On December 18, 2007, U.S. Customs and Border Protection (CBP) and Ford Motor Company entered into a Stipulation of Dismissal in CBP’s enforcement action brought after Ford failed to turn over certain documents in support of its preferential duty claims under the North American Free Trade Agreement (NAFTA). In accordance with the dismissal, Ford will not be required to pay the $42 million penalty CBP assessed against it for failing to produce documents supporting the NAFTA claims made on imported merchandise. The Stipulation of Dismissal did not indicate CBP’s reasons for settling the case. CBP has indicated, however, that it is reviewing its current policy on NAFTA recordkeeping, which may ultimately result in a change in the importer’s responsibility with respect to this area. Drinker Biddle Gardner Carton represented the American Association of Exporters and Importers as an amicus curiae in the case. In that capacity, we were involved in various aspects of the case, including fi ling a brief in support of a Motion to Dismiss on behalf of Ford.
This case was fi led in the U.S. District Court for the Western District of Texas and related to Ford’s imports of automotive parts from a Mexican supplier in 1996. On September 26, 2007, the court denied Ford’s Motion to Dismiss the case, in which Ford argued that records supporting NAFTA claims made on imported merchandise do not qualify as “entry records” as defi ned in 19 U.S.C. § 1509, and commonly referred to as “(a)(1)(A)” records. Accordingly, Ford argued that the government lacked the authority to impose and enforce the civil penalty against Ford’s refusal to comply with the summons demanding those records. Ford further argued in its Motion to Dismiss that the NAFTA supporting documents are foreign producer records that are to be maintained by the exporter.
Although this case illustrates that CBP may be unable to assess penalties against importers retroactively for not maintaining records in support of NAFTA certifi - cates received from its suppliers to claim duty preference on their products upon import, it does signify a potential for a change in this policy going forward. This could mean that importers will be required in the future to independently verify that information obtained from suppliers issuing NAFTA certifi cates is accurate and that the goods are, in fact, eligible for NAFTA. A review of current procedures with respect to supporting NAFTA and other duty preference claims, and the recordkeeping obligations under each trade program could be a good New Year’s resolution for importers that take advantage of NAFTA.