Volkswagen of Am., Inc. v. United States , 2007 CIT 47 ( 2007 )

Slip Op. 07 – 47
UNITED STATES COURT OF INTERNATIONAL TRADE
VOLKSWAGEN OF AMERICA, INC.,
Before: Richard W. Goldberg,
Plaintiff, Senior Judge
v. Court No. 96-01-00132
UNITED STATES, PUBLIC VERSION
Defendant.
OPINION
[Judgment for Defendant.]
Dated: March 28, 2007
Law Offices of Thomas J. Kovarcik (Thomas J. Kovarcik), for
Plaintiff Volkswagen of America, Inc.
Peter D. Keisler, Assistant Attorney General; Barbara S.
Williams, Attorney in Charge, International Trade Field Office,
Commercial Litigation Branch, Civil Division, U.S. Department of
Justice; Yelena Slepak, Office of Assistant Chief Counsel,
International Trade Litigation, U.S. Customs and Border
Protection, Of Counsel, for Defendant United States.
GOLDBERG, Senior Judge: In this case, Plaintiff Volkswagen of
America, Inc., (“Volkswagen”) seeks an allowance against import
duties for the value of imported automobiles that were allegedly
defective at the time of importation. The United States Customs
Service1 (“Customs”) liquidated the entries without an allowance
1
The United States Customs Service has since become the Bureau
of Customs and Border Protection per the Homeland Security Act
of 2002, § 1502, Pub. L. No. 107-296, 116 Stat. 2135, 2308-09
(Nov. 25, 2002), and the Reorganization Plan Modification for
Court No. 96 - 01 - 00132 Page 2
in the appraised value of the merchandise. Customs denied
Volkswagen’s protests, and Volkswagen commenced an action to
challenge the protest denials in this Court. Both Customs and
Volkswagen filed motions for summary judgment. The Court held
that it lacked jurisdiction over vehicles that were repaired
after the date of protest because Volkswagen “could not have had
in mind defects to automobiles that had not been repaired before
the protests were filed.” Volkswagen of Am., Inc. v. United
States, 27 CIT 1201, 1206, 277 F. Supp. 2d 1364, 1369 (2003)
(“Volkswagen I”). As for the remaining claims, the Court denied
both motions because factual issues remained as to whether the
defects existed at the time of importation and the amount of
allowances tied to those defects. See id. at 1208, 277 F. Supp.
2d at 1371. The Court specifically noted that “[w]hat remains
for trial is development of the factual record to ‘independently
confirm the validity’ of the repair records, to establish that
the defects did indeed exist at the time of importation.” Id.(quoting Samsung Elecs. Am., Inc. v. United States, 23 CIT 2, 8,
35 F. Supp. 2d 942, 947 (1999), aff’d 195 F.3d 1367 (Fed. Cir.
1999).
After the Court’s decision in Volkswagen I, this action was
stayed pending the resolution of Saab Cars USA, Inc. v. United
the Department of Homeland Security, H.R. Doc. 108-32, p. 4
(Feb. 4, 2003).
Court No. 96 - 01 - 00132 Page 3
States, 434 F.3d 1359 (Fed. Cir. 2006) (“Saab III”). The
circumstances in Saab III are very similar to those presented in
this action. The Federal Circuit held that Saab failed to prove
by a preponderance of the evidence that its merchandise was
defective at the time of importation. See id. at 1375. After
Saab III was decided, the Court ordered Volkswagen to attempt to
demonstrate how that case was distinguishable from the
circumstances of Volkswagen’s case.2 Volkswagen has complied
with this order, and has made clear that with the additional
trial evidence it has submitted, its supporting brief
constitutes its summation at trial. Pl.’s Br. 4. Accordingly,
2
The order stated the following in relevant part:
[I]t is hereby ORDERED that Plaintiff Volkswagen of
America, Inc. (“Plaintiff”), shall . . . file a brief
addressing why it believes the evidence in this case,
and in particular the evidence produced after this
Court’s denial of Plaintiff’s summary judgment motion
August 13, 2003, establishes that the alleged defects
existed at the time of importation; and it is further
ORDERED that such brief endeavor to distinguish the
circumstances of this case from the circumstances in
Saab Cars USA, Inc. v. United States, 434 F.3d 1359(Fed. Cir. 2006), where the U.S. Court of Appeals for
the Federal Circuit held that that plaintiff’s
reliance on probabilistic warranty tracking evidence,
though “generally reliable,” was not sufficient to
sustain a plaintiff’s burden of proving by a
preponderance of the evidence that the particular
defects in that case as to which allowances were
claimed under 19 C.F.R. § 158.12 existed at the time
of importation . . . .
Sched. Order 1, May 8, 2006.
Court No. 96 - 01 - 00132 Page 4
the decision rendered in this action will be submitted as a
final judgment.
I. JURISDICTION
In its evidence submitted for trial, Volkswagen includes
repairs completed after the vehicles’ respective protest dates.
Volkswagen claims that the Court has jurisdiction over these
repairs, because as long as at least one repair was done prior
to protest, the Court has jurisdiction over the “vehicle.”
Consequently, the Court would have jurisdiction over every
subsequent repair performed on that vehicle, even if the repair
was done after the date of protest. Customs disagrees, and
argues that all claims relating to repairs that occurred after
the date of protest should be dismissed for lack of
jurisdiction.
The Court has exclusive jurisdiction over “any civil action
commenced to contest the denial of a protest, in whole or in
part, under [19 U.S.C. § 1515].” 28 U.S.C. § 1581(a) (2000).
The Court does not have jurisdiction over the action pursuant to
§ 1581(a) if the plaintiff has not filed a valid protest. See
Computime, Inc. v. United States, 772 F.2d 874, 875 (Fed. Cir.
1985). If certain vehicle repairs are not covered by a valid
protest, the Court has no jurisdiction over those repairs.
A valid protest must set forth distinctly and specifically
each decision as to which a protest is made, and the nature of
Court No. 96 - 01 - 00132 Page 5
and reasons for each objection. See 19 U.S.C. § 1514(c)(1)
(2000); 19 C.F.R. § 174.13(a)(6) (2006). The governing
principles concerning what constitutes a valid protest were
articulated by the Supreme Court in Davies v. Arthur:
[T]he objections [in a protest] must be so distinct
and specific, as, when fairly construed, to show that
the objection taken at the trial was at the time in
the mind of the importer, and that it was sufficient
to notify the collector of its true nature and
character, to the end that he might ascertain the
precise facts, and have an opportunity to correct the
mistake and cure the defect, if it was one which could
be obviated.
96 U.S. 148, 151 (1878); accord VWP of Am., Inc. v. United
States, Slip Op. 06-144, 2006 Ct. Intl. Trade LEXIS 146, at *16
(CIT Sept. 26, 2006) (“The minimal requirement has long been
whether the importer has sufficiently conveyed to Customs an
impression of the injury it believes it suffered by Customs’
decision or action.”). In its evidence submitted for trial,
Volkswagen has included thousands of repairs that occurred after
the protest date. These alleged defects could not have been “in
the mind of the importer” when the protest was made.
Additionally, Customs would never have had the opportunity to
“correct the mistake and cure the defect” if a valid protest
could include thousands of repairs added post-protest. A
protest should sufficiently define the outside parameters of the
dispute so that they are brought to the attention of the Customs
Court No. 96 - 01 - 00132 Page 6
Service.3 See Lykes Pasco, Inc. v United States, 22 CIT 614,
615, 14 F. Supp. 2d 748, 750 (1998). In this case, the
parameters of the dispute would not be sufficiently defined by
the protest if Volkswagen was permitted to continually add
defects and repair evidence as they are discovered.
Following these principles, the Court held in Volkswagen I
that it did “not have jurisdiction over vehicles repaired after
the individual protest dates of each of the eighteen entries.”
27 CIT at 1206, 277 F. Supp. 2d at 1369. The Court reasoned as
follows:
It is clear that [Volkswagen] had in mind at the time
of protest defective automobiles that had already been
repaired; however, [Volkswagen] could not have had in
mind defects to automobiles that had not been repaired
before the protests were filed. Therefore, the Court
does not have jurisdiction over the automobiles that
were repaired after the date [Volkswagen] filed its
protests with Customs. See Mattel, 72 Cust. Ct. at
260, 377 F. Supp. at 959 (“a protest . . . must show
fairly that the objection afterwards made at the trial
was in the mind of the party at the time the protest
was made”).
Id. (footnote omitted). To support its theory of jurisdiction,
Volkswagen focuses on the Court’s statement in Volkswagen I that
“the Court does not have jurisdiction over the automobiles that
3
This is not to say that all omissions, including minor and
inadvertent ones, could divest the Court of jurisdiction. As
long as the original protest gave sufficient notice to Customs
of the actual claim, then jurisdiction will lie. See VWP, Slip
Op. 06-144, 2006 Ct. Intl. Trade LEXIS 146, at *16-17. (stating
that an inadvertent error in entry number contained in original
protest is not a jurisdictional bar if Customs was apprised of
the proper entry number).
Court No. 96 - 01 - 00132 Page 7
were repaired after the date [Volkswagen] filed its protests . .
. .” Id. (emphasis added). Volkswagen puts great emphasis on
the fact that the Court used the word “automobiles” instead of
“repairs” when making this statement. Additionally, the Federal
Circuit in Saab III “affirm[ed] the decision of the CIT
dismissing those claims relating to cars as to which no repair
existed at the time of protest, because Saab provided no
evidence that it was aware of those defects at that time.” 434
F.3d at 1368 (emphasis added). Once again, because the focus of
this language is on “cars,” and not “repairs,” Volkswagen
believes that once the Court has jurisdiction relating to a
vehicle, it has jurisdiction over repairs to that vehicle
discovered after the protest date.
Volkswagen is incorrect because its theory of jurisdiction
is completely divorced from the requirements of a valid protest.
Regardless of how the jurisdictional holdings were phrased in
both Volkswagen I and Saab III, the principles set forth in
Davies v. Arthur and 19 U.S.C. § 1514(c)(1) must be followed.
Additionally, Volkswagen fails to note that in Saab I, the Court
clearly stated that it “lacks jurisdiction over claims for
vehicle repairs that occurred after the vehicles’ respective
protest dates.” Saab Cars USA, Inc. v. United States, 27 CIT
979, 991, 276 F. Supp. 2d 1322, 1333 (2003) (“Saab I”) (emphasis
added). This language clarifies that the Court did not intend
Court No. 96 - 01 - 00132 Page 8
to make a distinction between vehicles that had at least one
repair before the protest date and vehicles that had no repairs.
Instead, the Court found a relevant legal distinction between
the defects Volkswagen knew about at the time of protest, and
the defects that were unknown at that time.
In light of the above, the Court does not have jurisdiction
over defects discovered (as evidenced by repairs done) after the
date of protest. The Court does have jurisdiction over
Volkswagen’s remaining claims pursuant to 28 U.S.C. § 1581(a).
II. STANDARD OF REVIEW
Customs’ appraisement decisions are ordinarily entitled to
a statutory presumption of correctness. See 28 U.S.C.
2639(a)(1) (2000); Saab Cars USA, Inc. v. United States, 28 CIT
__, __, 306 F. Supp. 2d 1279, 1283 (2004) (“Saab II”), aff’d,
Saab III, 434 F.3d at 1359. However, this presumption “carries
no force as to questions of law.” Universal Elecs. Inc. v.
United States, 112 F.3d 488, 492 (Fed. Cir. 1997). “[A]
question as to the legal sufficiency of the evidence is a
question of law.” Kent v. Principi, 389 F.3d 1380, 1383 (Fed.
Cir. 2004). In the present case, the Court is asked to
determine, in light of Saab II and Saab III, whether Volkswagen
has put forth sufficient evidence to sustain its burden of
proving by a preponderance of the evidence that certain defects
Court No. 96 - 01 - 00132 Page 9
existed in its merchandise at the time of importation. Because
this is a question of law, the Court will review it de novo.
III. DISCUSSION
A. Volkswagen’s Evidence Submitted for Trial
Volkswagen’s trial evidence consists of two exhibits.4
Exhibit A includes eighteen documents; one for each of the
eighteen subject entries. See Pl.’s Ex. A (Confidential); Pl.’s
Br. 12. Each document contains a chart with eighteen columns of
warranty repair details. The eighteen information categories
Volkswagen has provided are: (1) vehicle model number, (2)
vehicle identification number (“VIN”), (3) repair order number,
(4) warranty claim type, (5) damage code, (6) deciphered damage
code, (7) mileage, (8) in-service date, (9) repair date, (10)
labor cost, (11) part cost, (12) other costs and credits, (13)
total repair cost paid by plaintiff, (14) adjustments, (15)
repair cost billable to factory, (16) qualifying warranty repair
cost, (17) qualifying warranty overhead cost, (18) total
qualifying warranty cost. See Pl.’s Ex. A (Confidential); Pl.’s
Br. 12. Most of this information was already before the Court
in Volkswagen I, with the exception of the vehicle model number,
the deciphered damage code, mileage, and the in-service date.
4
For a discussion of evidence already before the Court in
Volkswagen I, see 27 CIT at 1206-08, 277 F. Supp. 2d at 1370-71.
Court No. 96 - 01 - 00132 Page 10
Volkswagen has also provided the Court with Exhibit B,
which is entitled “Damage Code Key.” See Pl.’s Ex. B
(Confidential). This exhibit categorizes the different warranty
claim types listed in Exhibit A. Volkswagen first lists what it
considers to be “included claim types.” These are warranty
claim categories that, according to Volkswagen, necessarily
encompass repairs of defects existing at the time of
importation. For example, the list of “included claim types”
includes emissions warranty repairs, recall repairs, paint
claims and powertrain defect repairs.5 See Pl.’s Br. 15-16.
Volkswagen claims that all repairs performed under these claim-
types reflect defects that existed at the time of importation.
If a repair reflects damage that did not exist at importation,
it would be categorized under one of the several “excluded claim
types” listed in Exhibit B.
Additionally, Exhibit B contains more detailed descriptions
of the repairs listed in Exhibit A. In order to connect the
more detailed descriptions in Exhibit B to the repairs in
Exhibit A, the Court is required to look at [ ] listed in
Exhibit A. That [ ] code is further deciphered in Exhibit B.
This process is further discussed below.
5
The complete list of “included claim types” is as follows: [ ].
See Pl.’s Ex. B (Confidential); Pl.’s Br. 16-17 (Confidential).
Court No. 96 - 01 - 00132 Page 11
B. An Allowance for Damage Existing at the Time of
Importation Pursuant to 19 C.F.R. § 158.12An importer may claim an allowance in value for merchandise
that is partially damaged at the time of importation. See 19
C.F.R. § 158.12 (2006).6 In order to successfully claim a §
158.12 allowance, an importer must “establish by a preponderance
of the evidence which entries had defects at the time of
importation.”7 Volkswagen I, 27 CIT at 1208; accord Fabil Mfg.
Co. v. United States, 237 F.3d 1335, 1339 (Fed. Cir. 2001). In
Volkswagen I, this Court was satisfied that Volkswagen could, in
part, link defective merchandise to specific entries. See 27
CIT at 1208, 277 F. Supp. 2d at 1371. While Volkswagen was able
6
Section 158.12 states the following:
Merchandise partially damaged at time of importation.
(a) Allowance in value. Merchandise which is subject
to ad valorem or compound duties and found by the port
director to be partially damaged at the time of
importation shall be appraised in its condition as
imported, with an allowance made in the value to the
extent of the damage.
19 U.S.C. § 158.12.
7
There are actually three requirements for an importer to
successfully claim an allowance under 19 C.F.R. § 158.12: (1)
the importer must show that it contracted for defect-free
merchandise, (2) the importer must link the defective
merchandise to specific entries, and (3) the importer must prove
the amount of the allowance value for each entry. See
Volkswagen I, 27 CIT at 1207, 277 F. Supp. 2d at 1370; Samsung,
23 CIT at 4-6, 35 F. Supp. 2d at 945-46. Volkswagen has already
successfully established that it contracted for “defect-free”
merchandise. See Volkswagen I, 27 CIT at 1207, 277 F. Supp. 2d
at 1370.
Court No. 96 - 01 - 00132 Page 12
to connect evidence of repairs to specific vehicles, and in turn
connect those vehicles to specific entries, it still needed to
develop the factual record to “independently confirm the
validity” of the repair records. Id. This independent
confirmation is necessary to “establish that the defects did
indeed exist at the time of importation.” Id.C. Independent Confirmation of the Validity of the Repair
Records
The Court discussed the “independent confirmation”
requirement in detail in Samsung, 23 CIT at 7-9, 35 F. Supp. 2d
at 947-48. In that case, Samsung presented consumer warranties
as evidence that the subject merchandise was damaged at
importation. See id. at 7, 35 F. Supp. 2d at 947. Samsung’s
warranty only covered repairs for defective merchandise, and not
merchandise damaged through misuse or mishandling. See id. at
8, 35 F. Supp. 2d at 947. In addition, an executive from
Samsung stated via affidavit that under the warranty, only
merchandise with latent defects was repaired or replaced. See
id. The Court found this evidence insufficient. The Court
stated that “[a]lthough the Court has no reason to doubt the
veracity of Samsung’s assertions, without additional,
independent evidence to corroborate the assertions, the Court
cannot verify that the merchandise was actually defective at the
time of importation, as opposed to damaged later through misuse
Court No. 96 - 01 - 00132 Page 13
or mishandling.” Id. The Court went on to describe how a
claimant could prevail on a § 158.12 claim:
[T]o make a section 158.12 claim, a claimant should
provide specific descriptions of the damage or defect
alleged and, in some manner, relate that defective
merchandise to a particular entry. Such descriptions
are necessary because both the Court and Customs must
independently confirm the validity of an allowance
claim. And, descriptions or samples provide a
reasonably objective basis upon which to assess such a
claim. For example, descriptions can be reviewed by
the Court and by independent experts to confirm that
the alleged damage existed at the time of importation,
or that the damage is recognizable as a true
manufacturing defect.
Id. at 8, 35 F. Supp. 2d at 947-48.8
In Saab II, the importer Saab attempted to meet this
evidentiary standard by providing the Court with short
descriptions of each vehicle part or component that was
allegedly defective. 28 CIT at __, 306 F. Supp. 2d at 1283.
The Court again found these insufficient because they were “not
detailed enough for anyone to ascertain whether the alleged
defects existed at the time of importation.” Id. at __, 306 F.
Supp. 2d at 1285. The Federal Circuit affirmed, and elaborated
8
The Court in Samsung applied a “clear and convincing”
evidentiary standard to § 158.12 claims, 23 CIT at 6, 35 F.
Supp. 2d at 946, which is obviously a stricter standard than is
currently applied in these cases. See Fabil Mfg. Co., 237 F.3d
at 1339 (holding that the elements of § 158.12 must be proven by
a preponderance of the evidence). However, the language in the
Samsung cases regarding sufficiency of evidence for § 158.12
claims has been adopted in later cases applying the
preponderance of the evidence standard. The requirement of
independent verification must be met in order to meet the
preponderance of the evidence standard.
Court No. 96 - 01 - 00132 Page 14
on the requirement that the evidence needed to prove defects
existed at the time of importation be independently verifiable.9
See Saab III, 434 F.3d at 1374-75. In light of these
precedents, Volkswagen’s brief descriptions for each repair are
insufficient to permit an objective fact-finder to conclude by a
preponderance of the evidence that the claimed defects existed
at the time of importation.
First, Volkswagen argues that repairs covered by certain
warranties, classified by “claim-types,” are evidence of defects
9
The Saab III court stated the following:
We conclude that although some repairs authorized
under the various warranties may relate to damage that
existed at the time of importation, they do not
necessarily so relate. Saab’s rigorous system for
tracking and auditing warranty repair claims does not
alter this result. That system, which involves
specialized databases that allow Saab to track all
vehicle repairs by VIN and uses three levels of audits
to ensure that dealers are making only appropriate
warranty claims, certainly increases one’s confidence
that Saab’s warranty claims in the aggregate are
generally reliable. Operating as it does, however, by
auditing a limited number of claims from a limited
number of dealers, it provides somewhat less assurance
that any particular warranty claim is valid. We
acknowledge, of course, the probative value of the
kind of statistical assurance that the auditing system
provides, but conclude that our cases’ emphasis on the
need for specificity in allowance claims requires more
than this kind of probabilistic evidence.
Saab III, 434 F.3d at 1374-75.
Court No. 96 - 01 - 00132 Page 15
existing at the time of importation.10 It has therefore listed
all repairs made pursuant to certain “included claim-types” in
Exhibit A. Even if these warranties make it clear that
Volkswagen would be reimbursed by the manufacturer only for
actual manufacturing or design defects in the imported
automobiles, still “it is not clear that all warranty repairs
necessarily indicate damage that existed at the time of
importation as required for an allowance under § 158.12.” Id.
at 1374; accord Samsung, 23 CIT at 8, 35 F. Supp. 2d at 947(holding that evidence of warranty that only covers repairs for
defective merchandise is insufficient to prove § 158.12 claim
without “additional, independent evidence to corroborate”). In
other words, evidence of warranty claims alone is not sufficient
without corroboration, even if the warranty only covers repairs
for design and manufacturing defects.11
10
Volkswagen also argues that every repair that was made
pursuant to a recall is, by definition, a repair of a design
defect that constitutes damage that existed at the time of
importation pursuant to § 158.12. See Pl.’s Br. 30. However,
recall repairs are not “by definition” repairs of damage that
existed at importation, because when the vehicle was ordered and
imported, it may have been manufactured exactly to the
construction specifications requested by Volkswagen. If this is
the case, the vehicle was not damaged at the time of
importation. Thus, the Court cannot conclude simply from the
evidence before it that repairs done pursuant to a recall
constitute evidence of damage that existed at the time of
importation.
11
Volkswagen argues that when evidence of a warranty is
presented, it should be assumed that any repair of that vehicle
Court No. 96 - 01 - 00132 Page 16
Second, Volkswagen discusses the descriptions it has
provided of each repair. The short descriptions in Exhibit A
provide slightly more detail than Saab’s brief descriptions of
repaired parts; however, as Volkswagen recognizes, they are
still insufficient to make a § 158.12 claim. See Pl.’s Br. 20.
For example, VIN [ ]12 corresponds to the following description:
“steering lock/cylinder; stiff (sticks, jams); replaced.” This
short statement does not give the Court or Customs enough
objective, independent and recognizable information to determine
wither the alleged defect existed at the time of importation.
Volkswagen goes on to explain that the Court can further
decipher the vehicle’s damage code by looking at Exhibit B, the
Damage Code Key, to find more information about the nature of
the repair. According to Volkswagen, the Damage Code Key
contains descriptions of “each defect in each part with detail
sufficient to prove that it existed at importation.” Id. 14.
For VIN [ ], the relevant portion of the damage code is [ ].
When these [ ] are cross-referenced with the Damage Code Key,
the Court finds the following statement: “Binding – All moving
within the warranty time period represents a defect that existed
at the time of importation in the absence of intervening events.
See Pl.’s Br. 22. This incorrectly shifts the burden to Customs
to prove the existence of intervening events. The burden is
undoubtedly on Volkswagen to prove the elements of its claim.
12
This VIN No. is found in the file in Exhibit A (Confidential)
for Entry No. 110-1030393-9.
Court No. 96 - 01 - 00132 Page 17
parts which stick, jam, are too tight, seized, locked, difficult
to shift, rubbing, insufficient play, do not engage or disengage
properly. Examples: Seized or scored pistons, door hinges.”
Ex. B 46. This language explains that this particular part was
damaged at the time it was repaired, but it certainly does
nothing to demonstrate, with independent and verifiable
evidence, that a defect existed at the time of importation.
Even the descriptions that use the word “defect,” or
similar words, are not adequate. VIN [ ]13 is described as “oe
power antenna; electrical defects; replaced.” In the Damage
Code Key, this repair is further described as “Electrical
malfunction – Malfunctions in the electrical or electronic
system (where mechanical defects, corrosion or noise cannot be
determined), such as an open or shorted electrical circuit or no
current flow . . . Examples: Alternator not charging, incorrect
indication, flasher inoperative[.]” This description explains
that there was an electrical malfunction, but it does nothing to
verify that the malfunction was caused by a defect that existed
at importation. Volkswagen is asking the Court and Customs to
assume that any repair listed in Exhibit A must be the result of
a latent defect, but the evidence does not compel this
conclusion. Volkswagen does label the repair as a “defect,” but
13
This VIN No. is found in the file in Exhibit A (Confidential)
for Entry No. 110-1030393-9.
Court No. 96 - 01 - 00132 Page 18
this description is merely conclusory. It does not allow an
independent fact-finder to conclude that this repair was
necessary to remedy a defect that more likely than not existed
at the time of importation.
D. The Distinction between Port Repairs and Warranty Repairs
In Saab II, the Court made a distinction between port
repairs and warranty repairs. A “port repair” was performed
“almost immediately after importation,” so the Court was less
concerned “that the repairs might have been made to remedy
damage resulting from intervening circumstances.” Saab II, 28
CIT at __, 306 F. Supp. 2d at 1287. Regarding port repairs,
Saab met its burden of proof with its short, simple descriptions
of the repaired part. On the other hand, a “warranty repair” is
performed at some time after importation. When a repair is not
performed at the time of importation, the claimant must provide
more specific evidence as described above. See Saab III, 434
F.3d at 1374 (holding that in the absence of evidence of
temporal proximity, claimant must provide more than warranty
agreements and more specific descriptions).
In the present case, Volkswagen contends that all repairs
made before the “in-service date” should be considered “port
repairs.” The Court will not adopt this sweeping
generalization. The Court will not assume that any vehicle
repaired before its “in-service date” was unlikely to be damaged
Court No. 96 - 01 - 00132 Page 19
due to intervening circumstances. If Volkswagen wished to
alleviate the Court’s concerns about intervening misuse or
mishandling, Volkswagen should have (1) clearly identified the
vehicle repairs that it likened to the “port repairs” in Saab
II, and (2) demonstrated that the repairs were completed
“immediately” after importation. It did not do this. All the
repairs are lumped together in Exhibit A, and the import dates
are not listed at all.14
IV. CONCLUSION
Volkswagen used a categorical approach to attempt to prove
that over 300,000 defects existed at the time of importation of
certain entries. According to Volkswagen, it has provided
Customs and the Court with a straightforward compilation of
Volkswagen’s defect claims. For any particular repair, if more
description is needed, the Court and Customs need only turn to
the Damage Code Key in Exhibit B (Confidential). However, this
shortcut method is not sufficient to meet the burden set forth
in Saab III. As discussed above, it requires the Court and
Customs to make too many unfounded assumptions about whether any
damage actually existed at the time of importation. Section
14
In its Reply Brief, Volkswagen attached a list of the import
dates for each entry. This last-minute addition does not help
Volkswagen to sufficiently identify, in a manner that is
readable by the Court, which repairs that it considered “port
repairs” because they were completed immediately after
importation. Therefore, Volkswagen has failed to meet its
burden of proof.
Court No. 96 - 01 - 00132 Page 20
158.12 does permit an allowance for any defect that existed at
the time of importation, even when the damage is discovered
later. See Saab III, 434 F.3d at 1371. However, claimants must
keep in mind that “[o]nce Customs has liquidated merchandise, it
can be damaged through a number of causes, including misuse or
mishandling. This makes it difficult, or in some cases
impossible, to identify the root cause of the damage or defect.”
Samsung, 23 CIT at 8, 35 F. Supp. 2d at 947. Volkswagen has
failed to overcome this difficult task with the evidence it has
submitted for trial in this case.15
For the foregoing reasons, judgment will be entered in
favor of the defendant.
/s/ Richard W. Goldberg
Richard W. Goldberg
Senior Judge
Date: March 28, 2007
New York, New York
15
Because Volkswagen has failed to prove that the damage at
issue existed at the time of importation, the Court need not
address the question of proving the value of that damage.
UNITED STATES COURT OF INTERNATIONAL TRADE
VOLKSWAGEN OF AMERICA, INC.,
Plaintiff, Before: Richard W. Goldberg,
Senior Judge
v.
Court No. 96-01-00132
UNITED STATES,
Defendant.
JUDGMENT
Upon consideration of Plaintiff Volkswagen of America,
Inc.’s Brief Demonstrating that its Additional Evidence
Submitted For Trial Herewith Is Sufficient to Prove An Allowance
for Defects, Defendant United States’ Memorandum in Opposition
to Plaintiff’s Brief, Plaintiff’s Reply Brief, and all
accompanying papers, and upon due deliberation, it is hereby:
ORDERED, ADJUDGED AND DECREED that the Court lacks subject
matter jurisdiction over repairs performed after the date of
Volkswagen’s protests; and it is further
ORDERED, ADJUDGED AND DECREED that, as to the remaining
repairs, judgment is entered for Defendant.
IT IS SO ORDERED.
/s/ Richard W. Goldberg
Richard W. Goldberg
Senior Judge
Date: March 28, 2007
New York, New York