REVIEW

A court should not dismiss a complaint for failure to state a

claim upon which relief may be granted “unless it appears beyond

doubt that the plaintiff can prove no set of facts in support of

his claim which would entitle him to relief.” Conley v. Gibson,

355 U.S. 41, 45-46 (1957); see also Halperin Shipping Co., Inc. v.

United States, 13 CIT 465, 466 (1989). Moreover, the Court must

accept all well-pleaded facts as true and view them in the light

most favorable to the non-moving party. See United States v.

Islip, 22 CIT 852, 854, 18 F. Supp. 2d 1047, 1051 (1998) (citing

Gould, Inc. v. United States, 935 F.2d 1271, 1274 (Fed. Cir.

1991)). A pleading that sets forth a claim for relief must contain

“a short and plain statement” of the grounds upon which

jurisdiction depends and “of the claim showing that the pleader is

entitled to relief . . . .” USCIT R. 8(a). “To determine the

sufficiency of a claim, consideration is limited to the facts

stated on the face of the complaint, documents appended to the

complaint, and documents incorporated in the complaint by

reference.” Fabrene, Inc. v. United States, 17 CIT 911, 913

(1993). Accordingly, the Court must decide whether plaintiff is

entitled to offer evidence in support of its claim, and not whether

plaintiff will prevail in its claim. See Halperin, 13 CIT at 466.
Court No. 05-00284 Page 4

DISCUSSION

I. Background

This action involves eleven entries of engines and

transmissions (“Complaint Entries”). See Mem. Law Supp. Def.’s

Mot. Dismiss (“Ford’s Mem.”) at 1; Mem. Opp’n Def.’s Mot. Dismiss

Compl. (“Customs’ Mem.”) at 5. In 1983, Ford applied to the

Foreign Trade Zone Board (“FTZ Board”) for approval in establishing

a Foreign Trade Subzone (“FTSZ”) in Louisville, Kentucky. See

Ford’s Mem. at 3; Customs’ Mem. at 2. The FTZ Board granted Ford’s

request in 1984. See Ford’s Mem. at 4; Customs’ Mem. at 2. A FTSZ

is a geographic area located within the United States that can be

treated as being outside the customs territory of the United

States. See Ford’s Mem. at 3; Customs’ Mem. at 2. Importers can

choose to pay duties on goods either at the rate applicable to the

foreign merchandise upon admission to the area, or on the emerging

product if used in manufacturing within the FTSZ. See id.;

Customs’ Mem. at 2.

In 1985 and 1986, the duty rate on finished imported cars was

2.6 percent ad valorem while the duty rate for foreign-made engines

and transmissions was 3.3 percent ad valorem. See Ford’s Mem. at

3; Customs’ Mem. at 2. The duty rate on finished imported trucks

was 25 percent ad valorem. See Ford’s Mem. at 3; Customs’ Mem. at

5. Ford intended to take advantage of the duty differential
Court No. 05-00284 Page 5

between the parts and the completed car through an “inverted tariff

program” by admitting car engines and transmissions into the FTSZ

as foreign merchandise. See Ford Mem. at 3-4; see also Customs’

Mem. at 2. The merchandise would then be incorporated into

finished cars within the FTSZ and subsequently be withdrawn for

entry into the United States. See id.; see also Customs’ Mem. at

2. Ford was required to file Customs Form (“CF”) 214 in order to

obtain the inverted tariff benefit by designating all car parts as

“non privileged foreign” (“NPF”) and all truck parts as “privileged

domestic” (“PD”). See Ford Mem. at 4; Customs’ Mem. at 3.

Ford incorrectly marked the CF 214 checkbox for the Complaint

Entries as NPF instead of PD. See Ford’s Mem. at 5; Customs’ Mem.

at 5. Customs investigated the Complaint Entries and determined

that the parts used in the manufacture of trucks were dutiable at

the finished truck rate of 25 percent ad valorem. See Ford’s Mem.

at 6; Customs’ Mem. at 5. Thus, Ford owed additional duties of

approximately 5.3 million dollars. See id. at 6; Customs’ Mem. at

5. Customs then liquidated the entries at the 25 percent rate,

which Ford timely paid and protested. See Ford’s Mem. at 6-7;

Customs’ Mem. at 5.

On January 22, 1992, Ford filed a protest action in this Court
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2 The relevant facts in this case have been heavily

litigated in Ford Motor Co. v. United States (“Ford I”), 21 CIT

983, 979 F. Supp. 874 (1997), Ford Motor Co. v. United States

(“Ford II”), 157 F.3d 849 (Fed. Cir. 1998), Ford Motor Co. v.

United States (“Ford III”), 24 CIT 775, 116 F. Supp. 2d 1214

(2000), and Ford Motor Co. v. United States (“Ford IV”), 286 F.3d

1335 (Fed. Cir. 2002), Ford Motor Co. v. United States (“Ford V”),

26 CIT 1246 (Oct 18, 2002), vacated by Ford Motor Co. v. United

States (“Ford VI”), 26 CIT 1292 (Oct 28, 2002).

challenging Customs’ assessments on the Complaint Entries.2 See

Ford’s Mem. at 7. After much litigation, on April 12, 2002, the

Court of Appeals for the Federal Circuit (“CAFC”) held that

Customs’ investigation was unreasonable and that the “entries must

be deemed liquidated under 19 U.S.C. § 1504(a).” Ford IV, 286 F.3d

at 1343. As a result this court further ordered that Customs

“refund to Ford Motor Company the increase in duties assessed

together with interest from the date of payment of the increased

duties to the date of reliquidation.” Ford VI, 26 CIT at 1292.

During the above mentioned proceedings, Ford drafted letters

waiving the statute of limitations period in 19 U.S.C. § 1621 on

ten separate occasions in response to a request from Customs. See

Ford’s Mem. at 8; Customs’ Mem. at 24. The first nine waivers,

dated between November 5, 1990, and February 15, 2002, were signed

by Customs “acknowledging receipt and acceptance.” See Ford’s Mem.

at Ex. I. In the tenth letter, dated January 13, 2003, Customs

crossed out the words “and acceptance.” See Ford’s Mem. at Ex. I.

Customs followed up with a letter dated January 22, 2003, informing
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3 See supra footnote 2 for a list of the cases.

Ford that under its current procedures, Customs now “only

acknowledge[s] receipt of waivers.” See Ford’s Mem. at Ex. I. On

April 12, 2004, Customs amended its original penalty notice to

include a claim for civil penalties and duties under 19 U.S.C. §

1592(d) demanding that Ford repay duties in the amount of

$5,275,329. See Ford’s Mem. at Ex. D. Subsequently, Ford moved

requesting dismissal of the case at bar.

II. Contentions of the Parties

A. Ford’s Contentions

Ford argues that Customs, in commencing the present action, is

disregarding the CAFC’s decision in Ford IV, and as such, issue

preclusion prevents further litigation. See Ford’s Mem. at 2.

Ford stresses that “[t]he assessment of duties on the Complaint

Entries, and the reasonableness of Customs’ actions and

investigation of Ford with respect to those entries, was

exhaustively litigated” during the past decade.3 Ford’s Mem. at 1.

Ford states that both this court and the CAFC made a number of

findings of fact and conclusions of law in the prior action which

involved the Complaint Entries. See id. at 2. Ford notes that the

CAFC held in Ford IV that the length of Customs’ investigation of

the Complaint Entries was unreasonable, and as a result, Ford
Court No. 05-00284 Page 8

received duty refunds of $5,275,379 with interest. See id. at 7.

Ford further contends that the CAFC decision indicates that the

Complaint Entries have been liquidated by operation of law in

accordance with 19 U.S.C. § 1504. See id. While admitting that

“the instant action is a claim for penalties and duties under [19

U.S.C. §1]592, and not an importer’s claim for duty refunds under

19 U.S.C. § 1514, as was the prior action,” Ford argues that the

operative facts between both the prior and the current actions are

essentially the same. Id. at 12. Ford further asserts that the

present case should be dismissed as its continuation would go

against public policy because it calls for the relitigation of

prior findings and holdings by the courts. See id. at 13. Ford

stresses that if the CAFC felt that Customs’ 592 penalty case had

merit, the CAFC would not have ordered a duty refund in Ford IV.

See id. at 29. Ford rationalizes that the only reasonable

conclusion to be drawn from Ford IV is that the CAFC intended not

only to award Ford a duty refund, but to preclude the present

penalty action. See id.

Ford further argues that there was no actual loss of revenue,

rather Customs can only seek a potential loss of revenue. See

Ford’s Mem. at 15-18. Ford contends that 19 U.S.C. §§ 1514 &

1592(a) state that if the loss of revenue claim did not result from

a violation of § 1592(a) and if there are no lawful duties to be
Court No. 05-00284 Page 9

restored, then recovery actions are barred. See id. at 18-19.

Ford stresses that when Customs liquidated the Complaint Entries at

25 percent ad valorem in 1989, it paid these duty increases. See

id. at 19. Ford argues that its protest action under 19 U.S.C. §

1514, and the CAFC holding which returned the duty increases to

Ford, do not change the fact that Customs received lawful duties

owed when it rate advanced the Complaint Entries. See id. Thus,

Ford concludes that the duties Customs now seeks are not lawful

duties to which Customs is entitled. See id.

Furthermore, Ford contends the errors that it made on the CF

214s were not fraudulent. See Ford’s Mem. at 23. Ford points out

that Customs’ past characterizations are inconsistent with its

present fraud action because it previously described Ford’s conduct

as a “mistake of law.” Id. at 23. Additionally, Ford contends

that even if fraud is found under 19 U.S.C. § 1592(4)(a), penalties

can not exceed 100 percent of the lawful duties owed because it

made a prior disclosure to Customs. See id. at 16. In a letter

dated February 14, 1986, Ford disclosed the CF 214 error to

Customs. See Ford’s Mem. at Ex. A. Customs then began its civil

fraud investigation under 19 U.S.C. § 1592 in August of 1986. See

Ford’s Mem. at 15. Since Ford’s letter disclosed the CF 214 error

before Customs began its investigation, Ford argues that it made a

valid prior disclosure which limits them to a maximum liability of
Court No. 05-00284 Page 10

$5.3 million dollars. See id. at 16.

Finally, Ford argues that the case should be dismissed as the

statute of limitations has run on both claims for penalties and

duties. See Ford’s Mem. at 30. Ford claims that Customs refused

to accept its tenth waiver offer by striking the words “and

accepted” from the waiver. See id. at 24. Previous to the tenth

waiver, Customs had always signed the waivers with the language

“acknowledged and accepted” intact. See id. The ninth waiver

expired on April 7, 2003. See id. In addition, Ford argues that

the scope of the waivers were limited only to penalties. See id.

at 26. Ford contends that because Customs’ request for a waiver did

not include the collection of unpaid duties, it never issued a

waiver applying to such duties. See id. Accordingly, Ford

concludes that as the ninth waiver regarding penalties

“acknowledged and accepted” by Customs expired in 2003, and as

there was never a waiver issued by Ford dealing with unpaid duties,

the statute of limitations has expired on both issues. See id. at

26-28. Therefore, this case should be dismissed. See id. at 26-

28.

B. Customs’ Contentions

Customs replies that Ford has failed to establish that duties

are not owed on the Complaint Entries. See Customs’ Mem. at 2.

Specifically, Customs asserts that it is not barred from seeking
Court No. 05-00284 Page 11

duties as a result of the issue preclusion or the statute of

limitations arguments raised by Ford. See id. at 1. Customs

argues that in Ford IV the CAFC ruled on “whether the Government

properly extended the liquidations of the entries under [19 U.S.C.

§] 1504, and whether Ford’s failure to pay duties before entering

the truck engines into the FTSZ constituted a correctable clerical

error under [19 U.S.C. §] 1520(c).” Id. at 21. Customs claims

that the prior action concerned its conduct when extending the

liquidations and Ford’s actions when it placed its merchandise in

its FTSZ. See id. “Ford’s culpability when it withdrew its

merchandise from the FTSZ,” which is at issue here “was simply not

addressed.” Id. (emphasis retained). Customs asserts that the

CAFC has yet to rule on Ford’s culpability as it relates to the §

1592 penalty action. See id. at 21. Customs asserts that issue

preclusion or collateral estoppel, applies only when the identical

issue was actually litigated in a prior proceeding and the losing

party was afforded a full and fair opportunity to litigate its

position. See id. at 16. Customs argues that Ford IV and the

present action differ substantially enough to bar Ford’s argument

of issue preclusion. See id. at 16.

Customs further contends that its § 1592 complaint is not

precluded by the statute of limitations. See Customs’ Mem. at 22-

29. Customs argues that waivers of statutes of limitations are
Court No. 05-00284 Page 12

unilateral acts that do not require acceptance from the non-waiving

party. See id. at 22. Thus, Customs asserts that when it struck

the word “accepted” from Ford’s tenth waiver, it did not diminish

or cancel the waiver’s effect. See id. at 24-25. Furthermore,

Customs asserts, the waivers are unlimited in scope because they

“contain no exclusions with respect to unpaid duties” and as such,

the waivers do not exclusively apply to penalty issues. Id. at 27.

Customs then concludes that since Ford waived the statute of

limitations in its tenth waiver, set to expire on April 7, 2005,

and Customs filed the present action on April 6, 2005, its § 1592

complaint is not precluded by the statute of limitations. See id.

at 28-29. Furthermore, as the CAFC has not previously addressed

the present § 1592 penalty action, Ford’s motion to dismiss should

be denied. See id.

III. Analysis

A. The Statue of Limitations for Filing a 19 U.S.C. § 1592

Complaint has Expired.

A legal waiver, such as a waiver of a statute of limitations

“is an intentional release of a known right” in which the following

elements must be met: “1) a right must exist at the time of the

waiver; 2) the party who is accused of waiver must have

constructive or actual knowledge of the right in question; and 3)

the party intended to relinquish its right.” Broad. Satellite
Court No. 05-00284 Page 13

Int’l, Inc. v. Nat’l Digital Television Ctr., Inc., 323 F.3d 339,

345 (5th Cir. 2003). Customs is required to publish notice of any

modification to long standing policy or practice in the Customs

Bulletin. See 19 U.S.C. § 1625(c) (2001). Treasury Decision 76-33

states that Customs “has the authority to accept an offer to

‘waive’ the running of the period of limitation . . . if it appears

that further administrative consideration would promote final

disposition of the matter.” T.D. 76-33, 41 Fed. Reg. 4,302 (Jan.

29, 1976). Treasury Decision 90-11 altered T.D. 76-33 by stating

that “[a]bsent compelling circumstances, Customs will not, as a

matter of policy, favorably entertain offers to waive the statute

for a shorter period of time than the two-year period.” T.D. 90-

11, 55 Fed. Reg. 3,682 (Feb. 2, 1990). Customs had, however,

exercised its right to accept waiver offers of under 24 months when

it accepted Ford’s ninth waiver dated February 15, 2002, although

it only covered a period of 12 months. See Ford’s Mem. at Ex. I.

In an internal Customs memorandum (“June Memo"), dated June

16, 1999, the Chief of the Penalties Branch of the Office of

Regulations & Rulings advised Fines, Penalties and Forfeitures

Officers that “submission of a waiver request represents a

unilateral act of the submitting party, not requiring acceptance by

Customs.” See Customs’ Mem. at Ex. 11. Customs later issued

Treasury Decision 01-65 in September of 2001, which it claims
Court No. 05-00284 Page 14

reiterates the language from June Memo. See Customs’ Mem. at 25;

see also T.D. 01-65, 66 Fed. Reg. 48,170 (Sept. 18, 2001).

Treasury Decision 01-65 states that Customs Headquarters would

delegate to Fines, Penalties and Forfeiture Officers the authority

to “acknowledge waivers of the statute of limitations from parties

who might otherwise be entitled to assert the statute of

limitations as a defense against civil suit.” T.D. 01-65, 66 Fed.

Reg. 48,170. The June Memo explicitly contains language revoking

the “acceptance” requirement, and states that Customs will treat

waivers as unilateral acts. See Customs’ Mem. at Ex. 11. The June

Memo also contains a new sample waiver form reflecting this

alteration. See id. Treasury Decision 01-65, however, contains no

such language. See T.D. 01-65, 66 Fed. Reg. at 48,170-71. 

An executive agency, such as Customs, must be held to the

standard by which it claims “to be judged.” Vitarelli v. Seaton,

359 U.S. 535, 546 (1959)(Frankfurter, J., concurring in part and

dissenting in part). “Accordingly, if [agency action] is based on

a defined procedure, even though generous beyond the requirements

that bind such agency, that procedure must be scrupulously

observed.” Id. at 546-47. Customs asked for a waiver of the

statute of limitations from Ford soon after it issued Ford a prepenalty notice. See Customs’ Mem. at Ex. 2. All subsequent ten

Ford letters of waiver continued to contain the language “I hereby
Court No. 05-00284 Page 15

acknowledge receipt and acceptance of the above waiver” printed

above the Customs’ signature line. See Ford’s Mem. at Ex. I.

Customs accepted Ford’s first waiver on November 5, 1990. See id.

The ninth waiver, dated February 15, 2002, was the last letter

which Customs signed and dated without making any modification to

the waiver language. See Ford’s Mem. at Ex. I. Customs altered

the tenth waiver, signed January 17, 2003, by striking out the word

“acceptance.” See id. Customs additionally sent a letter dated

January 22, 2003, advising Ford that it now only “acknowledge[s]

receipt of waivers.” See id. Customs had, however, continued to

both “acknowledge and accept” Ford’s waivers over two years after

it issued the June Memo changing its acceptance policy. See

Customs’ Mem. at Ex. 11. By selectively enforcing the June Memo,

Customs was not holding itself to the policy change that it claims

it was enforcing. Furthermore, Customs never published a

revocation of its previous policy relating to acceptance of waivers

as required by 19 U.S.C. § 1625. See T.D. 01-65, 66 Fed. Reg.

48,170 (T.D. 01-65 as published in the Federal Register does not

specifically reference Customs’ shift to unilateral acceptance of

waivers.). As such, Ford’s tenth waiver letter was never accepted

by Customs. Accordingly, the ninth and last valid waiver ended on

April 7, 2003. Therefore, the statute of limitations had expired

when Customs filed the present action. The case at bar is

dismissed in its entirety. See 19 U.S.C. § 1621.
Court No. 05-00284 Page 16

B. Customs is Not Entitled to Relief under 19 U.S.C. §

1592(d).

As the statute of limitations has expired, the dismissal of

this case renders moot the question of whether Ford committed

fraud, negligence or gross negligence under 19 U.S.C. § 1592(a)

(1982). Even if the statute of limitations had not expired,

Customs would still not be entitled to a repayment of duties in the

amount of $5,275,329 under 19 U.S.C. § 1592(d) (1982). Customs’

duty repayment request matches the dollar amount that the CAFC and

this court ordered to be refunded to Ford. See Customs’ Mem. at

Ex. 4; Ford IV, 286 F.3d at 1343; Ford VI, 26 CIT at 1292. 19

U.S.C. § 1592(d) states that “if the United States has been

deprived of lawful duties as a result of a violation of subsection

(a) of this section, [the Customs Service] shall require that such

lawful duties be restored, whether or not a monetary penalty is

assessed.” 19 U.S.C. § 1592(d). The eleven Complaint Entries were

liquidated on December 1, 1989, with duties assessed at the rate of

25 percent ad valorem. Ford I, 979 F. Supp. at 878. The court

held that “Ford timely protested the liquidations and ultimately

paid the additional duties assessed.” Id. Customs’ repayment of

duty claims under 19 U.S.C. § 1592(d) ceased upon Ford’s timely

payment of duties following the December, 1989 liquidations because

the United States was no longer deprived of lawful duties. The

court held that the 25 percent ad valorem duties paid on the
Court No. 05-00284 Page 17

Complaint Entries were not lawful duties to which Customs was

entitled to because Customs’ fraud “investigation and the manner in

which Customs conducted the investigation [was] unreasonable.”

Ford IV, 286 F.3d at 1343. Since Customs is not entitled to any

further lawful duties on the Complaint Entries, Customs cannot seek

relief under 19 U.S.C. § 1592(d).

CONCLUSION

The Court holds that Customs has proven no set of facts in

support of its claim which would entitle it to relief. Customs’

claims under 19 U.S.C. § 1592 extinguished when the statute of

limitations expired. For the foregoing reasons, Ford’s motion to

dismiss is granted. Judgment will be entered accordingly.

 /s/ Nicholas Tsoucalas 

 NICHOLAS TSOUCALAS

 SENIOR JUDGE

Dated: January 13, 2006

New York, New York