Ford Motor Co. v. United States , 181 F. Supp. 3d 1308 ( 2016 )

Slip Op.16-92
UNITED STATES COURT OF INTERNATIONAL TRADE
FORD MOTOR COMPANY,
Plaintiff,
Before: Mark A. Barnett, Judge
v.
Court No. 13-00291
UNITED STATES,
Defendant.
OPINION AND ORDER
[Plaintiff’s Motion for Summary Judgment is denied. Defendant’s Cross-Motion for
Summary Judgment is denied.]
Dated:October 5, 2016
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.
Barnett, Judge: Before the Court 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”)
1The ECF numbers for the briefs are not in sequential order because amended and
corrected versions were filed.
Court No. 13-00291 Page 2
contests the denial of protest number 1303-13-100060 challenging U.S. Customs and
Border Protection’s (“Customs”) liquidation of the subject imports, Model Year (“MY”)
2012 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"), 2
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); 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.
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 twenty-five percent
tariff on trucks imported from Europe. Id. This retaliatory duty on trucks, colloquially
2 Plaintiff contends that “[t]he MY2012 vehicles in the subject entry are similar in all
material respects to MY2010-MY2013 Transit Connects, all of which [U.S. Bureau of
Customs and Border Protection] has liquidated consistent with the decision challenged
in this case.” Pl.’s MSJ at 3 n.1. The case before the Court, however, is limited to
MY2012 Transit Connect 6/7s and the Court will confine its ruling to the vehicles in the
covered entry. Digidesign, Inc. v. United States, 39 CIT __, __, 44 F. Supp. 3d 1366,
1371 (2015) (“the identification of specific entries in a plaintiff’s complaint in part defines
of the boundaries of the court’s subject-matter jurisdiction in a given action”); Am. Fiber
& Finishing, Inc. v. United States, 39 CIT __, __, 121 F. Supp.3d 1273, 1287 n.47
(2015) (the court lacks jurisdiction when the entry is neither listed on the summons nor a
part of the underlying protest).
Court No. 13-00291 Page 3
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 percent. HTSUS
Heading 8703; see also Summons at 2.
As detailed below, 3 Ford manufactures the Transit Connect 6/7s in Turkey and
imports them into the United States. While 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 HTSUS 8703.23.00 and a 2.5
percent duty. 4 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,” “Customs,” or “CBP”)
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
3 See infra Section III.B.
4 Tariff provision 8703.23.00, HTSUS, covers:
8703 Motor cars and other motor vehicles principally designed for the transport of
persons (other than those of heading 8702), including station wagons and racing
cars:
Other vehicles, with spark-ignition internal combustion reciprocating piston
engine:
8703.23.00 Of a cylinder capacity exceeding 1,500 cc but not exceeding
3,000 cc . . . 2.5%
Court No. 13-00291 Page 4
classified as 8704.31.00 and subject to a twenty-five percent duty. 5 Ford contends that
this is legitimate tariff engineering. See Pl.’s MSJ at 21.
II. PROCEDURAL HISTORY
The sole entry at issue is Entry Number 300-86200183 which entered at the Port
of Baltimore on December 26, 2011 and Customs liquidated under tariff classification
8704.31.00.20, HTSUS, with a twenty-five percent duty rate on May 3, 2013. Summons
at 1. Ford timely and properly protested and claimed that the subject merchandise
should have been liquidated under tariff classification 8703.23.00.52, HTSUS, with a
duty rate of 2.5 percent, asserting that “CBP did not follow 19 U.S.C § 1315(d) or 1625
procedures in changing the classification.” Id. at 2. Ford timely commenced this case.
Id. Parties filed cross-motions for summary judgment and the Court held oral argument
in this case on June 8, 2016. See Oral Argument, ECF No. 104.
III. MATERIAL FACTS NOT IN DISPUTE 6
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
5 Tariff provision 8704.31.00, HTSUS, covers:
8704 Motor vehicles for the transport of goods:
Other, with spark-ignition internal combustion piston engine:
8704.31.00 G.V.W. not exceeding 5 metric tons . . . 25%
6 As discussed herein, in the statements of undisputed facts and responses thereto,
Parties sometimes objected to portions of a statement or the manner in which certain
facts were characterized. The Court attempted to distill the undisputed facts from these
various filings and released a draft of this section of the opinion to Parties on July 20,
2016 (ECF 105). Parties were invited to identify any of these facts that were, indeed,
disputed and to point to admissible evidence before the Court supporting such claim.
Both Parties provided limited comments (ECF Nos. 106 and 107) and the Court has
modified this section accordingly.
Court No. 13-00291 Page 5
judgment as a matter of law.” USCIT R. 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 R. 56(c)(1)(A). Parties submitted
separate facts, which contained mixtures of disputed and undisputed phrases or
sentences within a numbered paragraph. Upon review of Parties’ voluminous facts, the
Court finds the following undisputed and material facts. 7
A. Facts Regarding Jurisdiction
As noted above, CBP liquidated Entry Number 300-8620018-3 under tariff
classification 8704.31.00, HTSUS, with a twenty-five percent duty rate on May 3, 2013.
Summons at 1; Compl. ¶¶ 4, 6-7; Answer ¶¶ 4, 6-7, ECF No. 19; Def.’s Facts ¶ 8; Pl.’s
7 The Court reviewed each party’s submissions of facts, supplemental facts, and the
responses thereto, line by line, to distill which facts were undisputed by parties. See
generally Confidential Pl. Ford Motor Co.’s R. 56.3 Statement of Undisputed Material
Facts Filed in Conjunction with Pl.’s Mot. for Summ. J. (“Pl.’s Facts”), ECF No. 96-1;
Confidential Def.’s Resp. to Pl. Ford Motor Co.’s R. 56.3 Statement of Material Facts
(“Def.’s Resp. to Pl.’s Facts”), ECF No. 92-6; Def.’s Facts; “Pl.’s Resp. to Def.’s Facts;
Confidential Pl.’s Resp. to Def.’s Facts; Pl. Ford Motor Co.’s Supplemental R. 56.3
Statement of Undisputed Material Facts (“Pl.’s Suppl. Facts”), ECF No. 97-1;
Confidential Def.’s Resp. to Pl. Ford Motor Co.’s Supplemental R. 56.3 Statement of
Material Facts (“Def.’s Resp. to Pl.’s Suppl. Facts”), ECF No. 94-1. In its supplemental
fact submission, Plaintiff lists three groupings of facts: 21 paragraphs of clarifications of
its original facts; 16 paragraphs of replies to Defendant’s responses to Plaintiff’s facts;
and 11 paragraphs of additional new facts. See generally Pl.’s Suppl. Facts. Defendant
requests that the Court deny Plaintiff’s “attempts to reply to the responses [Defendant]
provided, pursuant to USCIT Rule 56.3(b)” because “nothing in USCIT Rule 56.3
permits such ‘replies.’” Def.’s Resp. to Pl.’s Suppl. Facts at 21-22. The Court notes that
replies to responses to facts are not contemplated in USCIT Rule 56.3 and, therefore,
the Court disregards Plaintiff’s 16 paragraphs of replies in submission ECF No. 97-1.
Accordingly, Defendant’s request for an opportunity “to respond in writing” to
aforementioned replies is moot. Def.’s Resp. to Pl.’s Suppl. Facts at 22. For purposes
of this discussion, citations are provided to the relevant paragraph number of the
undisputed facts and response, and internal citations generally have been omitted.
Court No. 13-00291 Page 6
Resp. to Def.’s Facts ¶ 8. Ford timely and properly protested, claiming that the subject
merchandise should have been liquidated under tariff classification 8703.23.00, HTSUS,
with a duty rate of 2.5 percent. Summons at 2; Def.’s Facts ¶¶ 3-5; Pl.’s Resp. to Def.’s
Facts ¶¶ 3-5. Jurisdiction is uncontroverted in this case. Compl. ¶ 3; Answer ¶ 3; Pl.’s
Facts ¶ 244-49; Def.’s Resp. to Pl.’s Facts ¶ 244-49; Def.’s Facts ¶ 2; Pl.’s Resp. to
Def.’s Facts ¶ 2. The Court has subject matter jurisdiction pursuant to 28 U.S.C.
§ 1581(a). Compl. ¶ 3; Answer ¶ 3.
B. Facts Regarding Subject Merchandise
1. Description of Subject Merchandise
The subject merchandise consists of Transit Connect 6/7s. 8 Def.’s Facts at 1;
Pl.’s Resp. to Def.’s Facts ¶ 1. The Transit Connect 6/7 “was a multipurpose vehicle
manufactured in Turkey and imported into the United States from 2009-2013.” Pl.’s
Facts ¶ 1; Def.’s Resp. to Pl.’s Facts ¶ 1. The subject imports are “part of Ford’s U.S.
Transit Connect vehicle line.” Def.’s Facts ¶ 11; Pl.’s Resp. to Def.’s Facts ¶ 11.
Transit Connect 6/7s were “designated within Ford as the V227N.” Pl.’s Facts ¶ 1;
Def.’s Resp. to Pl.’s Facts ¶ 1. “The V227N vehicles [were] 9 LWB (long wheel base).”
Def.’s Facts ¶ 62; Pl.’s Resp. to Def.’s Facts ¶ 62. The V227N line “included a van
model (Transit Connect Van) in two trim levels and a Wagon model (Transit Connect
8 References to Transit Connects, without the “6/7” thereafter, are references to the
product line generally and not limited to the subject imports.
9 While acknowledging that Plaintiff used curly braces in its briefs to designate its
confidential information, the Court employs single brackets [ ] to designate explanatory
or omitted words or phrases. This opinion does not contain any confidential material.
Court No. 13-00291 Page 7
Wagon) in two trim levels,” but “only the Transit Connect Vans are at issue in this
action.”10 Def.’s Facts ¶¶ 15, 16; Pl.’s Resp. to Def.’s Facts ¶¶ 15, 16. All Transit
Connects are imported with second row seats, but the Transit Connect Vans are
delivered to the customer as a two seat cargo van. Def.’s Facts ¶ 17; Pl.’s Resp. to
Def.’s Facts ¶ 17.
As imported into the United States, the subject merchandise had a Gross Vehicle
Weight Rating (“GVWR”) of 5005 pounds. Def.’s Facts ¶ 45; Pl.’s Resp. to Def.’s Facts
¶ 45. The Transit Connect 6/7s contained a Duratec 2.0L, four cylinder gasoline
engine, which is a spark-ignition internal combustion reciprocating piston engine with a
cylinder capacity of 1999 cc. Pl.’s Facts ¶ 36; Def.’s Resp. to Pl.’s Facts ¶ 36. In its
condition as imported into the United States, the Transit Connect 6/7s included: a steel
unibody construction with an interior volume of approximately 200 cubic feet, which
translates to just under 6m3; front-wheel drive; rear passenger seats with seat anchors;
and underbody bracing. Pl.’s Facts ¶¶ 38-39, 43, 45; Def.’s Resp. to Pl.’s Facts ¶¶ 38-
39, 43, 45. The Transit Connect 6/7s had Macpherson strut front suspension, ground
clearance of 8.2 inches, and over 50 inches of space from floor to ceiling in the rear.
Pl.’s Facts ¶¶ 41, 54-55; Def.’s Resp. to Pl.’s Facts ¶¶ 41, 54-55.
At the time of importation into the United States, subject imports had “swing-out
front doors with windows, second-row sliding doors with windows, and swing-out rear
doors, some of which had windows.” Pl.’s Facts ¶ 49; Def.’s Resp. to Pl.’s Facts ¶ 49.
10 The Court’s understanding is that reference to a van is to a cargo model (as delivered
to the customer) and reference to a wagon is to a passenger model.
Court No. 13-00291 Page 8
The sliding side doors met federal safety standards for passenger vehicles. Pl.’s Facts
¶ 50; Def.’s Resp. to Pl.’s Facts ¶ 50. At the time of importation into the United States,
no Transit Connect 6/7s “had a panel or barrier between the first and second row of
seats.” Pl.’s Facts ¶ 52; Def.’s Resp. to Pl.’s Facts ¶ 52.
As imported into the United States, the Transit Connect 6/7s included: second row
seats; seat belts for every seating position; permanent bracing in the side pillars of the
car body; child-locks in the sliding side doors; dome lighting in the front, middle, and
rear of the vehicle; a full length, molded cloth headliner; coat hooks in the second row;
and a map pocket attached to the rear of the front driver seat. Pl.’s Facts ¶¶ 44, 47-48,
51, 57-60; Def.’s Resp. to Pl.’s Facts ¶¶ 44, 47-48, 51, 57-60. The Transit Connect 6/7s
also had “front vents” and “front speakers.” Pl.’s Facts ¶ 68; Def.’s Resp. to Pl.’s Facts
¶ 68; Pl.’s Suppl. Facts at 7 11 (clarification of Pl.’s Fact ¶ 68); Def.’s Resp. to Pl.’s Suppl.
Facts at 6 (response to clarification of Pl.’s Fact ¶ 68); Def.’s Facts ¶ 118; Pl.’s Resp. to
Def.’s Facts ¶ 118.
There were “two cupholders in the center console and a compartment at the rear
of the center console to create an optional third cupholder.” Pl.’s Suppl. Facts ¶ 255;
Def.’s Resp. to Pl.’s Suppl. Facts ¶ 255. The Transit Connect 6/7s had carpeted
11Based on Defendant’s response to Plaintiff’s first set of facts, Plaintiff provided
revised facts in a section titled “Clarification of Facts Originally Included in Ford’s
Statement of Undisputed Material Facts.” See Pl.’s Suppl. Facts at 7-10. While USCIT
Rule 56.3 does not address the opportunity to clarify original facts, Defendant did not
object to Plaintiff’s clarification of its original facts and, in fact, submitted responses
thereto. See Def.’s Resp. to Pl.’s Suppl. Facts at 2-21. Accordingly, the Court has
taken into consideration Plaintiff’s clarified facts, and Defendant’s responses thereto.
Court No. 13-00291 Page 9
footwells in front of the second row seat. Pl.’s Facts ¶ 53; Def.’s Resp. to Pl.’s Facts ¶
53; Pl.’s Suppl. Facts at 7 (clarification of Pl.’s Fact ¶ 53) & ¶ 255; Def.’s Resp. to Pl.’s
Suppl. Facts at 5 (response to clarification of Pl.’s Fact ¶ 53) & ¶ 255.
The second row seats in the Transit Connect 6/7s did not include “headrests,
certain comfort wires, a tumble lock mechanism or accompanying labels,” and were
“wrapped in a cost reduced fabric.” Pl.’s Facts ¶ 44; Def.’s Resp. to Pl.’s Facts ¶ 44;
see also Def.’s Facts ¶ 114; Pl.’s Resp. to Def.’s Facts ¶ 114. The Transit Connect 6/7s
did not have rear (behind the front seats) vents, speakers, and handholds. Def.’s Facts
¶¶ 19-21; Pl.’s Resp. to Def.’s Facts ¶¶ 19-21; Def.’s Facts ¶ 118; Pl.’s Resp. to Def.’s
Facts ¶ 118. The subject imports did not have side airbags behind the front seats.
Def.’s Facts ¶ 18; Pl.’s Resp. to Def.’s Facts ¶ 18. The Transit Connect 6/7s did not
come with a cargo mat and the painted metal floor of the cargo area was left exposed.
Def.’s Facts ¶ 119; Pl.’s Resp. to Def.’s Facts ¶ 119.
The XL trim line 12 of the Transit Connect 6/7s “did not have front map lights, a CD
player, a power equipment group (including windows, locks, exterior mirrors and remote
keyless-entry with fobs), 12V powerpoint in the rear[,] or cruise control.” Pl.’s Facts ¶
67; Def.’s Resp. to Pl.’s Facts ¶ 67. After importation into the United States, but before
leaving the port, the Transit Connect 6/7s “were labeled with Monroney labels,
commonly known as window stickers, Smog Labels and Loose Item/Ramp labels.” Pl.’s
12Ford also manufactured the XLT (and XLT Premium) trim line of the Transit Connect
6/7 that included such features. Plaintiff’s Ex. A ¶ 82 (Ex. 79, T-1227) (Transit Connect
Order Guide). Neither party, however, has indicated the trim line of the specific vehicles
covered by this entry.
Court No. 13-00291 Page 10
Facts ¶ 75; Def.’s Resp. to Pl.’s Facts ¶ 75; Def.’s Facts ¶ 123; Pl.’s Resp. to Def.’s
Facts ¶ 123; Oral Arg. Tr. 91:3-14 (stipulating “to the fact that Monroney labels, were in
fact, attached to the subject Transit Connect 6/7s after they cleared customs, but before
they left the port facility”).
The Transit Connect 6/7s are finally “delivered to customers as two-seat cargo
vans.” Def.’s Facts ¶ 130; Pl.’s Resp. to Def.’s Facts ¶ 130.
2. History of Subject Merchandise
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] 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.
Court No. 13-00291 Page 11
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.” Pl.’s Suppl. Facts ¶ 258; Def.’s Resp.
to Pl.’s Suppl. Facts ¶ 258. Ford’s plant in Otosan used the vehicle identification
number 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 vehicle
identification from that point forward.” Def.’s Facts ¶ 31; Pl.’s Resp. to Def.’s Facts ¶ 31.
The vehicles in Ford’s European V227 line included the “double-cab-in-van
(DCIV),” which was also called the European Tourneo Connect or Transit Connect,
“depending on the country where sold,” and the “Cargo Van.” Pl.’s Facts ¶¶ 9, 11;
Def.’s Resp. to Pl.’s Facts ¶¶ 9, 11. Ford based the subject merchandise on its
European V227 DCIV, not its Cargo Van. Pl.’s Facts ¶ 21; Def.’s Resp. to Pl.’s Facts
¶ 21. “When Ford began product planning for the Transit Connect it did not know what
the ‘take rate’—product mix—would be between retail or fleet, and cargo or passenger,
sales.” Pl.’s Facts ¶ 20; Def.’s Resp. to Pl.’s Facts ¶ 20. Before it could be imported
into the United States as the Transit Connect 6/7, the European V227 DCIV had to be
modified to meet U.S. safety standards, “including the Federal Motor Vehicle Safety
Standards (‘FMVSS’).” Pl.’s Facts ¶ 25; Def.’s Resp. to Pl.’s Facts ¶ 25. Ford modified
the European V227 DCIV to comply with all relevant U.S. safety standards and imported
the modified vehicle as the Transit Connect. Pl.’s Facts ¶¶ 26, 32; Def.’s Resp. to Pl.’s
Facts ¶¶ 26, 32.
Court No. 13-00291 Page 12
To meet U.S. safety standards, Ford “redesigned the underbody support structure
for the second row of seats.” Pl.’s Facts ¶ 29; Def.’s Resp. to Pl.’s Facts ¶ 29. Ford
also “added a side-impact beam to the sliding side door to meet FMVSS 214” and “a
side-impact foam block to the sliding side door to meet [the] Insurance Institute of
Highway Safety (‘IIHS’) standards.” Pl.’s Facts ¶ 28; Def.’s Resp. to Pl.’s Facts ¶ 28.
Other safety modifications included making changes “to the vehicle lighting, turn signals
and vehicle labels.” Pl.’s Facts ¶ 27; Def.’s Resp. to Pl.’s Facts ¶ 27. Ford designed
the Transit Connect 6/7s on the Ford Focus platform. Pl.’s Facts ¶ 4; Def.’s Resp. to
Pl.’s Facts ¶ 4.
During the February 2008 Chicago Auto Show, “Ford displayed Transit Connect
models” and “conducted focus groups with potential customers in order to learn their
reactions to the Transit Connect.” Pl.’s Facts ¶ 90; Def.’s Resp. to Pl.’s Facts ¶ 90. The
following year at the same auto show, Ford displayed the following configurations of the
Transit Connect: two-passenger, four-passenger 13, and five passenger. Pl.’s Facts
¶ 91; Def.’s Resp. to Pl.’s Facts ¶ 91. “From May to June 2009, Ford conducted a 13-
city tour where potential customers were able to drive Transit Connects,” and “[i]n six of
the cities, Ford also did a press event for the Transit Connect.” Pl.’s Facts ¶ 97; Def.’s
13 Plaintiff urges that “in an effort to distinguish and acknowledge the physical
differences in the subject merchandise pre-conversion and post-conversion, [Ford] uses
the term ‘four-passenger wagon’ to describe the subject merchandise prior to the
removal of the second row seat.” Pl.’s Suppl. Facts at 6. However, “Ford’s MY2012
Specifications Brochure . . . demonstrated that Ford wagons and vans were different
models of the Transit Connect.” Def.’s Resp. to Pl.’s Suppl. Facts at 13. Furthermore,
the four-passenger configuration was discontinued after MY2010. See Def.’s Facts
¶ 23; Pl.’s Resp. to Def.’s Facts ¶ 23.
Court No. 13-00291 Page 13
Resp. to Pl.’s Facts ¶ 97; Pl.’s Suppl. Facts at 8 (clarification of Pl.’s Fact ¶ 97); Def.’s
Resp. to Pl.’s Suppl. Facts at 8-9 (response to clarification of Pl.’s Fact ¶ 97). “Ford
advertised the Transit Connects in magazines and on auto shopping websites.” Pl.’s
Facts ¶ 99; Def.’s Resp. to Pl.’s Facts ¶ 99.
In mid-MY2010, Ford created a “cost reduced” second row seat “for use in
Transit Connect cargo vans only. The purpose of the seat was to reduce costs by
removing items from the second-row seats used in the Transit Connect passenger
wagons including but not limited to the tumble lock mechanism, headrests and
associated parts, certain comfort wires,” and wrapping the second-row seat “in a cost
reduced fabric.” Def.’s Facts ¶ 114; Pl.’s Resp. to Def.’s Facts ¶ 114.
The Transit Connect was “a vehicle that could be readily adapted to suit different
customer demands.” Pl.’s Facts ¶ 20; Def.’s Resp. to Pl.’s Facts ¶ 20. “Each Transit
Connect was built to order.” Pl.’s Facts ¶ 33; Def.’s Resp. to Pl.’s Facts ¶ 33. Ford
“imported the Transit Connect in two trim series, XL, the base trim series, and XLT, the
upgraded trim series.” Pl.’s Facts ¶ 34; Def.’s Resp. to Pl.’s Facts ¶ 34. All the
differences between the various configurations and trim levels of the Transit Connect
2012 models that were available for sale are identified in the MY2012 Brochure,
procured by CBP from the Ford website in February 2012. Pl.’s Facts ¶ 69; Def.’s
Resp. to Pl.’s Facts ¶ 69.
Court No. 13-00291 Page 14
3. Post-Importation Processing 14 of Subject Merchandise
After subject imports cleared Customs, but still within the confines of the port,
processing procedures were conducted on all Transit Connects and, additionally,
certain features were removed and/or altered in the Transit Connect 6/7s. “The port
processing procedures carried out on all Transit Connect vehicles included removing
Rap-Gard, a protective covering during shipment; disengaging Transportation Mode;
and checking for low fuel.” Pl.’s Facts ¶ 74; Def.’s Resp. to Pl.’s Facts ¶ 74. For Transit
Connect 6/7s, additional post-importation processing entailed:
the second-row seat was unbolted and removed, along with
the associated second row safety restraints. A steel panel
was then bolted into the second row footwell to create a flat
surface behind the first rows of seats. A molded cargo mat
was placed over the floor behind the first row. Scuff plates
were added inside the second-row doors. In some vehicles
the sliding door windows were replaced with a solid panel.
Pl.’s Facts ¶ 78; Def.’s Resp. to Pl.’s Facts ¶ 78. Prior to the subject merchandise being
ordered or manufactured, “Ford had entered into a contract with its port processor” to
conduct the post-importation processing. Def.’s Facts ¶ 125; Pl.’s Resp. to Def.’s Facts
¶ 125.
The following features remained in the Transit Connect 6/7s after the post-
importation processing: underbody second-row seat support; anchors and fittings for the
14 The Court notes that Defendant objects to the term “post-importation processing” as
“vague.” See, e.g., Def.’s Resp. to Pl.’s Facts ¶ 79. There is, however, no dispute that
rear seats are removed, along with other post-importation alterations, after importation
but while still at the port. The Court utilizes “post-importation processing” throughout
this opinion as a short-hand term recognizing the undisputed alterations and the
undisputed timing of those alterations.
Court No. 13-00291 Page 15
second-row seat, permanent bracing in the side pillars to support the removed safety
restraints; and the beam and foam in the side sliding doors for rear passenger crash
protection. 15 Pl.’s Facts ¶ 80; Def.’s Resp. to Pl.’s Facts ¶ 80; Pl.’s Suppl. Facts ¶ 255;
Def.’s Resp. to Pl.’s Suppl. Facts ¶ 255.
4. CBP’s Investigations of Subject Merchandise
“Between April 17, 2009, and 2013,” Ford imported the Transit Connects through
the Ports of Baltimore, Maryland, Jacksonville, Florida, Los Angeles-Long Beach,
California, and Port Hueneme, California. Pl.’s Facts ¶ 137; Def.’s Resp. to Pl.’s Facts
¶ 137. From March 1, 2010 through November 23, 2012, “there were 477 liquidations
of entries containing Transit Connect vehicles classified under subheading 8703.23.00,
HTSUS, with 446 entries as bypass liquidations, i.e., unreviewed, and 31 entries
reviewed by CBP personnel” without a physical inspection of the goods by an import
specialist. Def.’s Facts ¶ 139; Pl.’s Resp. to Def.’s Facts ¶ 139. As part of Customs’
compliance validation, Customs reviewed “Ford’s entry documents” for at least nineteen
entries, and of those nineteen validated entries, eight were “found to be compliant.”
Pl.’s Facts ¶¶ 142-43; Def.’s Resp. to Pl.’s Facts ¶¶ 142-43.
In the winter of 2011 to 2012, CBP Supervisory Import Specialist Gerald Stroter
and Import Specialists Tamiko Bates and Jeremy Jackson conducted a Trade
Compliance Measurement Review as part of Tamiko Bates’ training at the Port of
15The anchor holes for the second row seat are plugged and no longer readily
accessible after post-importation processing. See Oral Arg. Tr. at 25:25-28:3.
Court No. 13-00291 Page 16
Baltimore. 16 Pl.’s Facts ¶ 151; Def.’s Resp. to Pl.’s Facts ¶ 151. One of the entries
covered in the Trade Compliance Measurement Review was of a Transit Connect 6/7.
Pl.’s Facts ¶ 152; Def.’s Resp. to Pl.’s Facts ¶ 152. Mr. Stroter noticed that “the
difference between the passenger version and the cargo version of the Transit Connect
appeared to be that the passenger version had a rear seat and the cargo version did
not.” Pl.’s Facts ¶ 155; Def.’s Resp. to Pl.’s Facts ¶ 155.
As a result of the aforementioned review, Import Specialists “believed that the
[Transit Connect 6/7s] were being misclassified.” Pl.’s Facts ¶ 157; Def.’s Resp. to Pl.’s
Facts ¶ 157; Pl.’s Suppl. Facts at 8-9 (clarification of Pl.’s Fact ¶ 157); Def.’s Resp. to
Pl.’s Suppl. Facts at 14 (response to clarification of Pl.’s Fact ¶ 157). On February 6,
2012, Mr. Jackson submitted a QUICS query—“a mechanism by which import
specialists are able to circulate questions to the National Import Specialists . . .
regarding classification . . . but the response is advisory and is not binding”—describing
the Transit Connect 6/7 “based on what was shown on Ford’s website.” Pl.’s Facts ¶¶
158-59; Def.’s Resp. to Pl.’s Facts ¶¶ 158-59.
On February 9, 2012, Mr. Stroter, Mr. Jackson, and CBP Officer Eric Dausch
went to the Port of Baltimore “to physically inspect a [Transit Connect 6/7],” and at this
time, Mr. Jackson “noticed that some Transit Connect vehicles had rear windows and
16 The fact that a review took place is not in dispute; however, Parties present two
different dates, within a month of each other, indicating when the review occurred.
Plaintiff asserted the review was conducted in December 2011, and Defendant asserted
the review was initiated on January 17, 2012. Pl.’s Facts ¶ 151 (citing Ex. M 60:11-
62:7); Def.’s Resp. to Pl.’s Facts ¶ 151 (citing Def.’s Ex. 20). The Court finds that this
difference is immaterial to the undisputed fact that a review took place.
Court No. 13-00291 Page 17
some did not.” Pl.’s Facts ¶¶ 160-61; Def.’s Resp. to Pl.’s Facts ¶¶ 160-61. Mr. Stroter
and Mr. Jackson learned that “vehicles with VIN’s containing the characters S6 or S7
. . . were consistently discovered to be 2-passenger cargo vans while those with the
characters S9 were identified as 5-passenger vehicles.” Pl.’s Facts ¶ 166 (internal
quotations omitted); Def.’s Resp. to Pl.’s Facts ¶ 166.
That day, Mr. Jackson “emailed Richard Laman, the National Import Specialist
responsible for reviewing Jackson’s earlier QUICS message,” describing “the vehicles
that he physically inspected, and included the pictures that were taken of the vehicles
during his visit.” Pl.’s Facts ¶ 163; Def.’s Resp. to Pl.’s Facts ¶ 163. Mr. Jackson
viewed Mr. Laman “as responsible for setting the policy for how the Transit Connect
[6/7] would be classified.” Pl.’s Facts ¶ 163; Def.’s Resp. to Pl.’s Facts ¶ 163.
On February 22, 2012, the Assistant Special Agent in Charge of U.S. Immigration
and Customs Enforcement in Baltimore was notified of the “Investigation into Proper
Classification of Ford Connect Vans.” Pl.’s Facts ¶ 169; Def.’s Resp. to Pl.’s Facts ¶
169. On February 23, 2012, the Port of Baltimore notified Ford that CBP had “initiated
an investigation into Ford Motor Company importations” and the “declaration of vehicles
classified under the Harmonized Tariff Schedule of United States (HTSUS) headings
8704 and 8703.” Pl.’s Facts ¶ 172; Def.’s Resp. to Pl.’s Facts ¶ 172.
On February 24, 2012, CBP Officer Benjamin Syzmanski contacted Mr. Stroter
and informed him for the first time that cargo vans “are imported in [sic] as passenger
vans.” Pl.’s Facts ¶ 185; Def.’s Resp. to Pl.’s Facts ¶ 185. Mr. Syzmanski explained
that “the Transit Connect vans make entry into the port and then are fully released by
Court No. 13-00291 Page 18
CBP. Only after the vans have been released by CBP . . . does Ford move the vans to
a facility within the Baltimore Port limits and select vans are gutted/stripped/altered to
become cargo vans.” Pl.’s Facts ¶ 185 (internal quotations omitted); Def.’s Resp. to
Pl.’s Facts ¶ 185.
On June 8, 2012, the Assistant Director for Trade Operations of the Port of
Baltimore, Thomas Heffernan, requested an Internal Advice from CBP’s Office of
Regulations and Rulings regarding the proper classification of the Transit Connect 6/7s.
Pl.’s Facts ¶¶ 87d, 216; Def.’s Resp. to Pl.’s Facts ¶¶ 87d, 216; Def.’s Facts ¶ 145; Pl.’s
Resp. to Def.’s Facts ¶ 145. On January 30, 2013, in response to Mr. Heffernan’s
request for Internal Advice, CBP Headquarters issued ruling HQ H220856 to the
Baltimore Field Office. Pl.’s Facts ¶ 237; Def.’s Resp. to Pl.’s Facts ¶ 237; Def.’s Facts
¶ 146; Pl.’s Resp. to Def.’s Facts ¶ 146. HQ H220856 held that the Transit Connect
6/7s were “properly classifiable as ‘Motor vehicles for the transport of goods,’ under
subheading 8704.31.00, HTSUS, dutiable at the rate of 25% ad valorem.” Def.’s Facts
¶ 147; Pl.’s Resp. to Def.’s Facts ¶ 147.
JURISDICTION AND STANDARD OF REVIEW
The Court has subject matter jurisdiction pursuant to 28 U.S.C. § 1581(a).
Jurisdiction is uncontroverted in this case. Pl.’s Facts ¶ 244-49; Def.’s Resp. to Pl.’s
Facts ¶ 244-49.
The Court may grant summary judgment when “there is no genuine issue as to
any material fact,” and “the moving party is entitled to judgment as a matter of law.”
Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247 (1986); USCIT R. 56(a). The court’s
Court No. 13-00291 Page 19
review of a classification decision involves two steps. First, it must determine the
meaning of the relevant tariff provisions, which is a question of law. See Bausch &
Lomb, Inc. v. United States, 148 F.3d 1363, 1365 (Fed. Cir. 1998) (citation omitted).
Second, it must determine whether the merchandise at issue falls within a particular
tariff provision as construed, which is a question of fact. Id. (citation omitted). When no
factual dispute exists regarding the merchandise, resolution of the classification turns
solely on the first step. See id. at 1365-66; see also Carl Zeiss, Inc. v. United States,
195 F.3d 1375, 1378 (Fed. Cir. 1999).
The court reviews classification cases de novo. See 28 U.S.C. §§ 2640(a),
2643(b). While the court accords deference to Customs classification rulings relative to
their ‘“power to persuade,’” United States v. Mead Corp., 533 U.S. 218, 235 (2001)
(quoting Skidmore v. Swift & Co., 323 U.S. 134, 140 (1944)), it has “an independent
responsibility to decide the legal issue of the proper meaning and scope of HTSUS
terms,” Warner-Lambert Co. v. United States, 407 F.3d 1207, 1209 (Fed. Cir. 2005)
(citing Rocknel Fastener, Inc. v. United States, 267 F.3d 1354, 1358 (Fed. Cir. 2001)).
It is “the court’s duty to find the correct result, by whatever procedure is best suited to
the case at hand.” Jarvis Clark Co. v. United States, 733 F.2d 873, 878 (Fed. Cir.
1984).
Court No. 13-00291 Page 20
DISCUSSION
The Court may grant summary judgment when “there is no genuine issue as to
any material fact,” and “the moving party is entitled to judgment as a matter of law.”
Anderson, 477 U.S. at 247; USCIT R. 56(a).
I. Material Facts
In the Material Facts Not in Dispute Section above, the Court discussed the
undisputed facts presented by Parties that are material for the classification analysis.
To determine which facts are material for a classification analysis, the Court requires an
accurate and detailed description of the article, at the time of importation. It is a well-
settled tenet of customs law that “[i]n order to produce uniformity in the imposition of
duties, the dutiable classification of articles imported must be ascertained by an
examination of the imported article itself, in the condition in which it is imported.”
Worthington v. Robbins, 139 U.S. 337, 341 (1891). However, it is equally settled that
articles cannot escape a prescribed rate of duty “by resort to disguise or artifice.”
United States v. Citroen, 223 U.S. 407, 415 (1912). The Supreme Court carved out an
exception from classifying a good “in the condition in which it is imported” by explaining
that “when the article imported is not the article described as dutiable at a specified rate,
it does not become dutiable under the description because it has been manufactured or
prepared for the express purpose of being imported at a lower rate.” Id. at 415. The
Citroen court created a bright line test for classification cases: “[d]oes the article, as
imported, fall within the description sought to be applied?” Id.
Court No. 13-00291 Page 21
With regard to the classification of vehicles, the Court of Appeals for the Federal
Circuit (“Federal Circuit”) has spoken to the distinction between passenger vehicles or
cargo vehicles. See Marubeni Am. Corp. v. United States, 35 F.3d 530 (1994). In
Marubeni, the court decided the proper classification of the 1989 and 1990, two door,
two-wheel and four-wheel drive, Nissan Pathfinder, when the sports utility vehicle first
entered the market. 35 F.3d at 532. The Marubeni court considered two possible
HTSUS headings—8703 and 8704—the same two headings at issue in the instant
case. Id. at 533. The Marubeni court held that the proper classification of the Nissan
Pathfinder was under heading 8703, encompassing motor cars and other motor
vehicles principally designed for the transport of persons, and affirmed the Court of
International Trade’s (“CIT”) decision. Id. at 532 (affirming Marubeni Am. Corp. v.
United States, 17 CIT 360, 821 F. Supp. 1521 (1993)). In so doing, the Federal Circuit
spoke to the test to determine “whether a vehicle is principally designed for a particular
purpose, not uniquely designed for a particular purpose,” by looking “at both the
structural and auxiliary design features, as neither by itself are determinative.” Id. at
535.
As part of its structural design analysis, the Marubeni court reviewed the lower
court’s findings following a three week trial:
[T]he Pathfinder was basically derived from Nissan's
Hardbody truck line yet, the Pathfinder was based upon
totally different design concepts than a truck . . . the reasons
behind the design decisions, including the need for speed
and economy in manufacturing to capture the changing
market, a market into which Nissan was a late entrant.
Specifically, the designers decided to adopt the Hardbody's
Court No. 13-00291 Page 22
frame side rails and the cab portion from the front bumper to
the frame just behind the driver's seats so that they could
quickly and economically reach the market. The front
suspension system was also adopted from Nissan's truck
line but the rear suspension was not. The fact that a vehicle
is derived in-part from a truck or from a sedan is not, without
more, determinative of its intended principal design
objectives which were passenger transport and offroad
capability.
Substantial structural changes were necessary to meet the
design criterion of transporting passengers. The addition of
the rear passenger seat required that the gas tank be moved
to the rear and the spare tire relocated. This effectively
reduces the cargo carrying capacity. Of particular
importance was the design of a new rear suspension that
was developed specifically to provide a smooth ride for
passengers. New and different cross beams, not present on
the Hardbody frame, were added to the Pathfinder's frame to
accommodate the above changes.
Other design aspects that point to a principal design for
passengers include: the spare tire and the rear seat when
folded down intrude upon the cargo space; the cargo area is
carpeted; a separate window opening in the pop-up tailgate
accommodates passengers loading and unloading small
packages without having to lower the tailgate. In contrast,
the Hardbody truck bed can accommodate loading with a
fork lift, clearly a design feature for cargo. . . . [T]he cargo
volume is greatly reduced when the rear seat is up to
accommodate passengers. Moreover, the axle and wheel
differences are minor and consistent with the Pathfinder's
off-road mission, particularly in the loaded condition. The
Pathfinder has the same engine size as the Maxima
passenger car.
Id. at 536-37. For its auxiliary design analysis, the Marubeni court noted:
Auxiliary design aspects . . . that indicate passenger use over
cargo use include: vehicle height was lowered 50 millimeters;
the seat slides were improved yet similar to those on two door
passenger sedans. Other auxiliary design features that point
to transport of passengers include: rear seats that recline, are
Court No. 13-00291 Page 23
comfortable, and fold to make a fairly flat cargo bed but are
not removable; rear seat stereo outlets, ashtrays, cubbyholes,
arm rests, handholds, footwells, seat belts, child seat tie
down hooks and operable windows. The CIT noted that there
is not much more that can be done to accommodate
passengers in the rear seat. Moreover, the testimony of the
three primary design engineers as well as the
contemporaneous design development documents support
the finding that the Pathfinder was principally designed for the
transport of persons.
Id. at 537. The Federal Circuit further acknowledged the trial court’s reliance on “three
primary design engineers” to assist in determining whether the Nissan Pathfinder was
principally designed for the transport of persons. Id. When interpreting these
competing headings, the Federal Circuit found that “the statutory language is clear that
a vehicle’s intended purpose of transporting persons must outweigh an intended
purpose of transporting goods.” Id. at 535.
The article at issue in this case is the Transit Connect 6/7. Parties presented
numerous detailed and undisputed facts about the structural and auxiliary design
features of the Transit Connect 6/7s, both as imported and following post-importation
processing. Although there is general agreement and sufficient information before the
Court about most of these structural and auxiliary features, there is one significant
feature about which the Court lacks sufficient material, undisputed facts: the cost
reduced rear seat. 17 The Court notes that, in Marubeni, the Federal Circuit discusses
17The Court’s reference to the rear seat as “cost reduced” should not be inferred as a
judgment about the rear seat but rather an undisputed characterization of the version of
the second row seat that is installed in the Transit Connect 6/7s at issue at the time of
importation.
Court No. 13-00291 Page 24
the rear seat in both its structural and auxiliary analyses. The Court finds that a detailed
description and understanding of the cost reduced rear seat is material to the proper
conduct of a Marubeni analysis.
II. Genuine Issue
While Parties provide some information about the cost reduced rear seat, there
remain questions about the nature of that seat that must be answered to allow the Court
to conduct a Marubeni analysis. Including the presence of the rear seat in an auxiliary
design list with height, footwells, seatbelts and child safety, Plaintiff contends that the
Transit Connect 6/7s’ cost reduced rear seat satisfies the Marubeni test merely because
it is included at the time of importation. See Pl.’s MSJ at 25-29. Though admitting that
its intention from the beginning is to remove the cost reduced rear seat immediately
after importation and before delivery to the customer, Ford asserts that “an importer’s
intention to modify goods after importation is irrelevant to classification.” Pl.’s MSJ at
22. Defendant responds that the Transit Connect 6/7s’ cost reduced rear seat was
never intended to be sat upon, pointing to the lack of “comfort wires” and indications
that it “sags a little” as support for its contention. Def.’s XMSJ at 18; Oral Arg. Tr. at
18:2-3.
During oral argument, the Court asked Parties to more fully describe this cost
reduced rear seat. See Oral Arg. Tr. at 39: 7-11 (The Court asked Parties, “[t]he
comfort wires that are referred to with regard to the second row, what are we talking
about there? I don’t recall seeing an explanation of what they are.”). Plaintiff
acknowledged using the term “comfort wires” but admitted that “I’m not truly sure where
Court No. 13-00291 Page 25
comfort wires came from, but I don’t think that any passenger comfort wires are actually
removed.” Id. at 40:9-12. In response, Defendant offered that “our understanding of
comfort wires are wires underneath the seat.” Id. at 41:6-7. Counsel was similarly
uncertain about the absence of the tumble lock mechanism from the cost reduced
second row seat. See, e.g., id. at 64: 21-25. Although the evidence is more clear that
the cost reduced rear seat excludes head rests and arm rests and is covered in a cost
reduced fabric that does not match the rest of the interior fabric, the Court is unclear
how the totality of these changes impacts the functionality of this seat and the overall
design of the vehicle, as imported. Additional information and evidence regarding this
seat will better enable the Court to determine whether the vehicle’s intended purpose of
transporting persons, as imported, outweighs an intended purpose of transporting
goods. See Marubeni, 35 F.3d at 535.
The Court finds there are genuine issues of material fact as to the characteristics
of the cost reduced rear seat at the time of importation. Because there are genuine
issues of material fact, neither moving party is entitled to judgment as a matter of law.
See Anderson, 477 U.S. at 247; USCIT R. 56(a). Accordingly, the Court cannot decide
this case on summary judgment. Plaintiff’s motion and Defendant’s cross-motion are
both denied.
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CONCLUSION AND ORDER
For the reasons discussed above, the Court hereby DENIES both Plaintiff’s
motion for summary judgment and Defendant’s cross-motion for summary judgment.
The Court will schedule a teleconference with Parties to discuss next steps.
/s/ Mark A. Barnett
Mark A. Barnett, Judge
Dated: ________________
October 5, 2016
New York, New York