A REVIEW OF CASES DECIDED UNDER 28 U.S.C. § 1582

Georgetown Journal of International Law, Fall 2006 by Outman, William D II

I. INTRODUCTION

During 2005, both the U.S. Court of International Trade ("CIT") and the U.S. Court of Appeals for the Federal Circuit ("CAFC") had occasion to consider issues arising under the CIT's exclusive jurisdiction over customs duties recovery by the United States under authority provided in 28 U.S.C. § 1582 ("§ 1582").1 This commentary reviews the decisions handed down by the CIT during its 2005 term on this issue, as well as the one appeal heard by the CAFC.

The theme of the CIT's § 1582 docket may very well be "timing is everything." Although the Court has the authority to set penalty amounts and to approve or reject Customs and Border Protection's ("Customs") calculations for unpaid duties, the Court's decisions in 2005 often focused on timeliness in filing suit, the chronology of prior disclosures, statutes of limitation, and ripeness. Only one case seemed to afford the CIT with the opportunity to develop new law in the § 1582 area, and even that case was a mere extension of agency principles to liability for customs violations.2 Thus the docket in 2005 did not pose inordinate or unusual challenges to the CIT in its exclusive jurisdiction over customs duties recovery and civil penalties, but rather reiterated the importance of meeting technical requirements in this area of law.

II. THE FORD CASES

The most prominent series of cases under the CIT's § 1582 jurisdiction in 2005 were two separate but similar cases against the Ford Motor Company ("Ford"), both before Judge Nicholas Tsoucalas, regarding the collection of a civil penalty and customs duties on importation of various automotive components between 1987 and 1992. In the first Ford case heard by the CIT in 2005, United States v. Ford Motor Co. (hereinafter Ford I),3 Ford was fined $3 million after being found grossly negligent when it did not provide accurate valuations to Customs upon entry of automotive dies into the United States, and when it failed to make valid prior disclosure of these violations. Even though Ford disclosed its violations, the company's penalties could not be mitigated because Customs had already commenced an investigation.4 The CIT cited the lack of internal communication at Ford regarding informal policies as partly to blame for Ford's troubles in this case.5

In the companion case, also named United States v. Ford Motor Co. (hereinafter Ford II),6 lack of communication was also at issue despite the existence of an internal compliance program in place at the time of the violations. Judge Tsoucalas found that Ford's failure to adhere to its own program was reckless, and that the company did not exercise reasonable care when it failed to declare more than $350 million of manufacturing equipment over the course of five years.7 Once again, Ford attempted to mitigate the potential penalties by claiming its disclosures about violations were prior disclosures, but the Court again noted these disclosures came after Customs had initiated an investigation.8 Although the CIT denied Customs' request that Ford pay unpaid duties, this second case illuminates the compliance issues importers face even after taking steps to enhance compliance with Customs regulations, and the strict chronological requirements of filing prior disclosures.

A. Ford I

The facts of Ford I involved automobile dies imported by the defendant between February and March in 1989. In this case, the Court issued twenty-four independent findings of fact relevant to the FN-36 program at issue, twenty-seven findings of fact related to Customs' investigation of Ford, ten findings related to Ford's provisional value policy and internal procedures, and nine findings of fact related to Customs Forms 28 ("CF-28s") and Ford's responses to those forms.

Customs alleged that Ford was negligent9 when, having failed to identify the declared prices of the imports as provisional because of known engineering changes which would increase their value, it certified the declared prices as accurate. The Court noted that despite an informal procedure of advising Customs of the fact that certain prices were provisional, the details about this policy were not clearly communicated within the company.10 Judge Tsoucalas held that this failure to notify Customs about engineering changes likely to cause a price change was a violation of 19 U.S.C. § 1484 because this was a material omission and breach of Ford's duty to present "true and correct" information at the time of entry.11 Ford's defense was that the equipment at issue was entered at the value known at the time of entry and, thus, the company did not violate any customs law. However, the Court held that "Ford knew or should have known at the time of importation that the value of the . . . dies was not solely the base tool order and amendments."12 Finally, because Ford did not notify Customs "at once" of the final prices, the company was found to have violated its duty under 19 U.S.C. § 1485.13

Related to this, the Court placed great emphasis on Ford's failure to answer fully the Requests for Information set fordi on the numerous CF-28s that had been furnished. The Court noted: