Slip Op. 05-25
UNITED STATES COURT OF INTERNATIONAL TRADE
BEFORE: SENIOR JUDGE NICHOLAS TSOUCALAS
________________________________________
:
United States, :
:
Plaintiff, :
: Court No.
v. : 02-00116
:
Ford Motor Company, :
:
Defendant. :
________________________________________:
Plaintiff, the United States Bureau of Customs and Border
Protection of the Department of Homeland Security (“Customs”),
moves pursuant to USCIT R. 56 for summary judgment for
reconciliation, shortfall payment, prior disclosure and statute of
limitations defenses. Customs seeks payment of a civil penalty and
customs duties concerning entries of vehicles and vehicle
components between 1987 and 1992 made by Ford Motor Company
(“Ford”), defendant, in violation of 19 U.S.C. § 1592 (1988).
Customs also moves to dismiss Ford’s counterclaim. Ford opposes
Customs’ motion and cross-moves for partial summary judgment,
stating that Ford fulfilled its obligation under 19 U.S.C. §§ 1484
and 1485 (1988). Additionally, Ford seeks a refund of all or part
of the $8,575,961.80 in duties tendered in connection with this
matter, and lawful interest.
Held: Plaintiff’s motion for summary judgment and its
motion to dismiss the counterclaim is denied. Defendant’s cross-
motion for partial summary judgment is denied.
Peter D. Keisler, Assistant Attorney General, David M. Cohen,
Director, Patricia M. McCarthy, Assistant Director, Commercial
Litigation Branch, Civil Division, United States Department of
Justice (David A. Levitt and Michael Panzera); 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: February 18, 2005
Case No. 02-00116 Page 2
OPINION AND ORDER
TSOUCALAS, Senior Judge: Plaintiff, the United States Bureau
of Customs and Border Protection of the Department of Homeland
Security (“Customs”),1 moves pursuant to USCIT R. 56 for summary
judgment for reconciliation, shortfall payment, prior disclosure
and statute of limitations defenses. Customs seeks payment of a
civil penalty and customs duties concerning entries of vehicles and
vehicle components between 1987 and 1992 made by Ford Motor Company
(“Ford”), defendant, in violation of 19 U.S.C. § 1592 (1988).2
Customs also moves to dismiss Ford’s counterclaim. Ford opposes
Customs’ motion and cross-moves for partial summary judgment,
stating that Ford fulfilled its obligation under 19 U.S.C. §§ 1484
and 1485 (1988). Additionally, Ford seeks a refund of all or part
of the $8,575,961.80 in duties tendered in connection with this
matter, and lawful interest.
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 H.R. Doc. No. 108-32 (2003).
2
Customs asserts that it was deprived of $8,644,139.80 in
lawful duty, of which $68,178 remains unpaid. See Complaint at ¶
9. Customs seeks civil penalties in the amount of $34,576,559 if
Ford’s conduct is found grossly negligent and $17,288,279 if Ford’s
conduct is found negligent. See Complaint at ¶¶ 13-17.
Case No. 02-00116 Page 3
BACKGROUND
On October 28, 2004, Customs moved for summary judgement on
reconciliation, shortfall payment, prior disclosure and statute of
limitations defenses raised by Ford and also moved to dismiss
Ford’s counterclaim for failure to state a claim upon which relief
can be granted. See Mot. Summ. J. Reconciliation, Shortfall
Payment, Prior Disclosure, Statute Limitations Defenses Dismiss
Countercl. (“Customs’ Mot.”). Ford responded on December 15, 2004.
See Def.’s Resp. Pl.’s Mot. Summ. J. Prior Disclosure Statute
Limitations Defenses Dismiss Countercl. (“Ford’s Response”). On
October 28, 2004, Ford moved for partial summary judgment. See
Def.’s Mot. Partial Sum. J. (“Ford’s Mot.”). Customs filed its
response with this Court on December 16, 2004. See Resp. Customs’
Def.’s Mot. Partial Summ. J.. Customs and Ford submitted a
proposed joint pretrial order on January 5, 2005. See Pretrial
Order. The Court heard oral arguments on February 7, 2005.
JURISDICTION
The Court has jurisdiction over this matter pursuant to 28
U.S.C. §§ 1582, 1583, and 1585 (2000).
STANDARD OF REVIEW
On a motion for summary judgment, the Court must determine
whether there are any genuine issues of fact that are material to
Case No. 02-00116 Page 4
the resolution of the action. See Anderson v. Liberty Lobby, Inc.,
477 U.S. 242, 248 (1986). A factual dispute is genuine if it might
affect the outcome of the suit under the governing law. See id.
A genuine dispute for trial exists only if there is evidence from
which a reasonably jury could return a verdict for the non-moving
party. See id. Accordingly, the Court may not decide or try
factual issues upon a motion for summary judgment. See Phone-Mate,
Inc. v. United States, 12 CIT 575, 577, 690 F. Supp. 1048, 1050
(1988). When genuine issues of material fact are not in dispute,
summary judgment is appropriate if a moving party is entitled to
judgment as a matter of law. See USCIT R. 56; see also Celotex
Corp. v. Catrett, 477 U.S. 317, 322-23 (1986). The burden of
demonstrating an absence of genuine disputes as to material facts
is on the moving party. See Celotex, 477 U.S. at 323. Once that
burden is discharged, the nonmoving party has the burden of showing
specific facts in dispute. See id.
The Court may dismiss a counterclaim for failure to state a
claim only “where it appears beyond doubt that plaintiff can prove
no set of facts which will entitle him to relief.” Constant v.
Advanced Micro-Devices, Inc. 848 F.2d 1560, 1565 (Fed. Cir. 1998)
(citing Conley v. Gibson, 355 U.S. 41, 45-46 (1957)). Moreover,
the Court must accept all well-pleaded facts as true and view them
in the light most favorable to the non-moving party. See United
Case No. 02-00116 Page 5
States v. Islip, 22 CIT 852, 854, 18 F. Supp. 2d 1047, 1051 (1998)
(citing Gould, Inc. v. United States, 935 F. 2d 1271, 1274 (Fed.
Circ. 1991)). A plaintiff is only required to set out in detail
the facts upon which the claim is based so that the defendant has
“fair notice of what his claim is and the grounds upon which it
rests.” Conley 355 U.S. at 47.
DISCUSSION
I. Factual Background
Ford’s supply agreements with many of its foreign vendors
contained post-importation price adjustments, which typically
provided a per vehicle or component base price subject to possible
modifications. See Pretrial Order, Schedule C at ¶ 1. Ford
entered the merchandise subject to this action beginning January 1,
1987 and continuing through December 31, 1992.3 See Complaint at
¶ 5. On October 14, 1988, Ford proposed to Customs that it be
allowed to track all lump sum billings throughout each model year,
which runs from July 1 to June 30, and report dutiable expenses
associated with each import program in a reconciliation report.
See Pretrial Order, Schedule C at ¶ 5. Under Ford’s proposal, the
reconciliation report was to be “filed with the Detroit customs
3
The subject entries consisted of vehicles, vehicle
engines, and automotive parts/components entered through various
ports. See Complaint at ¶ 5.
Case No. 02-00116 Page 6
district within 60 days after the close of each model year (July
30).” Id. In a letter dated August 29, 1989, Customs approved the
proposal for the annual reporting of price adjustments and payment
of duty within 60 days of the close of each model year
(“Reconciliation Agreement”). See id. at ¶ 8. On May 23, 1991,
Customs informed Ford, in writing, that it was opening a formal
investigation of the company regarding the proper declaration of
assists and indirect payments on imports of vehicles and vehicle
components. See id. at ¶ 14.
On May 22, 1992, Ford submitted a letter to Customs, which it
claimed to be a prior disclosure, concerning certain
undervaluations of imported tooling assists for the period of 1987
through 1992. See id. at ¶ 24. Customs, however, did not accept
the letter as a prior disclosure. See id. On November 18, 1992,
Ford tendered $1,304,847.95 in duties and fees in connection with
undeclared tooling assist on merchandise imported between January
1, 1987 through May 22, 1992. See id. Furthermore, on August 6,
1992 Ford submitted a letter to Customs claiming to be a prior
disclosure relating to lump sum payments for merchandise imported
between 1987 and August 6, 1992. See id. at ¶ 39. Ford explained
that it undervalued these goods because their price had been
revised subsequent to importation and Ford had failed to identify
and report the changes to Customs. See id. On December 16, 1992,
Case No. 02-00116 Page 7
Ford tendered $848,262.34 as unpaid duty in relation to these
transactions and stated that it needed further time to analyze some
additional payments. See id. On January 29, 1993, Ford tendered
an additional $17,888.23 as duty for unreported lump sum payments
for merchandise imported between 1987 and 1992. See id.
On October 22, 1992, Ford indicated to Customs that it had
manufactured developmental engine parts for engines manufactured at
its Windsor (Canada) Essex Plant. See id. at ¶ 40. These parts
were provided free of charge to the plant and Ford had provided
$1,327,455 worth of such parts for the 1990, 1991, and 1992 model
year engines manufactured at the plant. See id. Accordingly, on
April 13, 1993, Ford tendered $15,920.95 in duty for these
undeclared assists. See id.
A. Capri Vehicles
On June 7, 1991, Ford and Customs had a meeting to discuss the
scope of Customs’ investigation targeting undeclared assists and
indirect payments. See Pretrial Order, Schedule C at ¶¶ 13, 15.
Customs served Ford with a summons for records relating to the
Mercury Capri (“Capri”) vehicle import program. See id. at ¶ 16.
The summons was for all records related to any and all assists and
payments made in connection with the design, development,
engineering, production, purchase, and importation of the Capri
vehicles. See id. On August 26, 1991, Ford tendered $155,708 of
Case No. 02-00116 Page 8
duty to Customs indicating that it had made supplemental lump sum
payments to Ford of Australia for the 1991 model year Capri. See
id. at ¶ 17. On September 5, 1991, Ford provided Customs with a
copy of the supply contract for the Capri, which indicated that
transfer prices would be adjusted every six months to reflect
increases or decreases in a market basket of similar vehicles. See
id. at ¶ 19. The documents submitted by Ford indicated that two
undeclared lump sum payments totaling $5,570,900 had been made for
1991 model year Capri vehicles entered in the Port of San
Francisco. See id.
B. Festiva Vehicles
On January 22, 1992, Customs issued a summons for information
regarding Festiva vehicles supplies by KM Corporation of Korea.
See Pretrial Order, Schedule C at ¶ 20. Ford submitted to Customs
copies of its supply agreements for the Festiva program including
the supply agreement between Ford and the Mazda Motor Corporation
(“Mazda”), entitled Passenger Vehicle Program Agreement, and dated
July 1, 1988.. See id. at ¶ 26. In this agreement, Ford agreed to
purchase 85,000 Festiva vehicles for the United States and Canadian
markets. See id. If Ford failed to purchase 85,000 vehicles, then
it was subject to a per vehicle price adjustment. See id. The
agreement between the two companies outlined various formulas
whereby the purchase price was to be further adjusted based on the
Case No. 02-00116 Page 9
number of vehicles Ford purchased for each model year to arrive at
the “Market Basket” purchase price. See id. On June 5, 1992, Ford
apprised Customs that there had been $11,408,470.92 of undeclared
engineering and tooling costs prior to the 1993 model year Festiva.
See id. at ¶ 25. Ford stated that it owed $309,169.56 in duties
and other fees and tendered the duty on April 29, 1993, after
Custom’s review. See id. On November 13, 1992, Ford tendered
$362,013 as the duty and fees for an alleged “production shortfall”
in connection with the Festiva program. See id. at ¶ 27. On
November 18, 1992, Ford tendered $1,091,578 as the duty owed for a
supplemental lump sum payment of $43,663,125 for Festiva vehicles
entered between April 1, 1991 and July 31, 1992. See id. at ¶ 28.
C. Yamaha SHO Engines
Customs issues a summons on January 22, 1992, for all
documents and records related to any and all assists given and
payments made by Ford in connection with the Yamaha SHO engine
program. See Pretrial Order, Schedule C at ¶ 29. On June 5, 1992,
in response to the summons, Ford disclosed that it had failed to
declare $282,112 of merchandise value for the 3.0 liter SHO
engines. See id. at ¶ 30. After Customs reviewed the information
Ford provided, Ford tendered $9,623.16 for the duty owed on the 3.0
liter SHO engines. See id. In addition, Ford provided Customs
with a copy of its supply agreement, indicating that the base price
Case No. 02-00116 Page 10
for the SHO engines could be adjusted. See id. at ¶ 31. On June
5, 1992, Ford responded that there were $14,779,026 in prototype
and development costs for the 3.2 liter SHO engines for the 1993
model year, which would be declared 60 days after the end of the
1992 model year, July 30, 1992. See id. at ¶ 32.
On November 13, 1992, Ford identified further post-entry
payments for the 3.0 liter SHO engines and tendered $59,707 for the
duty. See id. at ¶ 34. On November 18, 1992, Ford tendered
$404,100 for duty associated with lump sum payments of $14,274,097
for design and development costs for the 3.2 liter SHO engines made
during 1991 and 1992. See id. at ¶ 35. Ford also indicated that
at the end of the 1993 model year it would reconcile actual usage
and tender additional money owed or request a refund based on
actual occurrences during the 1993 model year. See id. In a
meeting with Customs Import Specialist Spiro Karras on December 18,
1992, Ford admitted that it had not declared development costs
apportioned to Yamaha prototype 3.2 liter SHO engines that were to
be retained in Japan rather than shipped to the United States. See
id. at ¶ 36. Ford sought advice from Customs’ Office of
Regulations and Rulings and was advised that the development costs
should be apportioned over the imported production engines. See
Case No. 02-00116 Page 11
id. Ford did not tender $68,178 of alleged duty owed on the
undeclared development costs for 3.2 liter SHO engines. See id. at
¶ 37.
D. Engines From Germany and Transmissions from France
On March 23, 1992, Ford advised Customs that lump sum payments
totaling $21,401,808 and $32,130,256 had been made to Ford of
Germany for 1991 model year 2.9 liter and 4.0 liter V-6 engines,
respectively. See id. at ¶ 21-22. Ford tendered $726,591 and
$1,047,074, respectively, for duty on these payments. See id. On
May 6, 1993, Ford disclosed it had made lump sum payments to Ford
of Germany totaling $4,783,094 for 1991 model year V-6 engines.
See id. at ¶ 42. Therefore, Ford tendered $162,625 for the duty.
See id. Ford also 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 $25,728,951. See id. at ¶ 43. Ford
tendered $695,874 in unpaid duty in connection with these payments.
See id.
Ford also disclosed, on March 23, 1992, that lump sum payments
in the amount of $10,875,431 had been made to Ford of France for
1991 model year A4LD Bordeaux transmissions. See id. at ¶ 23.
Accordingly, Ford tendered $339,379 for duty in connection with
these payments. See id. On May 6, 1993, Ford disclosed that it
had made lump sum payments to Ford of France in the amount of
Case No. 02-00116 Page 12
$16,359,794 for 1992 model year A4LD Bordeaux and tendered $458,893
for the unpaid duty. See id. at ¶ 44.
II. Statutory Background
Customs is directed to appraise imported merchandise based on
the transaction value. See 19 U.S.C. § 1401a(a)(1)(A) (1988). The
statute defines transaction value as “the price actually paid or
payable for the merchandise when sold for exportation to the United
States, plus amounts equal to . . . the value, apportioned as
appropriate, of any assists . . . .” 19 U.S.C. § 1401a(b)(1).
Under 19 U.S.C. § 1481(a), all invoices for imported merchandise
are required to set forth, among other things, “[t]he purchase
price of each item in the currency of the purchase, if the
merchandise is shipped in pursuance of a purchase or an agreement
to purchase.” 19 U.S.C. § 1481(a)(5) (1988). The statute also
states that the invoices must contain “[a]ny other facts deemed
necessary to a proper appraisement, examination, and classification
of the merchandise that [Customs] may require. ” 19 U.S.C. §
1481(a)(10).
Pursuant to 19 U.S.C. § 1484(a)(1)(B), an importer is
obligated to file, at the time of entry, such “other documentation
as is necessary to enable [Customs] to assess properly the duties
on the merchandise . . . .” Id. Furthermore, an importer must
Case No. 02-00116 Page 13
sign the entry form and “set forth such facts in regard to the
importation as [Customs] may require for the purpose of assessing
duties . . . .” 19 U.S.C. § 1484(d). An importer making an entry
under the provisions of 19 U.S.C. § 1484 must file a declaration
under oath stating that “the prices set forth in the invoice are
true, in the case of merchandise purchased or agreed to be
purchased . . . [and that] all other statements in the invoice or
other documents filed with the entry, or in the entry itself, are
true and correct . . . .” 19 U.S.C. § 1485(a)(2) & (3). The
importer also must declare “[t]hat he will produce at once to the
appropriate customs officer any invoice, paper, letter, document,
or information received showing that any such prices or statements
are not true or correct.” 19 U.S.C. § 1485(a)(4).
Under 19 U.S.C. § 1952, “no person, by fraud, gross
negligence, or negligence–(A) may enter, introduce, or attempt to
enter or introduce any merchandise into the commerce of the United
States by means of– (i) any document, written or oral statement, or
act which is material and false, or (ii) an omission which is
material . . . .” 19 U.S.C. § 1592(a). If an importer discloses
facts and circumstance relating to a violation, then the maximum
penalty is significantly reduced. See 19 U.S.C. § 1592(c)(4).
Such disclosure, however, must come prior to the commencement of an
investigation by Customs relating to a violation, or with a lack of
Case No. 02-00116 Page 14
knowledge of the commencement of such investigation. See id. If
the alleged violator asserts a lack of knowledge of the
commencement of a formal investigation, then such person bears the
burden of proving such lack of knowledge. See id. A formal
investigation is considered to be commenced on the earliest of the
following: (1) the date recorded in writing in the investigatory
record; (2) the date an investigating agent identified himself and
the nature of his inquiry, in writing or in person; or (3) the date
an investigating agent, after identifying himself and the nature of
his inquiry, requested specific books and records. See 19 CFR §
162.74(d)(4) (1988).
III. Further Findings of Fact are Required to Determine if Ford
Complied with the Reconciliation Agreement
A. Contention of the Parties
1. Customs’ Contentions
Customs contends that Ford violated 19 U.S.C. § 1592 by making
false statements or omissions in connection with the entry into the
United States of the merchandise at issue. See Customs’ Mot. at
17. Specifically, Customs argues that Ford provided false prices
in connection with the entries and that Ford failed to immediately
advise Customs of additional payments made for the imported
merchandise or of changes to the price information previously
provided to Customs. See id. Ford was required to provide true
Case No. 02-00116 Page 15
and correct information in its invoices remitted at the time of
entry. See id. at 18 (citing 19 U.S.C. §§ 1481, 1484, & 1485).
Furthermore, Customs asserts that, under the Reconciliation
Agreement, Ford was required to file an annual reconciliation
report for each import “with the Detroit Customs District within 60
days after the close of each model year (July 30) . . . .” Id.
(emphasis in original). Customs alleges that Ford did not comply
with the Reconciliation Agreement because it failed to file the
reports and tender duties within 60 days of the close of the model
year. See id. at 20.
Additionally, Customs argues that the Reconciliation Agreement
did not relieve Ford of its liability under 19 U.S.C. § 1592. See
Customs’ Mot. at 20. Customs alleges that Ford falsely represented
in its entry documents that the prices were true and accurate
although it knew those prices were not final. See id. at 20-21.
Customs maintains that the Reconciliation Agreement “did not allow
[Ford] to misrepresent the facts at the time of entry, nor does
subsequently tendering duties serve to negate a prior violation.”
Id. at 21.
2. Ford’s Contentions
Ford responds that it complied with the Reconciliation
Agreement and all applicable reporting requirements. See Ford’s
Resp. at 19-26; see also Ford’s Mot. at 9-18. Ford maintains that
Case No. 02-00116 Page 16
there is no statute, regulation or Customs’ directive which sets
requirements for merchandise entered with provisional prices. See
Ford’s Mot. at 9. Ford argues that “[t]he mere fact that a price
may change after entry or that additional payments are made to the
vendor at a later date does not mean that the entry was incorrect
when it was filed.” Ford’s Resp. at 17. Ford also argues that its
tenders were not late under the Reconciliation Agreement because
the 60-day filing time frame was a “target date” and not a final
deadline. See id. at 8 & 21. Ford maintains that Customs’
acceptance of Fords submissions for years “led Ford to believe that
it was acceptable to file voluntary submissions after 60 days under
the [Reconciliation Agreement] and the law.” Id. at 25. Ford
further argues that Customs misinterprets the “at once” standard,
set forth in 19 U.S.C. § 1485, because Ford was only required to
place Customs on notice that the values of previously entered goods
were incorrect. See id. at 22. Ford maintains that the
Reconciliation Agreement put Customs on notice that it would
regularly report post-entry price adjustments and lump sum payments
to Customs. See id. at 23.
B. Analysis
Pursuant to USCIT R. 56, summary judgment is only appropriate
if the Court determines that there is no genuine issue as to any
material fact and that the moving party is entitled to judgment as
Case No. 02-00116 Page 17
a matter of law. See Anderson, 477 U.S. at 248-50; see also
Precision, 24 CIT at 1023, 116 F. Supp. 2d at 1359. In the case at
bar, summary judgment is not appropriate as to whether Ford
complied with the Reconciliation Agreement or violated 19 U.S.C. §§
1481, 1484 and 1485. The Reconciliation Agreement is a central
component to Customs’ contention that Ford violated the statutes,
and that civil penalties are therefore warranted. Customs alleges
that Ford failed to comply with the Reconciliation Agreement and
that, with the exception of one of the twenty-one duty tenders in
issue, Ford failed to file the reconciliation reports and tender
duties within the 60 days of the close of the model year.4
See Ford’s Mot. at 20. Ford responds that it fully complied with
the Reconciliation Agreement and that its tenders were not late.
See Ford’s Resp. at 21. Ford maintains that the 60-day filing time
frame was a “target date” for Ford’s filings and not a final
deadline. See id. at 8 & 21. The Court concludes that whether
Ford’s tenders were timely under the Reconciliation Agreement are
issues of material fact that remain in dispute.
4
Customs points to the tenders made by Ford for various
entries on March 23, 1992, November 13 and 18, 1992, December 16,
1992, January 29, 1993, March 25, 1993, April 29, 1993, May 6,
1993, August 9, 1993, September 2, 1993, December 1, 1993, as being
delinquent pursuant to the Reconciliation Agreement. See Customs’
Mot. at 19.
Case No. 02-00116 Page 18
Moreover, whether Ford fulfilled the “at once” requirement of
19 U.S.C. § 1485 is also an issue of material fact that remains in
dispute. Customs alleges that Ford falsely represented that the
prices submitted at the time of importation were true and accurate
because Ford knew those prices were not final. See Customs’ Mot.
at 20-21. Ford responds that the “at once” standard only required
Ford to provide Customs with notice that the values of previously
entered goods were incorrect. See Ford’s Resp. at 22. Ford argues
that the Reconciliation Agreement placed Customs on notice that it
would regularly report post-entry price adjustments and lump sum
payments to Customs. See id. at 23. The Court finds that the
terms of the Reconciliation Agreement, and whether it altered the
“at once” requirement, are issues of material fact in dispute.
Accordingly, this issue cannot be disposed of on a motion for
summary judgment. See Anderson, 477 U.S. at 248-50; see also
Precision, 24 CIT at 1023, 116 F. Supp. 2d at 1359. Custom’s
motion and Ford’s cross-motion are, therefore, denied with respect
to whether Ford satisfied the requirements of 19 U.S.C. §§ 1481,
1484 and 1485.
IV. Further Findings of Fact are Required to Determine Whether
Ford’s Submissions Constitute Prior Disclosures
The Court finds that issues of material fact are in dispute
with respect to whether Ford’s submissions qualify for prior
Case No. 02-00116 Page 19
disclosure treatment. Customs argues that certain tenders made by
Ford cannot be prior disclosures because they were not made before,
or without knowledge of, the commencement of the underlying
investigation. See Customs’ Mot. at 21-25. Here, Customs argues
that pursuant to 19 C.F.R. § 162.74(d)(4) and (f), Ford had
knowledge, by May 20, 1991 or May 23, 1991, that a formal
investigation by Customs was underway. See id. at 22. Customs
maintains that “the documentary evidence establishes that Ford was
aware that the investigation encompassed all undeclared payments
and was not limited in any way.” Id. at 24. Accordingly, Customs
contends that all submissions concerning undeclared costs made
after May 1991 are not entitled to prior disclosure treatment.
Ford contests Customs’ assertion that the formal investigation
began in May 1991 and that Ford’s submissions are not prior
disclosures. See Ford’s Resp. at 26-28; see also Ford’s Mot. at
19-26 . Ford argues that the formal investigation that began in
May 1991 was limited to assists and indirect payments. See Ford’s
Mot. at 19-23. Ford notes that a letter sent by Customs, dated May
23, 1991, indicates that the investigation was for Ford’s failure
to declare assists and indirect payments in its importation of
vehicles and vehicle component assemblies. See Ford’s Resp. at 26;
see also Ford’s Mot. at 20. Therefore, Ford was not precluded from
filing prior disclosures unrelated to that investigation. See
Case No. 02-00116 Page 20
Ford’s Resp. at 26. Moreover, Ford contends that, at a meeting
held on June 7, 1991, it was notified that the investigation was
only for assists and indirect payments. See Ford’s Resp. at 27.
Accordingly, Ford contends that its direct payments to its vendors
after May 1991 qualify for prior disclosures treatment because they
fall outside the scope of the investigation of assists and indirect
payments. See id. at 28.
The date, if any, on which Customs commenced its formal
investigation of Ford’s payments to its vendors remains in dispute.
Moreover, the scope of Customs’ investigation and whether it merely
covered assists and indirect payments or also included Ford’s
payments to its vendors in connection with the subject entries
remains an issue of material fact in dispute. If Ford is correct
that the formal investigation did not begin in May 1991, the Court
must determine when, if ever, a formal investigation concerning the
payments at issue began. Summary judgment is only appropriate when
issues of material fact are not in dispute. See Anderson, 477 U.S.
at 248-50; see also Precision, 24 CIT at 1023, 116 F. Supp. 2d at
1359. Accordingly, the Court denies Customs motion and Ford’s
cross-motion for summary judgment with respect to whether Ford’s
submission qualify for prior disclosure treatment.
Case No. 02-00116 Page 21
V. Further Findings of Fact are Required to Determine Whether
Ford’s Post-Importation Payments to Mazda are Dutiable
Summary judgment is not appropriate on the issue of whether
certain payments by Ford for the 1990, 1991, and 1992 model year
Festiva vehicles were shortfall payments and therefore not
dutiable. The nature of Ford’s agreement with Mazda and whether
the payments Ford made constitute a contractual penalty or an
adjustment in the purchase price requires further findings of fact.
Customs argues that the alleged shortfall payments are not the type
of payments which were found not dutiable in Chrysler Corp. v.
United States, 17 CIT 1049 (1993). See Customs’ Mot. at 27. The
shortfall payments in Chrysler “were found to be non-dutiable based
upon specific contractual provisions that addressed the buyer’s
failure to purchase merchandise . . . .” Id. at 29. Here, Customs
contends that all of the agreements between Ford and Mazda were
based on Ford’s actions to purchase merchandise. See id. Customs
argues that the agreements merely adjust the price of the vehicles
Ford actually purchased and do not penalize Ford for its failure to
meet a specific volume commitment. See id. Customs asserts that
“[a]t most, the agreements only provide for cancellation costs, and
those costs may not even apply to Ford,” because either party may
elect to terminate the agreement. Id. at 29-30.
Ford maintains that the amount paid to Mazda was a contractual
penalty for vehicles Ford failed to purchase from Mazda.
Case No. 02-00116 Page 22
See Ford’s Resp. at 31. Ford contends that the payments at issue
are related the “Annual Volume Commitment” provision of Ford’s
contract with Mazda. See id. at 28-33. The terms of the agreement
demonstrate that the volume adjustment is distinguishable in form
and substance from any other adjustments contained in its agreement
with Mazda. See id. at 29. The volume adjustments called for
under the agreement, according to Ford, are essentially the same to
the facts of Chrysler, where the court found “that shortfall
payments were in the nature of a contract penalty and not part of
the price paid or payable for the merchandise.” Id. The sole
difference between Chrysler and this case, Ford argues, is the
method for calculating the amount of the shortfall payment. See
id. at 30. Furthermore, the amount paid to Mazda did not effect
the price of vehicles actually imported even though the amount was
based on the “initial purchase price” set forth in the agreement.
See id. at 30-31.
Without further findings of fact, the Court cannot determine
the nature of Ford’s agreement with Mazda and in turn whether such
payments are dutiable. Accordingly, the Court denies Customs’
motion for summary judgment on the payments Ford made to Mazda.
Case No. 02-00116 Page 23
VI. Further findings of Fact are Required to Determine Whether
Ford Waived its Statute of Limitations Defense
Whether Ford has waived its statute of limitations defense is
not ripe for summary judgment because issues of material fact
remain in dispute. Customs argues that Ford executed a waiver of
this defense on March 6, 2001. See Customs’ Mot. at 31. Such
waiver, according to Customs, was the last in a series of waivers
dating back to the early 1990s. See id. Ford argues that the
waiver related only to retroactive payments made to Yamaha for SHO
engines imported between August 1, 1988, to date and did not
include payments outside the scope of District Penalty Case 93-
3801-21524-339. See Ford’s Resp. at 44. Ford also argues that the
waiver “does not explicitly include the claim for $68,178 in
additional duties due on prototype engines . . . .” Id. The
content of Ford’s executed waiver and whether Ford in fact waived
its statute of limitations defense remains in dispute.
Accordingly, Customs’ motion for summary judgment is denied.
VII. Ford’s Counterclaim for a Refund of Overpayments is Proper
Customs moves to dismiss Ford’s counterclaim to refund duties
it tendered to Customs. See Customs’ Mot. at 31-38. Customs
argues that Ford has failed to identify any statute or regulatory
basis for obtaining a refund. See id. at 31. Under USCIT R. 13
and 8(a), however, Ford is not required to identify such a basis
Case No. 02-00116 Page 24
for its counterclaim. Ford may bring as a counterclaim “any claim
which at the time of serving the pleading the pleader has against
any opposing party, if (1) the claim involves the imported
merchandise that is the subject matter of the civil action . . . .”
USCIT R. 13(a). Furthermore, such counterclaim “may or may not
diminish or defeat the recovery sought by the opposing party.”
USCIT R. 13(b). Under USCIT R. 8(a), Ford’s counterclaim must
contain “(1) a short and plain statement of the grounds upon which
the court’s jurisdiction depends . . . (2) a short and plain
statement of the claim showing that the pleader is entitled to
relief, and (3) a demand for judgment for the relief the pleader
seeks.” USCIT R. 8(a). The Court finds that Ford’s pleading meets
the requirements of this court’s rules and includes sufficient
facts to support its claim. Therefore, the Court denies Customs’
motion to dismiss Ford’s counterclaim.
CONCLUSION
The Court finds that further findings of fact are required
with respect to: (1) whether Ford complied with the Reconciliation
Agreement or violated 19 U.S.C. §§ 1481, 1484, and 1485; (2)
whether Ford’s submissions qualify for prior disclosure treatment;
(3) whether Ford’s post-importation payments to Mazda constitute a
penalty or price adjustment; and (4) whether Ford waived its
statute of limitations defense with respect to prototype Yamaha SHO
Case No. 02-00116 Page 25
engines. The Court finds that Ford satisfied the court’s rules
with respect to its counterclaim for a refund of tendered duties.
For the foregoing reasons, the Court denies Customs’ motions
for summary judgment and to dismiss Ford’s counterclaim and denies
Ford’s motion for partial summary judgment. Accordingly, parties
are hereby ordered to proceed with litigation on the merits.
/s/ Nicholas Tsoucalas
NICHOLAS TSOUCALAS
SENIOR JUDGE
Dated: February 18, 2005
New York, New York