United States v. Ford Motor Co.

Slip Op. 07-66

UNITED STATES COURT OF INTERNATIONAL TRADE

BEFORE: SENIOR JUDGE NICHOLAS TSOUCALAS
________________________________________
:
UNITED STATES, :
:
Plaintiff, :
: Court No. 02-00116
v. :
:
FORD MOTOR COMPANY, :
:
Defendant. :
________________________________________:

Peter D. Keisler, Assistant Attorney General, Jeanne E.
Davidson, Director, Patricia M. McCarthy, Assistant Director,
Commercial Litigation Branch, Civil Division, United States
Department of Justice (David A. Levitt and David S. Silverbrand);
of counsel: Jeffrey E. Reim and Katherine Kramarich, United States
Bureau of Customs and Border Protection, for the United States,
Plaintiff.

Grunfeld, Desiderio, Lebowitz, Silverman, & Klestadt, LLP
(Steven P. Florsheim, Robert B. Silverman, David M. Murphy, and
Frances P. Hadfield); of counsel: Paulsen K. Vandevert, Ford Motor
Company, for Ford Motor Company, Defendant.

Dated: May 7, 2007

ORDER

This matter comes before the court pursuant to the August 30,

2006 decision of the United States Court of Appeals for the Federal

Circuit (“CAFC”) in United States v. Ford Motor Co. (“CAFC
Case No. 02-00116 Page 2

Decision”), 463 F.3d 1267 (Fed. Cir. 2006) affirming in part,

reversing in part and remanding the judgment of this court in

United States v. Ford Motor Co. (“Negligence Decision”), 29 CIT

___, 395 F. Supp. 2d 1190 (2005).

In Negligence Decision, this Court held Ford Motor Company

(“Ford”) liable for negligent misrepresentation of the value of

import entries and, as such, imposed a penalty of $17,151,923.60

upon Ford. See Negligence Decision, 29 CIT at ___, 395 F. Supp. 2d

at 1222. The maximum penalty for negligent violations of 19 U.S.C.

§ 1592(a), is the lesser of the domestic value of the merchandise

or twice the loss of duties. See 19 U.S.C. § 1592(c)(3)(1988); 19

C.F.R. § 162.73(a)(3) (1992). This Court found that the actual

loss of revenue (“LOR”) to the United States (“Plaintiff” or

“Government”) was $8,575,961.80. See Negligence Decision, 29 CIT

at ___, 395 F. Supp. 2d at 1221. In calculating the penalty

imposed on Ford, this Court assessed the statutory maximum penalty

for negligence pursuant to 19 U.S.C. § 1592(c)(3) by doubling the

loss of duty amount. See Negligence Decision, 29 CIT at ___, 395

F. Supp. 2d at 1222.

The CAFC remanded in order to recalculate the penalty amount.

See CAFC Decision, 463 F.3d at 1285-86. The CAFC stated that this

Court erred in including “in its damage calculations tenders that

did not violate § 1592.” Id. at 1285. Specifically, the CAFC
Case No. 02-00116 Page 3

stated that:

I) The “lump-sum payment relating to the 1991 Capri
reported on August 26, 1991, appears to have been
disclosed to [the Bureau of Customs and Border Protection
(“Customs”)1] “within the period allowed by the
Reconciliation Agreement, and therefore did not violate
§ 1485.”

II) “The same appears to be true for the payment relating
to the 1993 Taurus SHO reported on November 18, 1992.”

III) This court “appears to have included in its
calculations tenders that occurred outside the scope of
the investigation - specifically, tenders relating to
model years 1992 and 1993. Those tenders should have been
excluded from the penalty calculation.”

IV) “[T]he penalty must be recalculated to reflect the
absence of § 1484 liability . . ..”

Id. at 1285-86.

I. 1991 Capri

In April 1990, Ford began to purchase and import Capri

vehicles from Ford of Australia. In connection with the

importation of the Capri vehicles, Ford filed 23 entries between

April 1990 through July 1991. On September 5, 1992, Ford complied

with the summons issued at the June 1991 Meeting and provided

Customs with the requested documents. Ford provided a copy of the

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).
Case No. 02-00116 Page 4

supply contract for the Capri vehicles, which indicated that

transfer prices would be adjusted every six months to reflect

increases or decreases in a market basket of similar vehicles.

Ford made lump sum payments to Ford of Australia for the 1991 model

year Capri vehicle, which were in addition to the payments

reflected on the commercial invoices at the time of entry. Ford

disclosed these lump sum payments, totaling $5,570,900, to Customs

in a letter dated August 26, 1991 and tendered a check for $155,708

for duties and fees. See Negligence Decision, 29 CIT at ___, 395

F. Supp. 2d at 1199 (citation omitted).

II. 1993 Taurus SHO

Ford informed Customs that there were $14,779,026 in prototype

and development costs for the 3.2 liter SHO engine for the 1993

model year. In a letter dated November 18, 1992, Ford tendered

$404,100 for duties associated with those design and development

costs. See Negligence Decision, 29 CIT at ___, 395 F. Supp. 2d at

1201 (citation omitted).

III. Post-1991 Model Year Tenders

During a telephone conference held on February 2, 2007, this

Court ordered the Government and Ford to confer regarding the CAFC

remand. The parties were instructed to attempt to come to a

consensus as to which entries “occurred outside the scope of the
Case No. 02-00116 Page 5

investigation - specifically, tenders relating to model years 1992

and 1993.” CAFC Decision, 463 F.3d at 1285-86.

Shortly thereafter, the parties advised the Court that they

agreed that the minimum LOR2 for calculating the penalty amount is

$5,877,912.64.3 See Pl.’s Mem. in Supp. of Revised Penalty

Calculation in the Amount of $12,522,638.08 (“Pl.’s Mem.”) at 1;

Def.’s Post-Remand Br. (“Def.’s Mem.”) at 4-6. The parties agreed,

with one exception, on which duty tenders are in scope, and which

are out of scope. See Pl.’s Mem. at 2; Def.’s Mem. at 6.

The only LOR remaining in dispute between the parties relates

to Ford’s $695,874 duty tender for 4.0 Liter V-6 German engines.

See Pl.’s Mem. at 2-3; Def.’s Mem. at 6. The parties both

recognize that $313,468.60 of the $695,874 LOR relate to 1992 model

year engines, thereby making them out of scope. See Pl.’s Mem. at

3; Def.’s Mem. at 6. The Government, however, argues that the

remaining $383,405.40 should be included within LOR calculations.

See Pl.’s Mem. at 3; Def.’s Mem. at 6. The disagreement concerns

whether the LOR is related solely to 1992 model year engines, or

whether it encompasses pre-1992 engines as well. See Pl.’s Mem. at

2
Ford did not reference the $5,877,912.64 amount as
being a “minimum.” See Def.’s Mem. at 4-6.
3
The $5,877,912.64 amount includes deductions for both the
1991 Capri and the 1993 Taurus SHO.
Case No. 02-00116 Page 6

2-3; Def.’s Mem. at 6-7.

The issue of the proper application of Ford’s $695,874 duty

tender has, however, already been considered by this Court. In the

Negligence Decision this Court stated that:

Ford disclosed on May 6, 1993, that it had made lump sum
payments to Ford of Germany for 1992 model year 4.0 liter
V-6 engines in the amount of $25,782,651. Ford tendered
$695,874 in unpaid duties and fees in connection with
these payments.

Negligence Decision, 29 CIT at ___, 395 F. Supp. 2d at 1202.

Additionally, the CAFC referenced the “V-6 engines for the 1992

model year (payment of $695,874)” while commenting that “the trial

court appears to have included tenders related to the 1992 and 1993

model years.” CAFC Decision, 463 F.3d at 1282. As both this

Court, and the CAFC have referenced the $695,874 duty tender total

as applying to the 1992 model year, that entire amount is thus out

of the scope of the investigation. As such, the remaining

$383,405.40 is not included in the LOR. The total LOR for

calculating the penalty amount is thus $5,877,912.64.

IV. 19 U.S.C. § 1484 Liability

In Negligence Decision, this Court found “that Ford violated

19 U.S.C. § 1592.” Negligence Decision, 29 CIT at ___, 395 F.

Supp. 2d at 1213. The CAFC affirmed this Court’s decision that

Ford negligently violated 19 U.S.C. § 1485 in accordance with 19
Case No. 02-00116 Page 7

U.S.C. § 1592.4 CAFC Decision, 463 F.3d at 1279. The CAFC,

however, stated that the penalty must be recalculated to reflect

the absence of 19 U.S.C. § 1484 liability and any other adjustments

required by their opinion. CAFC Decision, 463 F.3d at 1286.

For negligent violations of 19 U.S.C. § 1592(a), the maximum

penalty is the lesser of the domestic value of the merchandise or

twice the loss of duties. See 19 U.S.C. § 1592(c)(3); 19 C.F.R. §

162.73(a)(3). The plain language of the statute only sets maximum

penalties and does not establish minimum penalties. See 19 U.S.C.

§ 1592(c)(3). The statute does not require the court to begin with

the maximum possible penalty and reduce that amount in light of

mitigating factors. See United States v. Modes, Inc., 17 CIT at

627, 635, 826 F. Supp. 504, 512 (1993). Furthermore, in its

remand, the CAFC clearly ruled that this Court’s “decision to

impose the maximum penalty was within its discretion.” CAFC

Decision, 463 F.3d at 1285.

This Court’s Conclusion in Negligence Decision stated:

Ford negligently violated 19 U.S.C. §§ 1481, 1484, 1485
and 1592 by failing to advise Customs that the
transaction values in the entry documents were not final.
Ford violated 19 U.S.C. § 1485 by failing to adhere to
the requirements of the Reconciliation Agreement of

4
“Statutory negligence under § 1592, unlike common-law
negligence, shifts burden of persuasion to the defendant to
demonstrate lack of negligence.” CAFC Decision, 463 F.3d at 1279
(citing 19 U.S.C. § 1592(e)(4)).
Case No. 02-00116 Page 8

reporting lump sum payments.

Negligence Decision, 29 CIT at ___, 395 F. Supp. 2d at 1222. This

Court did not declare the § 1484 violation as being the primary

basis for imposition of maximum penalties. This Court stated that

the degree of harm to Customs, the duration of Ford’s violations,

and whether Ford made a good faith effort to fulfill its statutory

obligations were all clear factors supporting the imposition of

maximum penalties. See id. at 1221. Furthermore, as this Court

previously found, “[t]he significant public interest in the

enforcement of Customs’ regulations also weigh in favor of the

imposition of a heavy penalty.” Id. at 1222. As such, this Court

finds that even with the absence of § 1484 liability, Ford’s

penalty does not warrant mitigation. Consequently, the Court

assesses the statutory maximum penalty for negligence pursuant to

19 U.S.C. § 1592(c)(3).

CONCLUSION

The total LOR for calculating the penalty amount is

$5,877,912.64. The Court assesses the statutory maximum penalty

for negligence pursuant to 19 U.S.C. § 1592(c)(3). The CAFC has

clearly ruled that this Courts “decision to impose the maximum

penalty was within its discretion.” CAFC Decision, 463 F.3d at

1285. For negligent violations of 19 U.S.C. § 1592(a), the maximum

penalty is the lesser of the domestic value of the merchandise or
Case No. 02-00116 Page 9

twice the loss of duties. See 19 U.S.C. § 1592(c)(3); 19 C.F.R. §

162.73(a)(3). Pursuant to 19 U.S.C. § 1592, the Court grants

judgment for plaintiff and assess a civil penalty against defendant

in the amount of $11,755,825.28 (twice the LOR) plus interest from

the date of judgment. Judgment shall be entered accordingly.

/s/ Nicholas Tsoucalas
NICHOLAS TSOUCALAS
SENIOR JUDGE

Dated: May 7, 2007
New York, New York
 UNITED STATES COURT OF INTERNATIONAL TRADE

BEFORE: SENIOR JUDGE NICHOLAS TSOUCALAS
________________________________________
:
UNITED STATES, :
:
Plaintiff, :
: Court No. 02-00116
v. :
:
FORD MOTOR COMPANY, :
:
Defendant. :
________________________________________:

JUDGMENT

This case having been duly submitted for decision and the
Court, after due deliberation, having rendered a decision herein;
now, in accordance with said decision, it is hereby

ORDERED that Plaintiff shall recover unpaid duties from Ford
in the amount $5,877,912.64 plus all legal interest; and it is
further

ORDERED that Plaintiff shall recover against Ford an assessed
civil penalty in the amount of $11,755,825.28, plus interest from
the date of judgment, for negligent violations of 19 U.S.C. § 1592;
and it is further

ORDERED that this case is dismissed.

/s/ Nicholas Tsoucalas
NICHOLAS TSOUCALAS
SENIOR JUDGE

Dated: May 7, 2007
New York, New York