Opinion ID: 211089
Heading Depth: 2
Heading Rank: 2

Heading: Customs' Investigation and Complaint

Text: Customs initiated Operation Hat Trick in the early 1990s to identify undeclared assists and indirect payments made by the Big Three automakers, to determine the level of culpability of parties responsible for the failure to declare the assists/payments, and to refer cases for criminal and civil action as appropriate. Negligence Decision, 395 F. Supp. 2d at 1193. On May 23, 1991, Customs notified Ford by letter that a formal investigation was underway concerning the proper declaration of assists and indirect payments in imports of vehicles and vehicle component assemblies. Id. at 1194. On June 7, 1991, at Ford's request, the parties met to clarify the meaning of indirect payments as it was used in the notice of investigation. Id. The substance of the discussions held at the meeting are the subject of dispute in this appeal. The trial court concluded that, following the meeting, Ford knew or should have known that the term 'indirect payment' . . . included all payments that impacted the final price paid by Ford for the merchandise in question, including payments made directly by Ford to foreign suppliers. Id. at 1195. The trial court also found as fact that Ford was advised by Customs that the investigation would encompass entries made between 1987 05-1584 4 through the 1991 model year, but would not include entries for model years 1992 or later. Id. at 1196. Both of these findings are discussed in detail below. The government filed its complaint in the Court of International Trade on January 29, 2002, charging Ford with violation of 19 U.S.C. § 1592, which provides that no person, by fraud, gross negligence, or negligence, may enter any merchandise into the commerce of the United States by means of any document, information, statement, act, or omission which is material and false. 19 U.S.C. § 1592(a)(1). The government’s allegations center on alleged omissions from Ford’s entry documents under 19 U.S.C. § 1484, which requires importers to file with Customs information about entered merchandise, including the declared value, classification and rate of duty applicable to the merchandise, and . . . such other information as is necessary to enable the Customs Service to . . . properly assess duties on the merchandise. 19 U.S.C. § 1484(a)(1)(B). The government alleges that Ford’s entry documents were materially false to the extent that they assigned to merchandise a concrete value that Ford knew was likely to change pursuant to variable-pricing provisions in the sale contracts. The government further alleges that, regardless of whether Ford had an affirmative duty to disclose the provisional nature of its pricing, it had an affirmative obligation to inform Customs at once when it became aware that the declared values were incorrect, but failed to do so. 19 U.S.C. § 1485(a) (stating that every importer making an entry under § 1484 shall make a declaration under oath, stating, inter alia, [t]hat the prices set forth in the invoice are true, that all other statements in the invoice or other documents filed with the entry, or in the entry itself, are true and correct, and that he will produce at once to the appropriate customs officer any invoice, paper, letter, document, or information 05-1584 5 received showing that any such prices or statements are not true or correct) Ford denied the allegations and counterclaimed for a refund of duties it allegedly overpaid. The Court of International Trade conducted a bench trial, after which it found that Ford was guilty of negligent (but not grossly negligent) violation of both § 1484 and § 1485 and assessed a penalty of more than $17 million—the maximum penalty permitted by statute in the circumstances. In reaching that decision, the trial court concluded that § 1484 included an affirmative requirement that entry prices indicate the existence of any provisional pricing arrangements that might render the invoice price non-final; that Ford violated that requirement; and that because Ford had knowledge of the requirement, it could be held liable for the violation consistent with due process. Negligence Decision, 395 F. Supp. 2d at 1208-13. The Court of International Trade further held that Ford failed to satisfy the Reconciliation Agreement's requirements for reporting direct payments, thereby violating that agreement and, by extension, § 1485. Id. at 1213-15. It also dismissed Ford's counterclaim for a refund of overpaid duties. Id. at 1222. Finally, the court assessed the maximum penalty permitted by the statute in a case involving negligence: double the amount of revenue lost to the government, for a total of $17,151,923.60. Id. at 1221-22; see also 19 U.S.C. § 1592(c)(3) (setting forth the maximum civil penalty for negligent violation of § 1592). In so doing, the court considered various mitigating factors proposed by Ford but concluded that because Ford failed to make a good faith effort to meet its obligations, and inexplicably failed to follow its own compliance procedures, the penalty did not warrant mitigation. Negligence Decision, 395 F. Supp. 2d at 1221. 05-1584 6 On appeal, Ford challenges all of the trial court's legal rulings. It argues that 19 U.S.C. § 1484 does not require importers to disclose the existence of provisional pricing, or, in the alternative, that such a requirement could not be imposed on Ford consistently with due process of law. It argues that the Reconciliation Agreement modified its obligation to disclose modified price information at once and that Ford complied with all the requirements in that agreement. It also claims that even if it violated §§ 1484 and 1485, the trial court erred in finding its conduct negligent for purposes of liability under § 1592. Ford further asserts that several of its submissions detailing direct payments constituted prior disclosures under 19 U.S.C. § 1592(c), subjecting Ford to less rigorous penalties. Finally, Ford argues that the trial court erred in its calculation of the final penalty of $17,151,923.60. Ford timely appealed to this court, and we have jurisdiction pursuant to 28 U.S.C. § 1295(a)(5).