Saab Cars Usa, Inc. v. U.S., SLIP OP. 04-3. No. 00-00041.

• Decision Date: 06 January 2004
• Docket Number: No. SLIP OP. 04-3. No. 00-00041.,SLIP OP. 04-3. No. 00-00041.
• Citation: 306 F.Supp.2d 1279
• Parties: SAAB CARS USA, INC., Plaintiff, v. UNITED STATES, Defendant.
• Court: U.S. Court of International Trade

306 F.Supp.2d 1279

SAAB CARS USA, INC., Plaintiff, v. UNITED STATES, Defendant.

No. SLIP OP. 04-3. No. 00-00041.

United States Court of International Trade.

January 6, 2004.

Gibson, Dunn & Crutcher LLP, Washington, DC (Judith A. Lee and Brian J. Rohal) for Plaintiff Saab Cars USA, Inc.

Peter D. Keisler, Assistant Attorney General, and Barbara S. Williams, Acting

Attorney in Charge, Civil Division, Commercial Litigation Branch, United States Department of Justice; Paula Smith, Office of Assistant Chief Counsel, International Trade Litigation, United States Bureau of Customs and Border Protection, for Defendant United States, of counsel.

OPINION

GOLDBERG, Senior Judge.

Saab Cars USA, Inc. ("SCUSA") imports into the United States automobiles from Swedish manufacturer Saab Automobile AB ("Saab Auto"). SCUSA protested the United States Customs Service's¹ ("Customs") liquidation of several entries of automobiles that were appraised at transaction value. In the protests, SCUSA argued that an allowance in value should be granted for defects present in the automobiles at the time of importation. Customs denied SCUSA's protests.

SCUSA timely appealed Customs's denial of those protests to the Court of International Trade on January 20, 2000. On March 6, 2001, SCUSA filed a motion for summary judgment requesting a partial refund of duties for the defective automobiles. Customs filed a cross-motion for summary judgment on June 4, 2001, requesting that the Court dismiss this action. Both parties' motions for summary judgment were denied by the Court on July 14, 2003. In its opinion, the Court disposed of the repairs covered by some protests on jurisdictional grounds, holding that "the Court does not have jurisdiction over the automobiles that were repaired after the date SCUSA filed its protests with Customs." Saab Cars USA, Inc. v. United States, 27 CIT ___, 276 F.Supp.2d 1322, 1329 (CIT 2003). With regard to the remaining repairs, the Court instructed SCUSA that "[w]hat remains for trial is to develop the factual record to `independently confirm the validity' of the repair records in order to establish that the defects did indeed exist at the time of importation." Id. at 1332 (citation omitted).

The parties agreed, in lieu of trial, to submit a factual stipulation to the Court due September 29, 2003. A hearing on the matter was held on October 1, 2003, at which both parties presented their respective arguments before the Court. For the following reasons, the Court holds that SCUSA is entitled to an allowance for its port repair expenses and rejects all other claims presented by SCUSA.

I. BACKGROUND

SCUSA imports into the United States automobiles manufactured by Saab Auto. The automobiles purchased by SCUSA from Saab Auto are subject to a warranty agreement (the "Warranty"). The terms of the Warranty are contained in the Warranty Policy and Procedures Manual dated January 11, 1995, and updated by warranty policy letters. According to SCUSA, the terms of the Warranty reimburse SCUSA for the following specific repair expenses: (1) pre-warranty, (2) new car warranty, (3) emission warranty, (4) perforation warranty, and (5) the importer's own extended warranty. Warranty Manual, Pl.'s Ex. 1 (Confidential) ¶ 4.2.1.

To claim reimbursement from Saab Auto under the terms of the Warranty, the retailer must submit the repairs to SCUSA's AS-400 Warranty System. The AS-400 Warranty System is a database system designed for SCUSA to track the automobile repairs which correspond to each Vehicle Identification Number ("VIN"). The AS-400 Warranty System also runs a series of "edits" to confirm that the repair was subject to the Warranty. In addition, Saab Auto requires SCUSA (along with other importers) to audit dealers' warranty repair claims. Id. ¶ 5.4.6.

At issue in this case are entries of automobiles SCUSA imported from Saab Auto between June of 1996 and July of 1997.² At the time of importation, SCUSA declared the transaction value of the automobiles to be the price it paid Saab Auto for defect-free automobiles.

While the vehicles were still at the port of importation, SCUSA claims it identified defects in certain automobiles. Pl.'s Mot. Summ. J. at 13. These defects were repaired by SCUSA at the port. Id. at 13-14. The costs associated with these repairs are termed "port repair expenses" and are documented either through the AS-400 Warranty System or through invoices sent to SCUSA. Id. at 14. For each repair performed, the computer printout lists the protest number, the entry number, the VIN, the dealer, the claim number, the repair date, the object code, a brief description of the repair,³ and the total paid for the repair. Pl.'s Ex. 15 (Confidential). The port repair expenses claimed by SCUSA total $[ ].⁴

Prior to expiration of the Warranty period, but after the vehicles were shipped from the port, additional defects were discovered in the vehicles. Pl.'s Mot. Summ. J. at 14. To restore the vehicles to defect-free condition, the dealers repaired the vehicles. Id. The costs associated with these repairs represent SCUSA's "warranty expenses." Id. As with the port repair expenses, SCUSA has a computer printout that lists the protest number, the entry number, the VIN, the dealer, the claim number, the repair date, the object code, a brief description of the repair, and the total paid for each repair that constitutes a warranty expense. Pl.'s Ex. 16 (Confidential). The warranty expenses claimed by SCUSA total $[ ].⁵

In addition to the computer printouts provided by SCUSA in Exhibits 15 and 16, SCUSA also included with its Motion for Summary Judgment five sample computer claim form submitted by dealers to SCUSA using the AS-400 Warranty System.⁶ Pl.'s Ex. 21 (Confidential). These computer claim forms are considerably more detailed than the printouts contained in Exhibits 15 and 16. The pertinent portions of the computer claim forms list the claim number; the VIN; the model; the "in service date"; the repair date; the mileage on the vehicle at the time of the repair; whether the repair was the result of a recall; a breakdown of the repair costs for parts and labor; and a more detailed description of the customer's complaint, the type of defect, and the repair(s) performed. Id. SCUSA failed to provide computer claim forms for every repair at issue "because of the prohibitive cost of producing all of the records." Pl.'s Reply at 19 n. 10. Instead, SCUSA simply submitted computer printouts of all warranty and port repair expenses.

Customs liquidated the entries, appraising the vehicles at their transaction values. SCUSA protested the liquidations, requesting allowances under 19 C.F.R. § 158.12 for "damage [or] latent manufacturing defects." These protests were denied by Customs on August 9, 1999. On January 20, 2000, SCUSA filed a timely summons before the Court, and it filed its complaint on August 11, 2000. The parties subsequently filed motions for summary judgment, and the Court denied both parties' motions on July 14, 2003.

In its Opinion, the Court ruled that although SCUSA's protests were valid and jurisdiction was therefore proper under 28 U.S.C. § 1581(a), the Court nonetheless lacked jurisdiction over two groups of entries: those which Customs and SCUSA agreed were not protested in a timely manner,⁷ and those encompassing automobiles whose defects had not been repaired before the protests were filed.⁸ Next, after determining that 19 C.F.R. § 158.12 does apply to defects existing at the time of importation, regardless of whether or not those defects were discovered by the port director at the time of importation, the Court delved into the three requirements for an importer successfully to claim an allowance under section 158.12, as set forth in Samsung Electronics America, Inc. v. United States, 23 CIT 2, 35 F.Supp.2d 942 (1999), aff'd, 195 F.3d 1367 (Fed.Cir.1999). The Court found that SCUSA had easily satisfied the first requirement of showing that it contracted for "defect-free" merchandise. Saab Cars USA, Inc. v. United States, 27 CIT ___, 276 F.Supp.2d at 1332-33 (2003). With regard to the second and third requirements, the Court held that SCUSA had shown material issues of fact as to both, which needed to be resolved at trial. According to the Court, "[w]hat remains for trial is to develop the factual record to `independently confirm the validity' of the repair records in order to establish that the defects did indeed exist at the time of importation." Id. at 1332 (citation omitted). Likewise, "[t]rial is necessary to independently verify the amount of the allowances." Id. at 1332.

In lieu of trial, the parties opted to submit an agreed stipulation of facts to the Court. On September 29, 2003, SCUSA submitted its Factual Stipulation in Lieu of Trial, along with affidavits from its expert witnesses, and Customs provided a declaration from its expert witness. The Court held a hearing on the matter on October 1, 2003. Because the Court previously concluded that SCUSA filed valid protests, jurisdiction is proper pursuant to 28 U.S.C. § 1581(a). See id. at 8-16 (analyzing the validity of SCUSA's protests).

II. STANDARD OF REVIEW

Customs's appraisal decisions ordinarily are entitled to a statutory presumption of correctness. 28 U.S.C. § 2639(a)(1). However, when a question of law is before the Court, the statutory presumption of correctness does not apply. Samsung, 23 CIT at 5, 35 F.Supp.2d at 945-46 (citing Universal Elecs., Inc. v. United States, 112 F.3d 488, 492 (Fed.Cir.1997)). Here, the only question before the Court is a question of law: What type of evidence is sufficient to satisfy Samsung's instruction that, to prevail on a section 158.12 claim, an importer must proffer "objective and verifiable evidence with some semblance of specificity"? Id. at 8, 35 F.Supp.2d at 947. Since a question of law is at issue, the usual statutory presumption of correctness afforded Customs's appraisal decisions does...