497 F.3d 1331 (Fed. Cir. 2007), 2006-1479, United States v. Ford Motor Co.

Docket Nº:2006-1479.
Citation:497 F.3d 1331
Party Name:UNITED STATES, Plaintiff-Appellant, v. FORD MOTOR COMPANY, Defendant-Appellee.
Case Date:August 17, 2007
Court:United States Courts of Appeals, Court of Appeals for the Federal Circuit
 
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497 F.3d 1331 (Fed. Cir. 2007)

UNITED STATES, Plaintiff-Appellant,

v.

FORD MOTOR COMPANY, Defendant-Appellee.

No. 2006-1479.

United States Court of Appeals, Federal Circuit.

August 17, 2007

Appealed from: United States Court of International Trade Senior Judge Nicholas Tsoucalas

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David A. Levitt, Trial Attorney, Commercial Litigation Branch, Civil Division, United States Department of Justice, of Washington, DC, argued for plaintiff-appellant.

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With him on the brief were Peter D. Keisler, Assistant Attorney General, and Patricia M. McCarthy, Assistant Director of counsel on the brief was Kathleen Bucholtz, Attorney, United States Customs and Border Protection, of Chicago, IL.

Charles J. Cooper, Cooper & Kirk PLLC, of Washington, DC, argued for defendant-appellee. With him on the brief were Vincent J. Colatriano and Nicole Jo Moss of counsel on the brief were Robert B. Silverman, David M. Murphy, and Frances P. Hadfield, Grunfeld, Desiderio, Lebowitz, Silverman & Klestadt, LLP, of New York, NY; and Paulsen K. Vandevert, Ford Motor Company, of Dearborn, MI.

Before SCHALL, Circuit Judge, ARCHER, Senior Circuit Judge, and GAJARSA, Circuit Judge.

GAJARSA, Circuit Judge.

This is a waiver and issue preclusion case. The issues before us are whether the government was required to accept Ford Motor Company's ("Ford") waiver of a statute of limitations defense in order for the waiver to take effect and whether the government is barred by issue preclusion from pursuing its claims for civil penalties pursuant to 19 U.S.C. § 1592 for Ford's alleged fraud. Because we find that the government's claims are not barred by the statute of limitations in 19 U.S.C. § 1621 or by our decision in Ford IV, we vacate the Court of International Trade's decision to dismiss Counts I, II, and III of the government's complaint. However, because the government was not deprived of any lawful duties by Ford's allegedly unlawful conduct as required by § 1592(d), we affirm the Court of International Trade's dismissal of Count IV of the government's complaint.

I. BACKGROUND

This appeal derives from a dispute involving import duties at Ford's Foreign Trade Subzone ("FTSZ") 1 in Louisville, Kentucky. The relevant facts are set forth in one of our previous opinions in this case, Ford Motor Co. v. United States, 286 F.3d 1335, 1336-39 (Fed.Cir.2002) ("Ford IV "). Ford's Louisville FTSZ operated for three months, between November of 1985 and February of 1986. During those three months, Ford received eleven entries of engines and transmissions from abroad. The engines and transmissions could be used interchangeably for cars and trucks. The merchandise was incorporated into finished cars and trucks at Ford's assembly plant located within the Louisville FTSZ, and the finished cars and trucks were subsequently withdrawn for entry into the United States.

In 1985 and 1986, the duty rate for foreign-made engines and transmissions was 3.3% ad valorem, the duty rate on finished imported cars was 2.6% ad valorem, and the duty rate on finished imported trucks was 25% ad valorem. By establishing its Louisville FTSZ, Ford intended to take advantage of the duty differential

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between the unassembled car and truck parts and the assembled cars and trucks. Under the duty rates in place when Ford entered its merchandise, the optimal strategy for Ford was to import engines and transmissions into its Louisville FTSZ and then separate the merchandise used for cars from the merchandise used for trucks. In order for Ford to receive the benefit of the duty rates applicable to its FTSZ, the regulations required Ford to file Customs Form 214 designating each part entering the Louisville FTSZ as either a car part or a truck part. After making the designations, Ford could then pay duties on truck parts as they entered the FTSZ at the duty rate of 3.3% ad valorem, thereby avoiding the 25% duty rate for assembled trucks. Ford could also defer paying duties on car parts until the assembled car emerged from the plant, at which time Ford could pay the duty rate for the assembled car of 2.6% ad valorem, applying that rate to the car parts. 2

However, when Ford filled out Customs Form 214, it incorrectly designated that each transmission and engine imported into the Louisville FTSZ was a part for an assembled car product. Consequently, for all eleven entries, Ford paid an estimated duty rate on the basis of the 2.6% ad valorem rate for car parts. Thus, to the extent that it meant to treat any of its entries as unassembled truck parts in order to receive the benefit of the 3.3% duty rate as opposed to the 25% duty rate, Ford failed to pay duties for any truck parts, as required by the regulations. See 19 C.F.R. § 146.22.

Ford reported its error to Customs. In July of 1986, Customs concluded that the proper duty rate on the truck parts received at Ford's FTSZ was the 25% ad valorem duty rate applicable to assembled trucks. As a result, Customs found that Ford owed approximately $5.3 million in additional duties. Customs also referred Ford's error to its fraud investigation office.

In August of 1986, pursuant to 19 U.S.C. § 1592, Customs initiated a civil fraud investigation, which continued until at least March of 1990. On the basis of its ongoing fraud investigation, Customs issued three one-year extensions of the statutory one-year liquidation deadline as permitted under 19 U.S.C. § 1504(b). Pursuant to 19 U.S.C. § 1504(a), an entry of merchandise that Customs does not liquidate within one year of the date of entry is deemed liquidated by operation of law at the rate of duty asserted by...

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