CAFC Grants Duty Allowance for Port Repair Expenses, Denies it for Warranty Expenses, for Defective Vehicles
In Saab Cars USA, Inc. v. U.S., the Court of Appeals for the Federal Circuit (CAFC) affirmed the Court of International Trade's (CIT's) decision to grant claims for duty allowances for port repair expenses and deny claims (except for one claim involving three vehicles) for duty allowances for warranty expenses.
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(Saab USA purchased vehicles from Saab Sweden. Some defects were found at the place of importation (port repair expenses). Other defects were discovered after the cars had been shipped but before the expiration of warranty (warranty expenses). Saab filed protests with Customs seeking allowance against import duties for the value of both of these repair expenses. Customs denied these protests, and Saab brought the claims before the CIT.
The CIT approved the port repair expenses, but rejected all but one of Saab's warranty expense claims - even though the same type of evidence was submitted for each. According to the CIT, the rejected claims failed to meet the last two of the three requirements necessary for an importer to successfully claim an allowance under 19 CFR 158.12 (merchandise partially damaged at the time of importation) - i) show that it contracted for "defect-free" merchandise, ii) link the defective merchandise to specific entries, and iii) prove the amount of the allowance for each entry.)
Port repair expenses. With respect to port repair expenses, the CIT granted Saab's claims, because among other things, the repairs were made almost immediately after importation. Therefore, the CIT found that Saab is not required to provide defect descriptions with the same degree of specificity as required for its warranty expenses. The CAFC upheld the CIT's conclusion and its granting of these Saab claims.
Warranty expenses. With respect to warranty expenses, the CIT concluded that Saab had failed to satisfy its burden to link the defective merchandise to specific entries, and to prove the amount of the allowance for each entry, as the descriptions provided by Saab with respect to most of its claims were not detailed enough for anyone to ascertain whether the alleged defects existed at the time of importation.
The CIT therefore denied Saab's claims for duty allowances for warranty expenses (with the exception of one claim for three vehicles for which additional information was provided).
On appeal, the CAFC determined that Saab's various warranty and warranty repair spreadsheet evidence did not provide the assurance that any particular warranty claim was valid. As a result, Saab did not meet its burden of proving that the warranty repair expenses were incurred to repair defects in existence at importation. The CAFC therefore affirmed the CIT's denial of duty allowances for warranty expenses.
(See ITT's Online Archives or 03/22/04 news, 04032230, for BP summary of the CIT's original ruling in this case.
See ITT's Online Archives or 09/05/03 news, 03090525, for BP summary of the CIT's ruling that a trial was needed to determine this matter.)
CIT Slip Op. 04-3 (dated 01/06/04) available at http://www.cit.uscourts.gov/slip_op/Slip_op04/slip%2004-3.pdf
CAFC Docket 04-1268 (dated 01/17/06) available athttp://www.fedcir.gov/opinions/04-1268.pdf