Opinion ID: 211089
Heading Depth: 2
Heading Rank: 1

Heading: Assists and Direct Payments

Text: Two concepts lie at the heart of the case. The first, assist, is defined by statute as materials, components, parts, and similar items incorporated in the imported merchandise that is provided free of charge or at a reduced cost, by the buyer of imported merchandise for use in connection with the production or sale for export to the United States of the imported merchandise. 19 U.S.C. § 1401a(h)(1). An assist might consist of, for example, design or engineering work provided overseas by the buyer/importer to the seller that is not factored into the invoice price. The value of the assists is subject to import duties pursuant to 19 U.S.C. § 1401a(b)(1)(C). The trial court found, and Ford does not dispute, that assists relating to a particular model year vehicle or component typically occur long before entry of the actual merchandise. Negligence Decision, 395 F. Supp. 2d at 1197. During the years at issue, Ford maintained an internal program whereby it gathered information about assists at the time of importation and paid all duties related to such assists on the first entry of the related merchandise. Id. Despite this program, it appears that Ford failed to report significant numbers of assists until years after the related merchandise entered the United States. In 1992, Ford disclosed to what was then the United States Customs 05-1584 2 Service (Customs)1 the existence of previously undisclosed assists relating to numerous entries in the years 1987-1991. Id. at 1197-200. The second concept is direct or lump-sum payments, which are payments of money by the importer to the seller separate from—and usually subsequent to—the payment of the original price but that relate directly to the purchase price of the imported item. A typical lump-sum payment might represent amounts owed to the seller under a variable-pricing clause, pursuant to which the final cost of the item varies with some extrinsic index or factor, and requires a gross-up payment after the fact. Lump-sum payments, like assists, are dutiable under the import laws as part of the the total payment . . . for imported merchandise for purposes of 19 U.S.C. § 1401a(b)(4). Ford's supply agreements with many of its overseas vendors contained postimportation price adjustments, which typically provided a per vehicle or vehicle component base price subject to possible modifications. Id. at 1196. Ford knew that the prices of imported merchandise, although fairly firm upon importation, could change after importation pursuant to the supply agreements. During the years at issue, Ford's internal compliance procedures stated that upon entry [t]he invoice must be priced so that the true value can be ascertained. In the event that the value is not completely and correctly shown, a 'provisional' disclaimer is stated on the invoice, thereby advising [C]ustoms of the possibility that the entry price was non-final. Id. at 1203. The record indicates, however, that despite this policy Ford invoices in the disputed period did not disclose the provisional nature of invoice prices. 1 The United States Customs Service is now part of the Department of Homeland Security, and is known as the Bureau of Customs and Border Protection. 05-1584 3 In 1988, Ford and Customs entered into an agreement that altered Ford's reporting obligations relating to direct payments (the Reconciliation Agreement). The Reconciliation Agreement permitted Ford to report all lump-sum post-importation payments relating to a particular model year in a single disclosure filed at the end of the model year in question. The exact scope of the Reconciliation Agreement, and the timing of disclosures made pursuant to it, are the subject of dispute between the parties, and are discussed in detail below.