GOVERNMENT ABANDONS $42 MILLION
RECORDKEEPING PENALTY CASE

On December 17, 2007, the United States voluntarily dismissed its claims against Ford Motor Company for alleged violations of Customs & Border Protection (CBP’s) recordkeeping requirements.  United States v. Ford Motor Company, Case No. 06-cv-00013-DB (WDTX).  The Government had alleged that  Ford negligently violated 19 U.S.C. § 1509 in failing to produce records to support the NAFTA Certificates of Origin that had been issued  for 1996 importations of automotive parts from Mexico.

The case was initiated in the District Court in El Paso, Texas in January 2006. The government sought production and other records relating to the component parts used to manufacture the finished goods imported from Mexico under the NAFTA.  CBP claimed in the litigation that the records were “entry records” and that recordkeeping penalties could be assessed pursuant to 19 U.S.C. § 1509(a)(1)(A) and 19 C.F.R. Part 163 Appendix (the (a)(1) (A) list).  Ford had maintained that: (1) the summons was not a proper (a)(1)(A) demand; (2) the records were not (a)(1)(A) records so Section 1509(g) recordkeeping penalties could not be assessed; (3) Customs interpretation of its regulations conflicted with NAFTA and CBP’s NAFTA directives; and (4) Ford’s conduct was not negligent because it was based on advice of counsel.

On September 27, 2007, the Court denied Ford’s motion  to dismiss the complaint because it found that Ford could not demonstrate beyond a doubt that the Government could not prove a set of facts that would entitle it to relief.  In the course of its decision on the motion to dismiss, the court held that the requested documents were described on the (a)(1)(A) list as “supporting records” to the NAFTA COs that had been issued, and as such were(a)(1)(A) records despite contradictory information published by CBP.  Ford believed that this holding was incorrect, but because it was an interim holding, it could not be challenged until trial or appeal.

On the date that motions for summary judgment were to be filed that would have resolved the issues of law mentioned above, CBP dismissed the case with prejudice without any penalty assessment against Ford.  The Government has stated that its decision to abandon this case was based on a re-evaluation of its policy regarding NAFTA COs.  As a result of the dismissal, the Government forfeited its claims for any penalties in the matter.

GDLSK LLP has been counsel to Ford during the administrative penalty phase of this case, and has been part of the litigation team defending Ford in court.  While Customs has abandoned this NAFTA recordkeeping case against Ford, it is anticipated that other recordkeeping penalties may be pursued against importers, especially with respect to other special duty programs.  If you have any questions, or need additional information, please feel free to contact Robert B. Silverman (rsilverman@gdlsk.com) or David M. Murphy (dmurphy@gdlsk.com).