Opinion ID: 211089
Heading Depth: 3
Heading Rank: 2

Heading: Direct Payments

Text: Ford argues, and the trial court agreed, that an importer is not in violation of § 1485 if arrangements have been made with Customs to report changes in declared entry values, and that the Reconciliation Agreement constituted such an arrangement. Negligence Decision, 395 F. Supp. 2d at 1213. The trial court further concluded, however, that Ford failed to comply with the terms of the Reconciliation Agreement, thus effectively violating § 1485 itself. Id. On appeal, Ford challenges that conclusion. The Reconciliation Agreement consists of two documents: a proposal letter sent to Customs by Ford on October 14, 1988, and a response letter from Customs dated on or about August 29, 1989. The Ford letter described a lump sum billing proposal (modifying a previous agreement) in which Ford offered to track all lump sum billings throughout each model year . . . and report the dutiable expenses associated with each import program. Under the proposal, An annual reconciliation report will be prepared for each import program and filed with the Detroit customs district within 60 days after the close of each model year (July 30) to enable us to follow up and capture all relevant model year expenses. (emphasis original). Customs' response letter stated that Customs approved the proposal with two modifications, one of which stated that [t]his policy applies to withheld duties on entry summaries which have been liquidated. The Court of International Trade concluded that [u]nder the plain language of the Reconciliation Agreement, Ford was required to submit [reports of lump sum payments] 05-1584 14 within 60 days after the close of each model year, and that Ford did not rebut with credible evidence the specific language of the agreement which set the 60-day timeframe as a fixed deadline. Negligence Decision, 395 F. Supp. 2d at 1213. Finding the testimony of Ford's witnesses on this point incredible based upon their demeanor, and further finding that with a single exception Ford failed to submit its reconciliation reports to Customs within the 60-day deadline, the court concluded that Ford had violated § 1485. Id. at 1214. On appeal, Ford raises three arguments. It asserts, first, that Customs' response letter implicitly eliminated the 60-day deadline in favor of a simple reasonableness standard; second, that [n]o one from Ford or Customs ever took the position that a strict 60-day deadline applied to Ford's reconciliation obligations; and third, that the parties' course of practice establishes that Customs never treated the 60-day period as a firm deadline. First, Ford argues that Customs modified the agreement to eliminate the 60-day requirement. It bases this argument on the fact that its initial proposal, which included the 60-day requirement, applied to both liquidated and unliquidated entries. Customs' modification of the proposal to apply only to liquidated entries, Ford maintains, is incompatible with the existence of such a deadline, because regulations provided that Customs had up to four years to liquidate entries, and Customs at that time was running a 90-day liquidation cycle. In light of that evidence, Ford reasons, a 60-day reporting deadline is nonsensical, because very few if any entries from the relevant model year will have been liquidated within the 60 days. 05-1584 15 We disagree. First, we note that there is no discussion of this argument in the trial court's decision, and it is not clear that it was raised at trial. If it was not raised at trial, it is waived. In addition, it is not clear that—contrary to Ford's argument—Ford's original proposal was intended to apply to both liquidated and unliquidated entries. The letter makes no explicit statement to that effect, and Customs' response—This policy applies to withheld duties on entry summaries which have been liquidated—does not unambiguously demonstrate that Ford's proposal would have applied to unliquidated entries. If, in fact, Ford's initial proposal was itself intended to be limited to withheld duties on entry summaries which have been liquidated, Ford's argument about the consequence of Customs' modification loses force. In any case, we find Ford's argument unpersuasive. Customs' letter makes no reference to the 60-day deadline, and Ford's argument of repeal-by-implication is, at best, strained. Ford's argument rests heavily on the implication that the parties knew that Customs was then running a 90-day liquidation cycle, and that they therefore understood that Customs' modification necessarily eliminated the 60-day deadline. That implication, however, conflicts with the testimony of Ford employee P.B. Kruzich, who proposed the 60-day deadline, and who testified that it was just a target, but one that he thought . . . was reasonable at the time. If, in fact, Ford was aware that the liquidation cycle took 90 days, and if Ford intended its proposal to apply to both liquidated and unliquidated entries, it seems unlikely that it would have proposed—and underlined for emphasis—a 60-day target for filing its reconciliations. Finally, Ford's primary evidence for its position is the testimony of former Customs officer and later Ford employee Manns—testimony that the trial court found to 05-1584 16 be incredible for demeanor-related reasons, a credibility determination that this court will not second-guess. Negligence Decision, 395 F. Supp. 2d at 1213-14. Ford's second and third arguments present a more difficult question. Ford points to considerable evidence in the record suggesting that, although Ford consistently failed to file its reconciliation reports within the 60-day time-frame, Customs never complained that any of Ford's numerous reconciliation submissions filed after the supposed 60-day deadline were 'late.' Indeed, the trial court accepted this as fact. See id. at 1197. Nevertheless, the parties' course of performance is insufficient either to read out the 60-day deadline from the Reconciliation Agreement or to estop the government from enforcing that deadline. Course of performance evidence in most circumstances is relevant to interpretation of an instrument only if the terms of that instrument are ambiguous. See, e.g., Barron Bancshares, Inc. v. United States, 366 F.3d 1360, 1375-76 (Fed. Cir. 2004) (noting that evidence of course of dealing is parol evidence, and therefore inadmissible in the absence of contractual ambiguity); see also Restatement (Second) of Contracts § 203(b) (1981) (stating that express terms are given greater weight than course of performance). The Court of International Trade held that the Reconciliation Agreement was not ambiguous on this issue, and we agree. We will not address whether they may be a circumstance in which course of performance may override an unambiguous term in the contract. See Cruz-Martinez v. Dep't of Homeland Sec., 410 F.3d 1366, 1371 (Fed. Cir. 2005). We are satisfied that no such circumstance exists here. As for estoppel, the government correctly points out that estoppel is available against government actors only in cases involving affirmative misconduct. Rumsfeld 05-1584 17 v. United Techs. Corp., 315 F.3d 1361, 1377 (Fed. Cir. 2003); Henry v. United States, 870 F.2d 634, 637 (Fed. Cir. 1987). Ford has not alleged any affirmative misconduct here, and indeed has not pled the elements of an equitable estoppel case at all. Therefore, there is no basis on which estoppel might prevent the government from enforcing § 1485 against Ford. There remains the question of negligence. Statutory negligence under § 1592, unlike common-law negligence, shifts the burden of persuasion to the defendant to demonstrate lack of negligence. 19 U.S.C. § 1592(e)(4). That is, Customs has the burden merely to show that a materially false statement or omission occurred; once it has done so, the defendant must affirmatively demonstrate that it exercised reasonable care under the circumstances. The trial court concluded that Ford failed to rebut the prima facie case of negligence, although it did not explain in detail why. Negligence Decision, 395 F. Supp. 2d at 1215. Ford argues that Customs’ consistent acceptance of late filings suggests the reasonableness of Ford’s conduct. It also points to Customs’ new “Reconciliation Prototype” program, which allows importation up to 21 months after entry to file reconciliations. Ford’s reliance on Customs’ pattern of accepting its late filings is simply a reiteration of its estoppel argument, rejected above. The fact that Customs today—fifteen years after the events in dispute here—may regard twenty-one months to be a reasonable reconciliation period has little bearing on what constituted reasonable care for Ford, which was subject to a requirement that it file its reconciliations within 60 days. We therefore affirm the trial court’s conclusion that Ford negligently violated § 1485. 05-1584 18