Ford Motor Co. v. United States

• Decision Date: 09 August 2017
• Docket Number: Slip Op. 17-102 Court No. 13-00291.
• Citation: 254 F.Supp.3d 1297
• Parties: FORD MOTOR CO., Plaintiff, v. UNITED STATES, Defendant.
• Court: U.S. Court of International Trade

254 F.Supp.3d 1297

FORD MOTOR CO., Plaintiff,

v.UNITED STATES, Defendant.

Slip Op. 17-102 Court No. 13-00291.

United States Court of International Trade.

August 9, 2017

Gordon D. Todd, Sidley Austin LLP, of Washington, DC, argued for plaintiff. With him on the brief were Richard M. Belanger and Mark D. Hopson.

Beverly A. Farrell, Trial Attorney, International Trade Field Office, Commercial Litigation Branch, Civil Division, U.S. Department of Justice, of New York, NY, argued for defendant. With her on the brief were Benjamin C. Mizer, Principal Deputy Assistant Attorney General, Amy M. Rubin, Assistant Director, and Jason M. Kenner, Trial Attorney.

OPINION AND ORDER

Barnett, Judge:

Before the court in this classification case are cross-motions for summary judgment. Confidential Pl.'s Mot. for Summ. J. and Confidential Mem. of P. & A. in Supp. of Pl.'s Mot. for Summ. J. ("Pl.'s MSJ"), ECF No. 96; Def.'s Mot. for Summ. J. and Def.'s Mem. of Law in Opp'n to Pl.'s Mot. for Summ. J. and in Supp. of Def.'s Cross–Mot. for Summ. J. ("Def.'s XMSJ"), ECF No. 91–1.¹ Plaintiff Ford Motor Company ("Plaintiff" or "Ford") contests the denial of protest number 1303–13–100060 challenging U.S. Customs and Border Protection's ("Customs" or "CBP") liquidation of the subject imports, Model Year ("MY") 2012 ("MY2012") Ford Transit Connect vehicles with vehicle identification numbers ("VINs") containing either a number 6 or 7 in the sixth digit (hereinafter "Transit Connect 6/7"), under subheading 8704.31.00 of the Harmonized Tariff Schedule of the United States ("HTSUS"), as "motor vehicles for the transport of goods." Compl. ¶¶ 7, 10–11, 25, ECF No. 6 (alteration omitted); Pl.'s MSJ at 3; Def.'s XMSJ at 5. There is only one entry at issue, Entry Number 300–8620018–3, which entered at the Port of Baltimore on December 26, 2011 and which Customs liquidated on May 3, 2013. Summons at 1, ECF No. 1.²

The court previously denied the pending motions due to the presence of genuine issues of material fact regarding the characteristics of the Transit Connect 6/7's cost-reduced rear seat. See Ford Motor Co. v. United States , 40 CIT ––––, 181 F.Supp.3d 1308 (2016). Thereafter, Parties filed a Joint Supplemental Rule 56.3 Statement of Undisputed Material Facts ("Joint Supplement"), see Confidential Joint Rule 56.3 Suppl. Statement of Undisputed Material Facts Filed in Conjunction with Pl.'s and Def.'s Mots. For Summ. J. ("Joint Suppl."), ECF No. 132,³ and asked the court to reconsider the Parties' cross-motions in light of the supplemental facts, see Docket Entry, ECF No. 138. Cf. USCIT Rule 54(b).⁴ The court agreed to reconsider its prior ruling based upon the additional facts and, upon that reconsideration, the court finds that Customs' ruling lacks persuasive force. In order to avoid any confusion as between the prior opinion and this opinion, and because this opinion restates any relevant portions of the prior opinion, the court vacates its prior opinion and order, grants Plaintiff's motion for summary judgment, and denies Defendant's cross-motion for summary judgment.

BACKGROUND

I. Overview

In the 1960s, the United States and Europe were involved in a "trade war." Def.'s XMSJ at 2 n.1 (citing Def.'s Ex. 5). Europe increased the duty on chicken imported from the United States, and the United States responded by placing a 25% tariff on trucks imported from Europe. Id. This retaliatory duty on trucks, colloquially referred to as the "chicken tax," was still in place when Ford began importing the subject merchandise into the United States from its factory in Turkey in 2009. Id. ; Confidential Def.'s Statement of Material Facts as to Which There Are No Genuine Issues to Be Tried ("Def.'s Facts") ¶ 13, ECF No. 92–7; Confidential Pl. Ford Motor Co.'s Resp. to Def.'s R. 56.3 Statement of Material Facts ("Pl.'s Resp. to Def.'s Facts") ¶ 13, ECF No. 97–12. By contrast, the duty on imports of passenger vehicles is 2.5%. HTSUS Heading 8703; see also Summons at 2.

As detailed below,⁵ Ford manufactures the Transit Connect 6/7s in Turkey and imports them into the United States. Although these vehicles are made to order and are ordered as cargo vans, Ford manufactures and imports them with a second row seat, declaring the vehicles as passenger vehicles subject to subheading 8703.23.00 and a 2.5% duty.⁶ After clearing customs but before leaving the port, Ford (via a subcontractor) removes the second row seat and makes other changes, delivering the vehicle as a cargo van. Defendant United States ("Defendant" or "United States") determined that the inclusion of the second row seat is an improper artifice or disguise masking the true nature of the vehicle at importation and that such vehicle is properly classified under subheading 8704.31.00 and subject to a 25% duty.⁷ Ford contends that this is legitimate tariff engineering.⁸

II. Procedural History

The sole entry at issue is Entry Number 300–8620018–3, which entered at the Port of Baltimore on December 26, 2011 and Customs liquidated pursuant to subheading 8704.31.00, with a 25% duty rate on May 3, 2013. Summons at 1. Ford timely and properly protested, claiming that the subject merchandise should have been liquidated pursuant to subheading 8703.23.00, with a duty rate of 2.5%, asserting that "CBP did not follow 19 U.S.C § 1315(d) or 1625 procedures in changing the classification." Id. at 2. CBP denied the protest on June 4, 2013, and, on August 19, 2013, Ford timely commenced this case. Id. at 1–2; see also HQ H220856 (Customs' explanatory ruling).

After several amendments to the scheduling order, Parties filed cross-motions for summary judgment and the court held oral argument on June 8, 2016. See Oral Argument, ECF No. 104. On October 5, 2016, the court denied the cross-motions. Ford , 181 F.Supp.3d at 1321–22. The court explained that Parties had provided insufficient information about the cost-reduced rear seat for the court to properly conduct the analysis required by the Court of Appeals for the Federal Circuit's ("Federal Circuit") decision in Marubeni Am. Corp. v. United States, 35 F.3d 530 (1994), which spoke to the distinction between passenger vehicles and cargo vehicles for the purpose of tariff classification. Ford , 181 F.Supp.3d at 1319, 1321. The court concluded that "[a]dditional information and evidence regarding [the cost-reduced car] seat [would] better enable [it] to determine whether the vehicle's intended purpose of transporting persons, as imported, outweighs an intended purpose of transporting goods." Ford , 181 F.Supp.3d at 1321 (citing Marubeni , 35 F.3d at 535 ). Thereafter, following a telephone conference, on October 13, 2016, the court ordered Parties to submit the Joint Supplement regarding the cost-reduced rear seat. Docket Entry, ECF No. 112.⁹ As noted above, submission of the Joint Supplement—and the additional undisputed material facts stated therein—has prompted the court to reconsider the Parties' cross-motions for summary judgment.¹⁰

III. Material Facts Not in Dispute

The court's rule regarding summary judgment requires the moving party to show that "there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." USCIT Rule 56(a). Movants should present material facts as short and concise statements, in numbered paragraphs and cite to "particular parts of materials in the record" as support. USCIT Rule 56(c)(1)(A). In responsive papers, the opponent "must include correspondingly numbered paragraphs responding to the numbered paragraphs in the statement of the movant." USCIT Rule 56.3(b).

Concurrent with briefing their respective summary judgment motions, Parties submitted separate facts, which contained mixtures of disputed and undisputed phrases or sentences within a numbered paragraph.¹¹ And, as previously noted, Parties submitted the Joint Supplement containing supplemental facts specific to the cost-reduced rear seat. Upon review of Parties' voluminous separate and joint facts and supporting documents, the court finds the following undisputed and material facts regarding the subject merchandise.¹²

A. History of the Subject Merchandise

The subject merchandise consists of Transit Connect 6/7s.¹³ Def.'s Facts ¶ 1; Pl.'s Resp. to Def.'s Facts ¶ 1. Ford derived the Transit Connect 6/7s from a line of vehicles designed and manufactured in Europe with the V227 designation. Pl.'s Facts ¶ 2; Def.'s Resp. to Pl.'s Facts ¶ 2. When considering whether to expand the European V227 line to the United States, "Ford researched the European ISV [integrated style vans]^[14] market for approximately six months, including researching who the competitors were and how big the market was" and explored targeting "both personal and commercial customers—such as cleaning services, florists, newspaper carriers, telephone repair, and food delivery." Pl.'s Facts ¶¶ 15–16; Def.'s Resp. to Pl.'s Facts ¶¶ 15–16. Plaintiff "identified owners of the Chevrolet Astro/Safari, a minivan used for both passengers and cargo but that was no longer in production, as possible customers for the Transit Connect." Pl.'s Facts ¶ 17; Def.'s Resp. to Pl.'s Facts ¶ 17.

Ford initially considered whether it would be feasible to manufacture the vehicles in the United States, but decided to import a vehicle built on the European V227 production line already in use at its Otosan plant in Kocaeli, Turkey, because it was more efficient to use an existing line and the vehicle could be brought to market sooner. Pl.'s Facts ¶ 19; Def.'s Resp. to Pl.'s Facts ¶ 19. "Every Transit Connect manufactured in Turkey was built on the same production line."¹⁵ Pl.'s Suppl. Facts ¶ 258; Def.'s Resp. to Pl.'s Suppl. Facts ¶ 258. Ford's plant in Otosan used the VIN as a plant inventory control number. Pl.'s Facts ¶ 35; Def.'s Resp. to Pl.'s Facts ¶ 35. Transit Connect 6/7s received a VIN "during the manufacturing process ... then going forward that's how the vehicle [was] managed. That [was] the...