Ford Motor Co. v. United States

Slip Op. 06-95

UNITED STATES COURT OF INTERNATIONAL TRADE

FORD MOTOR CO.,

Plaintiff, Before: Richard W. Goldberg,
Senior Judge
v.
Court No. 99-00394
UNITED STATES,

Defendant.

OPINION

[Customs’ motion to dismiss is granted.]

Dated: June 21, 2006

Stein Shostak Shostak Pollack & O'Hara LLP (Stanley Richard
Shostak and Heather Christi Litman) for Plaintiff Ford Motor Co.

Peter D. Keisler, Assistant Attorney General; Barbara S.
Williams, Attorney in Charge, International Trade Field Office,
Commercial Litigation Branch, Civil Division, U.S. Department
of Justice (Saul Davis), for Defendant United States.

GOLDBERG, Senior Judge: In this action, Plaintiff Ford Motor Co.

(“Ford”) seeks review of the denial of its Protest No. 2704-98-

101394 contesting certain actions taken by Defendant United

States Customs and Border Protection (“Customs”) regarding the

Entry CE 231-5174793-0 entered in Los Angeles on June 9, 1997

and liquidated on May 8, 1998 (“the L.A. Entry”). Customs filed

a motion to dismiss for lack of jurisdiction and lack of

standing under Article III of the U.S. Constitution (“Customs’
Court No. 99-00394 Page 2

Mot.”) on October 31, 2005.1 Ford filed a motion for summary

judgment on the same day. On January 23, 2006, Customs filed a

motion for summary judgment on the merits. Also on January 23,

2006, Ford filed a response to Customs’ motion to dismiss

(“Ford’s Resp.”). Both parties filed replies on February 13,

2006. For the reasons that follow, the Court grants Customs’

motion to dismiss and dismisses the case for lack of subject

matter jurisdiction.

I. BACKGROUND

Although this case is limited to a review of Ford’s protest

of the L.A. Entry, the underlying dispute between Customs and

Ford dates back much further. The L.A. Entry itself is

1
Customs refers alternately to its October 31, 2005 motion as a
“cross-motion for summary judgment” and a “motion to dismiss and
for summary judgment.” The motion seeks dismissal of the case
for want of subject matter jurisdiction and standing, two
matters normally dealt with on a motion under USCIT Rule 12 and
not USCIT Rule 56. See Robinson v. Union Pac. R.R., 245 F.3d
1188, 1191 (10th Cir. 2001) (“Seeking summary judgment on a
jurisdictional issue . . . is the equivalent of asking a court
to hold that because it has no jurisdiction, the plaintiff has
lost on the merits.”) (quotation marks omitted); Winslow v.
Walters, 815 F.2d 1114, 1116 (7th Cir. 1987) (noting that
because summary judgment has res judicata effect on the merits
of the case, it would be inappropriate in cases where a court
has not considered the merits, as with a jurisdictional
challenge); cf. also Pringle v. United States, 208 F.3d 1220,
1222 (10th Cir. 2000) (holding that a motion to dismiss for lack
of subject matter jurisdiction may be converted to a summary
judgment motion only when “resolution of the jurisdictional
question is intertwined with the merits of the case”). As such,
Customs’ motion is a motion to dismiss under USCIT Rule
12(b)(1), and will be referred to as such in this opinion.
Court No. 99-00394 Page 3

comprised of 288 3.4L production engines that Ford purchased

from Yamaha Motor Co., Ltd. (“Yamaha”) for installation in 1996

1/2 Ford Taurus SHO automobiles in the United States. Those

production engines were developed and produced pursuant to a

series of agreements between Ford and Yamaha. Ford and Yamaha

entered in to a “3.4L Engine Development Agreement”

(“Development Agreement”) effective as of September 1990. The

purpose of the Development Agreement was to modify and improve

the existing automobile engines used in the Taurus SHO. Ford

and Yamaha also entered into a Supply Agreement effective in

1996 that outlined the terms according to which successful

development projects would yield purchasable production engines.

Engine prototypes constituted a crucial component of the

development process. The Development Agreement itself explains

the role prototypes were to play:

4. Prototypes

A (1) Prototype Engines and prototype parts
that are required by Ford shall be purchased by
Ford from Yamaha under separate purchase
orders, in accordance with payment terms of Net
15th and 30th Prox. A specimen copy of the
purchase order form is annexed hereto as
Attachment VI. The printed terms and
conditions of the purchase order shall apply to
purchases pursuant to this Section 4. Ford,
from time to time, may change its purchase
order form but such change shall not amend or
modify the respective rights and obligations of
the parties hereunder.
Court No. 99-00394 Page 4

Development Agreement ¶ 4A. In total, Ford issued purchase

orders to Yamaha for the purchase of 298 prototype engines, for

which Ford paid Yamaha a total of ¥891,747,801, or $9,058,310.

Though some of the prototype engines purchased by Ford

remained in Japan, many were imported into the United States.

The majority of the imported prototypes entered under bond as

temporary imports, that is, the prices paid to Yamaha for the

prototype engines were declared but duties were not paid. Ford

imported a smaller number of prototype engines by means of

consumption entries with payment of duties.

This 3.4L SHO engine program was not the first time Ford

and Yamaha had collaborated in the design, development, and

supply of prototype and production engines for use in Ford’s

Taurus model. Years earlier, Ford and Yamaha had entered into

similar agreements in connection with Ford’s 3.2L SHO engine

development program, which also involved Ford’s importation of

prototype engines from Yamaha. The 3.2L SHO prototype program

occasioned a dispute with Customs regarding the dutiability vel

non of prototype engines. By the time the L.A. Entry arrived in

the United States, Customs had already issued two Customs

Headquarters Rulings2 regarding the dutiability of prototype

2
An importer may request a ruling letter from a Customs field
office respecting the treatment of a prospective customs
transaction. See 19 C.F.R. § 177.9(a) (2005). Customs’ field
offices may themselves request “internal advice” from Customs
Court No. 99-00394 Page 5

engines in connection with the by-then obsolete 3.2L SHO engine

development program.

In April 1994, Customs issued HQ 545278, in which it ruled

on two issues impacting the duty treatment of the 3.2L prototype

engine program as follows: (1) the value of imported prototype

engines did not constitute an “assist,”3 and was properly

considered part of the “price actually paid or payable,” 19

U.S.C. § 1401a(b)(4)(A), of the imported prototype engines

themselves; and (2) the payments made to Yamaha for design and

development of prototype engines should also be included in the

transaction value4 as part of the “price actually paid or

payable” for subsequently imported production engines. See HQ

Headquarters “at any time.” Id. § 177.11(a). The result of the
process is usually a Customs Headquarters Ruling, detailing
Customs Headquarters’ “official position” as to the transaction
in question. Id. § 177.11(b)(6). In the case of the two
Headquarters Rulings relating to the 3.2L engine program,
Customs officials at the Port of Detroit made a request for
internal advice. Then, Ford requested reconsideration of the
ruling, and Customs Headquarters responded by affirming its
original ruling.
3
An “assist” is a good or service that is “supplied directly or
indirectly, and free of charge or at reduced cost, by the buyer
of imported merchandise for use in connection with the
production or the sale for export to the United States of the
[imported] merchandise[.]” 19 U.S.C. § 1401a(h)(1)(A) (1999).
4
The “transaction value” of imported merchandise is the
statutorily preferred method of valuing merchandise for purposes
of duty calculation. See 19 U.S.C. § 1401a(1) (1999). The
transaction value of imported merchandise is “the price actually
paid or payable for the merchandise when sold for exportation to
the United States, plus” other specified additions. Id. §
1401a(b)(1).
Court No. 99-00394 Page 6

545278 (April 7, 1994), available at 1994 U.S. Custom HQ LEXIS

327. Customs determined that the prototype payments were

“inextricably linked to the design and development process.”

Id. at *8. In other words, Customs’ treatment of the 3.2L

prototype program amounted to “double-counting” the cost of the

imported prototype engines by fully allocating the prototype

costs to the transaction values of both the production engines

and the imported prototypes themselves.

In October 1996, Customs affirmed its conclusion in

response to Ford’s request for reconsideration, stating that

“[p]ayments relating to the prototypes are part of the price

actually paid or payable of the imported production engines

notwithstanding the fact that many of the prototypes were

subject to duties upon their importation into the United

States.” HQ 545907 (Oct. 11, 1996), available at 1996 U.S.

Custom HQ LEXIS 1946, at *10-11.

On May 9, 1997, Customs notified Ford that it had initiated

a formal investigation of the 3.4L SHO Engine program under 19

U.S.C. § 15925 for its suspected “fail[ure] to declare the total

5
Section 1592 of Title 19 outlines the civil penalties for
fraud, gross negligence, and negligence where an importer,
depriving the U.S. Treasury of duties owed, “may enter,
introduce, or attempt to enter or introduce any merchandise into
the commerce of the United States by means of any document or
electronically transmitted data or information, written or oral
statement, or act which is material and false, or any omission
which is material[.]” 19 U.S.C. § 1592(a)(1)(A) (1999).
Court No. 99-00394 Page 7

value of engineering, design and development costs for

prototypes utilized in the subsequent importation of production

merchandise.” Decl. of Paul Vandevert, Ex. 4 (“Notice Letter”).

After receiving the letter and reviewing its records, Ford

conducted a conference call with Customs agents and determined

that, applying the logic of HQ 545278 and assuming a

conservative estimate of $17 million in payments to Yamaha for

prototype engines, it owed Customs $425,000 in back duties for

merchandise imported over a period of three years.

On November 5, 1997, Ford submitted a letter to Special

Agent Robert L’Huillier of Customs’ Office of Investigations,

stating that it had completed a more thorough review and its

records indicated $226,458 in back duties owed, based on

$9,058,310 in payments to Yamaha since April 1994. See Decl. of

Paul Vandevert, Ex. 5 (“Nov. 5 Letter”). That letter quoted

from HQ 545907, and also provided that the additional duties

owed “will be included with an unliquidated 3.4L SHO engine

entry so as to permit Ford to file a formal protest under

Section 514 (19 U.S.C. 1514) and later to serve Customs with a

summons to institute Court proceedings.” Nov. 5 Letter.

On November 20, 1997, Ford’s customs broker Expeditors

International of Washington, Inc. (“Expeditors”) sent another

letter to Detroit Customs attaching a copy of the Nov. 5 Letter

and enclosing a check for $226,458 “as a supplemental tender of
Court No. 99-00394 Page 8

duties on payments to Yamaha for prototypes for the 1996 1/2 MY

SHO Engine Program.” Decl. of Paul Vandevert, Ex. 6 (“Nov. 20

Letter”). The Nov. 20 Letter did not specify the entry, if any,

to which the duties were to be allocated “so as to permit Ford

to file a formal protest[,]” Nov. 5 Letter.

On January 29, 1998, another letter from Expeditors arrived

on the desk of Linda Connor, a Customs agent at the Port of

Detroit. See Decl. of Paul Vandevert, Ex. 7 (“Jan. 29 Letter”).

That letter requested that the already deposited $226,458 in

duties be “allocated” to the L.A. Entry, which Customs had not

yet liquidated. See Jan. 29 Letter. Ford included a copy of

the Customs receipt for the $226,458 with the Jan. 29 Letter.

Customs accepted the tender of duties. The L.A. Entry, one

of many entries of production engines, occurred on June 9, 1997.

Ford paid Yamaha a total of $1,329,629 for the production

engines (along with various containers) in the L.A. Entry and

declared, via Expeditors, the total “entered value” on its Entry

Summary Form 75016 to be as much. See Customs’ Mot., Ex. B

(Customs Form 7501). The L.A. Entry was accounted for in the

6
The customs regulations permit customs brokers to file an
Entry Summary Form 7501 at the time of entry in order to obtain
the immediate release of imported merchandise from Customs’
possession. See 19 C.F.R. §§ 142.3(b), 142.12(a) (2005). The
Entry Summary Forms expedite the customs processing of entries,
but rely on accurate statements made by importers and their
customs brokers.
Court No. 99-00394 Page 9

Entry Summary Form 7501 by dividing the total invoiced payment

of $1,329,629 into three separate transaction values for the

three duty treatments to which the entry was entitled. Thus,

Ford noted that $201,600 of the invoice price was entitled to

duty-free treatment because the engines contained “other

articles assembled abroad of domestically fabricated

components,” see Harmonized Tariff Schedule of the United States

(“HTSUS”) subheading 9802.00.8065. In addition, Ford noted an

entered value of $65,979 for substantial containers and holders,

which also corresponded to a zero duty rate, under HTSUS

subheading 9803.00.50. The entered dutiable value for the 288

production engines was $1,062,050. Given the applicable duty

rate of 2.7 percent, Customs assessed duties of $28,675.35 for

the production entries, plus the addition of certain fees of

$2147.03, for a total of $30,822.38. Nowhere in the Entry

Summary Form 7501 did Ford or Expeditors mention the $226,458 in

supplemental duties tendered.

On May 8, 1998, Customs liquidated the L.A. Entry. The

computer printout documentation relating to that liquidation7

demonstrates that Customs liquidated the L.A. Entry at a “paid

amount” and “liquidated amount” of $30,822.38. An annotation

7
The Customs printout is the product of the Customs Automated
Commercial Systems (“ACS”) program that tracks, controls, and
processes data on U.S. customs transactions. See Decl. of Chi
S. Choy ¶ 2.
Court No. 99-00394 Page 10

appeared on the second page of the printout associating that

entry with the $226,458 payment, and categorizing the tender as

“PRIOR DISCLOSURE ONLY — LIQUID.” Upon liquidation, the Entry

Summary Form 7501 was stamped in red “AS ENTERED.”

Ford filed Protest No. 2704-98-101394 on August 6, 1998.

Customs denied the protest on December 31, 1998. On June 28,

1999, Ford commenced this case.

II. DISCUSSION

Absent jurisdiction, a court may not proceed in any cause,

and must dismiss the case before it. “The requirement that

jurisdiction be established as a threshold matter ‘spring[s]

from the nature and limits of the judicial power of the United

States’ and is ‘inflexible and without exception.’” Steel Co. v.

Citizens for a Better Envm’t, 523 U.S. 83, 94-95 (1988) (quoting

Mansfield, C. & L. M. R. Co. v. Swan, 111 U.S. 379, 384 (1884));

see also USCIT R. 12(h)(3) (“Whenever it appears . . . that the

court lacks jurisdiction of the subject matter, the court shall

dismiss the action.”). Because the Court is convinced that

subject matter jurisdiction does not lie in this case, it must

dismiss the case forthright, and need not therefore consider the

respective motions for summary judgment on the merits.

A. A Valid Protest of a Customs Decision Must Be Timely.

Ford invokes the U.S. Court of International Trade’s

(“CIT”) subject matter jurisdiction under 28 U.S.C. § 1581(a).
Court No. 99-00394 Page 11

That jurisdictional grant enables the CIT to assert jurisdiction

over “any civil action commenced to contest the denial of a

protest, in whole or in part, under section 515 of the Tariff

Act of 1930.” 28 U.S.C. § 1581(a) (1999). The referenced

section 515 is codified at 19 U.S.C. § 1515, and lays out the

procedures for administrative review of Customs decisions under

the protest system. Therefore, a prerequisite to the Court’s 28

U.S.C. § 1581(a) jurisdiction is the filing of a valid protest

under the protest statute, 19 U.S.C. § 1514. See Saab Cars USA,

Inc. v. United States, 434 F.3d 1359, 1365 (Fed. Cir. 2006).

The protest statute provides that “decisions of the Customs

Service . . . shall be final and conclusive upon all persons . .

. unless a protest is filed in accordance with this section . .

. .” 19 U.S.C. § 1514(a) (1999). One of the necessary elements

of a valid protest is that it is timely. See Juice Farms, Inc.

v. United States, 68 F.3d 1344, 1346 (Fed. Cir. 1995). Under 19

U.S.C. § 1514(c)(3), the time period within which a protesting

importer must file its protest varies according to the

circumstances of the protest. The statute provides that “[a]

protest of a decision, order, or finding . . . shall be filed

with the Customs Service within ninety days after but not before

(A) notice of liquidation or reliquidation, or (B) in

circumstances where subparagraph (A) is inapplicable, the date

of the decision as to which protest is made.” 19 U.S.C. §
Court No. 99-00394 Page 12

1514(c)(3) (1999). In deciding whether a valid protest has

occurred, then, a court must determine if subparagraph (A) is

applicable to the facts of the case. In most cases, this

inquiry is summary; however, where, as here, the protest

presents an unordinary and complicated customs transaction, a

quick look will not suffice.

B. An Importer May Run the Ninety-Day Protest Period from the
“Notice of Liquidation” Only When the Liquidation Is
Materially Affected by the Protested Customs Decision.

Subparagraph (A) runs the ninety-day protest period from

the date an importer receives notice of a liquidation or

reliquidation. The Court reads that subparagraph as containing

an implicit requirement that the “liquidation or reliquidation”

be materially affected by the substance of the challenged

decision.8 Without imposing such a requirement, the terms of the

statute are such that any “decision of the Customs Service”

could be protested within ninety days of the “notice of [any]

liquidation or reliquidation,” which is patently absurd because

it would vitiate the institution a ninety-day time limitation

period in the first place. Put another way, “notice of

8
This is not to say that the notice must communicate to the
importer the substance of Customs’ decision for the first time
in order to fall within the purview of subparagraph (A).
Whether the notice represents the initial notification of a
Customs decision, or whether the notice reiterates a position
established prior to liquidation, some substantial nexus must
exist between the liquidation being noticed and the substance of
the protested decision.
Court No. 99-00394 Page 13

liquidation” must refer to a specific liquidation, otherwise

importers could bring challenges to Customs decisions years

after the decisions were made, respecting entries that evince no

logical connection to the protested decision. Cf. Gould v. U.S.

Dep’t of Health & Human Serv., 905 F.2d 738, 746 (4th Cir. 1990)

(en banc) (rejecting as contrary to the purpose of a statute of

limitations the possibility of an “open-ended rule”). Ford is

therefore only entitled to the application of subparagraph (A)

if the Court finds that the liquidation of the L.A. Entry was

materially affected by the challenged Customs decision.

On the other hand, Subparagraph (B) applies to protests

when Customs discloses the terms of its protested decisions

independent of any liquidation. See 19 C.F.R. § 174.12(e)(2)

(2005) (providing a non-exhaustive list of “decisions of the

Customs Service” to which subparagraph (B) applies). In such

circumstances, the protest period will run from “the date of the

decision as to which protest is made.” 19 U.S.C. §

1514(c)(3)(B) (1999). If subparagraph (B) applies in this case,

then the protest period began running from “the date of the

decision,” which was either (1) a date in mid- to late-1997 when

Customs, after notifying Ford of its ongoing investigation,

demanded a tender of back duties9, or (2) October 11, 1996 (the

9
Between May 9, 1997 (the date Customs informed Ford of its
investigation), and Nov. 5, 1997 (the date Ford determined its
Court No. 99-00394 Page 14

date Customs published HQ 545907, putting Ford on notice of

Customs’ decision that the cost of the prototype engines were

includable in the transaction value of production engines10). In

either event, Ford’s filing of a protest on August 6, 1998 was

well after these ninety day windows had expired. As such,

Ford’s protest is valid only if the Court determines that

subparagraph (A) applies to this dispute.11

final liability from its invoices), Customs and Ford had been in
negotiations as to the ultimate amount of liability Ford owed
for its 3.4L prototype engines. The Court assumes that some
“decision” to demand duties from Ford occurred during that
period. Cf. Alcan Alum. Corp. v. United States, 28 CIT ___,
___, 353 F. Supp. 2d 1374, 1378-79 (2004) (holding that Customs’
calculation of back duties owed and subsequent demand of that
amount following an investigation was a protestable decision
under 19 U.S.C. § 1514). However, even assuming the protestable
decision occurred on the last day of this period, Ford’s protest
would still have been late.
10
Nothing in 19 U.S.C. § 1514 prevents an importer from
protesting a 19 C.F.R. § 177 Headquarters Ruling, see supra note
2, provided the strictures of Article III standing under the
U.S. Constitution are met. Though the case law is sparse in
this regard, examples of such cases do exist. See, e.g., Conair
Corp. v. United States, 29 CIT ___, Slip Op. 05-95 (Aug. 12,
2005). In that case, the importer first requested and received
a letter ruling from the Port of New York regarding the
classification of merchandise. See NY F83276 (Mar. 15, 2000),
available at 2000 US Customs NY LEXIS 1803. Then, the importer
requested and received reconsideration from Customs
Headquarters, which affirmed NY F83276. See HQ 964361 (Aug. 6,
2001). Thereafter, the importer protested, and Customs denied
the protest. Finally, the importer commenced a case in the CIT,
which asserted its 28 U.S.C. § 1581(a) jurisdiction. See
Conair, 29 CIT at ___, Slip. Op. 05-95 at *3-*4.
11
Lamentably, Ford did not avail itself of the most obvious
course of action in this case. Had Ford simply declared the
costs of its prototype program from the outset, it would have
Court No. 99-00394 Page 15

In this case, Ford is challenging “Customs’ decision that

the costs of the prototypes were properly includable in the

‘price actually paid or payable’ for the production engines in

the subject entry.” Ford’s Resp. at 6-7 (quoting 19 U.S.C. §

1401a(b)(1) (1999) (defining dutiable “transaction value” as

including “the price paid or payable”)). However, the

liquidation of the L.A. Entry relates to this protested decision

only by virtue of a legal and accounting contrivance that Ford

concocted itself. Specifically, Ford attempted to allocate the

duty amount owed for the entire prototype program to the

transaction value of the production engines in the L.A. Entry.

C. The Terms and Circumstances of the Liquidation of the L.A.
Entry Demonstrate No Material Link to the Protested
Decision.

Assuming arguendo that the Customs officials at the Port of

Detroit agreed to Ford’s request to allocate the $226,458 to the

L.A. Entry, and endeavored to communicate as much to the Customs

officials at the Port of Los Angeles, there is no evidence that

such allocation was actually and practically accomplished.12 As

had ninety days from the liquidation of the first entry of
production engines within which to file its protest, over which
the Court would unambiguously possess jurisdiction. Instead,
Ford was subject to an investigation under the penalty statute
19 U.S.C. § 1592 and attempted to craft a “do-it-yourself”
solution.
12
It is of no legal relevance that Customs, or any of its
officials, may have intended to accommodate Ford’s request to
commence an action under 28 U.S.C. § 1581(a). An administrative
Court No. 99-00394 Page 16

such, the Court finds that the requisite nexus between the

protested decision and the liquidation of the L.A. Entry is

lacking. For this reason, subparagraph (A) cannot apply, and

the protest was untimely and invalid.

As discussed above, on November 5, 1997, Ford informed

Customs of its intention to have the $226,458 payment “included

with an unliquidated 3.4L SHO engine entry so as to permit Ford

to file a formal protest . . . .” Nov. 5 Letter (emphasis

added). On November 29, 1997, Expeditors transmitted that

payment to Customs. See Nov. 29 Letter. Over two months later,

Expeditors requested that the payment be allocated to [the L.A.

Entry].” Jan. 29 Letter (emphasis added). Customs admits that

its agents “appeared to agree to this process, because [they]

allocated the payment of the $226,458.00 to the entry which Ford

requested be liquidated, by adding this amount to the entry . .

. .” Customs’ Mot. at 11 (emphasis added).

agency may not waive the U.S. government’s sovereign immunity by
consenting to be sued. Such consent may only come from an
unequivocal expression of Congress. See Irwin v. Dep’t of
Veterans Affairs, 498 U.S. 89, 95 (1990). Because Congress
provided a framework, in 19 U.S.C. § 1514, for civil suits
challenging Customs decisions, a plaintiff must look to that
statute, and that statute alone, to obtain its relief.
Court No. 99-00394 Page 17

However, “allocation” and “inclusion” are distinct concepts

from liquidation.13 The seed of any valid protest under

subparagraph (A) must be a liquidation that is affected by the

protested decision, see 19 U.S.C. § 1514(c)(3)(A). If

“allocation” and “inclusion” simply refer to the process of

appending documentation relating to another separate

transaction, then those processes have no relevance to the

question of whether subparagraph (A) will apply to the

liquidation. An importer may not avail itself of the protest

procedures by simply allocating a payment to an entry that

otherwise is logically unconnected to the protested decision.

Absent a formal rule-making process, neither an importer nor

Customs may create a new analogue to statutorily-recognized

liquidation. Customs makes this distinction in its motion to

dismiss, noting that despite the undeniable association of the

payment with the L.A. Entry, “Customs never actually liquidated

this entry to include the $226,458.00 in the actual value and

liquidated duties for this entry.”14 Customs’ Mot. at 11. After

13
“Liquidation means the final computation or ascertainment of
the duties . . . accruing on an entry.” 19 C.F.R. § 159.1
(2005).
14
Ford points out that in its Answer, Customs admits to
paragraph 16 of Ford’s Amended Complaint, which states: “The
¥891,747,801 paid by Ford to Yamaha for the 3.4 liter prototype
engines, was treated as part of the price ‘actually paid or
payable’ for the 288 production engines in the [L.A. Entry].”
Complaint ¶ 16; see also Answer ¶ 16 (admitting the same). In
Court No. 99-00394 Page 18

examining the ACS printout, the Court agrees with Customs that,

despite any allocation or inclusion, “[t]here was never any

liquidation or appraisement of merchandise encompassed by this

case that actually included any portion of the amount in

dispute.” Id.

The ACS printout documentation consists of two pages. The

first page is the routine document relating the specifics of the

liquidation. That page lists the “paid amount” and the

“liquidated amount” at $28,675.35. That sum was derived from

applying the then applicable 2.7 percent duty rate to the

declared value of the entered production engines themselves,

spite of that admission, Customs is currently arguing that the
payment of duties that corresponded to the ¥891,747,801 at issue
was never included in the transaction value of the production
engines in the L.A. Entry.
The Court interprets the evidence independently, and may
rely on the extensive discovery in this case occurring over a
seven year period. At such a late stage in the proceedings, a
court is hardly compelled to bind itself to the mast of a
defendant’s pleadings and assert its jurisdiction over a case it
has no authority to adjudicate. See USCIT R. 12(h)(3)
(“Whenever it appears by suggestion of the parties or otherwise
that the court lacks jurisdiction of the subject matter, the
court shall dismiss the action.”); cf. also Grafon Corp. v.
Hausermann, 602 F.2d 781, 783 (7th Cir. 1979) (“The district
court may properly look beyond the jurisdictional allegations of
the complaint and view whatever evidence has been submitted on
the issue to determine whether in fact subject matter
jurisdiction exists.”); Nat'l Union Fire Ins. Co. of Pittsburgh,
PA v. BP Amoco P.L.C., 319 F. Supp. 2d 352, 368-69 (S.D.N.Y.
2004) (noting that a court, when ruling on a motion to dismiss
for lack of jurisdiction, must construe pleadings in favor of
plaintiff only when jurisdictional discovery has not occurred).
The Court therefore has no difficulty disregarding the purported
admission of jurisdiction contained in Customs’ Answer.
Court No. 99-00394 Page 19

independent of any supplemental amount, on either a pro rata or

lump-sum basis, for the prototype engines. The page also

indicates that the entry was subject to fees and taxes amounting

to $2147.03. In total, the amount owed on the L.A. Entry was

$30,822.03. The notation “NO CHANGE—LIQ” appears below the

liquidation data, and is evidence that the liquidation was based

on the declared values without any changes or modifications in

the transaction.15 There is no mention of the $226,458 payment

Ford made for the prototype engines on the first page.

By contrast, the second page of the ACS printout mentions

the $226,458 payment and contains the notation “PRIOR DISCLOSURE

ONLY—LIQUID.” That terminology signifies to Customs that the

tender was treated as relating to an entry that already had been

liquidated. See Decl. of Mary Ann Morris ¶ 9. The reference to

the prior disclosure procedures is almost certainly inapposite,

since those procedures permit an importer to disclose instances

of underpayment of duties prior to Customs’ discovery in

exchange for limited immunity from 19 U.S.C. § 1592 negligence

and fraud liability. See 19 C.F.R. §§ 162.73(b), 162.74(a)

15
The Court’s interpretation of the “NO CHANGE—LIQ” notation is
supported by a similar notation that appears on the Entry
Summary Form 7501. At the time of liquidation, the L.A. Entry
Form 7501 was stamped “AS ENTERED,” a label that “possesses the
same meaning as ‘No Change Liq’ — it means that Customs
liquidated this entry at the amount deposited by the importer at
the time of entry.” Decl. of Chi S. Choy ¶ 8.
Court No. 99-00394 Page 20

(2005). Here, both parties acknowledge that Ford discussed its

prototype program with Customs only after Customs informed Ford

of an ongoing section 1592 investigation. However, that

notation is instructive in placing the unordinary $226,458

payment in context.

The use of the “prior disclosure” notation accentuates the

anomaly of Ford’s attempted accounting feat. Typically, a prior

disclosure will occur after entry and liquidation. The notation

is helpful to signify that although the entry and liquidation

documentation is incomplete, Customs may not pursue the full

panoply of civil penalties for deprivation of duties under 19

U.S.C. § 1592. In a typical case, this is an unremarkable

“tender on an entry that had already been liquidated.” Decl. of

Mary Ann Morris ¶ 9. When the Customs officials borrowed this

terminology from an obviously inapposite context, the Court

supposes they were doing their best to document a unique

transaction.16 Whatever its underlying impetus was, the notation

clearly places the payment in the context of a settlement of the

16
The Court expresses its doubts whether Customs possesses the
authority, given an ongoing 19 U.S.C. § 1592 enforcement
proceeding, to effectuate this unique liquidation transaction in
the first place. Because the Court finds that whatever the
parties’ intentions, such a transaction was not in fact
effectuated in this case, it need not decide the tougher
question of whether this sort of transaction would have been
ultra vires and invalid if successfully accomplished.
Court No. 99-00394 Page 21

negligence and fraud claim that Customs had already started

investigating under 19 U.S.C. § 1592.

Section 1592(d) requires Customs to recoup any deprived

duties, “whether or not a monetary penalty is assessed.” 19

U.S.C. § 1592(d) (1999). The ACS documentation relating to the

L.A. Entry is consistent with a routine liquidation of the

production engines, accompanied by an appended form documenting

the settlement of a 19 U.S.C. § 1592 claim. Even if the tender

is not construed as a settlement of the section 1592 claim, it

is pellucid that the L.A. Entry was not liquidated to include

the prototype engine costs. The documentation testifies to two

distinct and unrelated transactions. Therefore, the Court is

unable to find any evidence that the protested decision

materially affected the liquidation of the L.A. Entry, and the

protest period did not run from the date of liquidation under

subparagraph (A).

As such, any protest was untimely and invalid, and the

Court lacks jurisdiction under 28 U.S.C. § 1581(a). See Saab

Cars USA, 434 F.3d at 1365.

III. CONCLUSION

The Court finds that the L.A. Entry was not materially

affected by the protested “decision of the Customs Service,” 19

U.S.C. § 1514(a). Therefore, Ford is not entitled to have its

protest period run from the date of liquidation of the L.A.
Court No. 99-00394 Page 22

Entry as contemplated by subparagraph (A) of 19 U.S.C. §

1514(c)(3), and its protest was untimely under subparagraph (B).

Accordingly, there can be no valid protest under 19 U.S.C. §

1514 and subject matter jurisdiction does not lie under 28

U.S.C. § 1581(a). This case is dismissed for lack of subject

matter jurisdiction. The Court will issue an order in

accordance with this opinion.

/s/ Richard W. Goldberg
Richard W. Goldberg
Senior Judge

Dated: June 21, 2006
New York, New York