Volkswagen of Am., Inc. v. United States , 2009 CIT 31 ( 2009 )

Slip Op. 09-31
UNITED STATES COURT OF INTERNATIONAL TRADE
VOLKSWAGEN OF AMERICA, INC., Before: Richard W. Goldberg,
Senior Judge
Plaintiff,
v. Court No. 96-00132
UNITED STATES,
Defendant.
OPINION
[Judgment for Defendant.]
Dated: April 15, 2009
Law Offices of Thomas J. Kovarcik (Thomas J. Kovarcik), for
Plaintiff Volkswagen of America, Inc.
Michael F. Hertz, Acting Assistant Attorney General; Barbara S.
Williams, Attorney in Charge, International Trade Field Office,
Commercial Litigation Branch, Civil Division, U.S. Department of
Justice.
GOLDBERG, Senior Judge: This matter is before the Court
following the Federal Circuit’s remand in Volkswagen of America,
Inc. v. United States, 540 F.3d 1324 (Fed. Cir. 2008). The
narrow issue left before the court is whether repairs made
pursuant to federal emissions recalls establish that these
defects existed at the time of importation, and in turn, entitle
Volkswagen of America, Inc. (“Volkswagen”) to an allowance for
Court No. 96-000132 Page 2
the value of these repairs. For the foregoing reasons, we find
that Volkswagen is entitled to an allowance for the value of its
repairs made in response to federal emissions recalls.
I. DISCUSSION
Our decision in Volkswagen of America, Inc. v. United
States addressed the company’s entitlement to reductions in the
appraised values of its imported merchandise for repairs made to
latent defects under 19 C.F.R. § 158.12, which permits an
allowance for damage existing at the time of importation. 31
CIT __, 484 F. Supp. 2d 1314 (2007). In this case, we held that
Volkswagen’s evidence was insufficient to establish that its
various repair claims related to defects existing at the time of
importation. Id. at 1321-22. The Federal Circuit affirmed
this decision in-part, and reversed-in-part—finding that
Volkswagen was entitled to an allowance for warranty repairs
made in response to government-mandated safety recalls. In the
Federal Circuit’s view, the “very nature of a government
mandated safety recall establish[ed] the high likelihood that
any defects repaired pursuant to the recall existed at the time
of importation.” Volkswagen, 540 F.3d at 1336. The Federal
Circuit further ordered this Court to examine whether “state law
Court No. 96-000132 Page 3
1
recalls and the FTC recall exhibit [this] same reliability.”
Id. For the foregoing reasons, we find that Volkswagen is
entitled to an allowance because the nature of the federal
emissions recalls similarly establishes a high likelihood that
the defects existed at the time of importation.
In Volkswagen, the Federal Circuit based its conclusion
that the applicable defects existed at the time of importation
on the fact that federal law prohibits the importation of
automobiles not in compliance with federal safety standards.
540 F.3d at 1335-36. Federal law similarly prohibits “the
importation into the United States, of any new motor vehicle or
new motor vehicle engine . . . unless such vehicle or engine is
covered by a certificate of conformity [with federal emissions
laws].” 42 U.S.C. § 7522(a)(1) (2000). Further, the similarity
of federal safety and emissions-based recalls is demonstrated by
the fact that the reporting provisions for emissions-based
recalls grafts on to the reporting system utilized for safety-
recalls - requiring a manufacturer to file a report “in
1
Volkswagen concedes that the only recalls that need to be
analyzed on remand are federal emissions recalls for two
reasons. First, Volkswagen’s FTC “claim” does not reflect a
“recall”, but rather a “claim” for a warranty repair outside the
scope of the Federal Circuit’s holding. Second, only California
had the right to regulate its automobile emissions at the time
of these entries, and thus, “state recalls” or “state law
emissions recalls” could refer only to California emissions
recalls, and Volkswagen made no allowance claims pursuant to
emissions recalls issued by California.
Court No. 96-000132 Page 4
accordance with procedures established by the manufacturer to
identify safety related defects that a specific emissions-
related defect exists.” 40 C.F.R. § 85.1903. The required
content of the reports are also very similar. Compare 40 C.F.R.
§ 85.1903, with 49 C.F.R. § 573.6.
United States Customs and Border Protection (“Customs”),
maintains that repairs made pursuant to a federal emissions
recall do not establish that the defects existed at importation.
To support its argument, Customs relies on an EPA report on
emissions-based recalls and voluntary service repairs.
Compliance & Innovative Strategies Div., Office of Transp. & Air
Quality, EPA, Annual Summary of Emissions-Related Recall and
Voluntary Service Campaigns Performed on Light-Duty Vehicles and
Light-Duty Trucks (2008), http://www.epa.gov/otaq/cert/recall/
420b08012.pdf. Customs cites a 2007 service action for the New
Beetle, GTI, Golf, and Jetta models (EPA # 2814, Manufacturer
Recall 2007/04/10), which states that “[a]n incorrect
interpretation of information in the electronic parts catalogue
directed dealership technicians to install the wrong catalyst on
these particular vehicles.” Id. at 8. In Customs’ view, the
fact that Volkswagen had to initiate a service action to fix
mistakes made by its dealers demonstrates that not all repairs
due to federal emissions-based recalls relate to defects
existing at the time of importation. This example, however, is
Court No. 96-000132 Page 5
misplaced as the service action Customs is citing is not an
emissions-based recall, but instead a voluntary service action
to fix a repair, which has no bearing on the emissions-based
recalls at issue in this case. Accordingly, this Court finds
that there is a similarly high likelihood that any repairs due
to federal emissions recalls relate to defects existing at
importation, and in turn, that Volkswagen is entitled to its
claimed allowance.
II. CONCLUSION
In light of the foregoing, this Court grants final judgment
to Volkswagen in favor of its claims for an allowance for
repairs made pursuant to federal emissions-based recalls.
/s/ Richard W. Goldberg
Richard W. Goldberg
Senior Judge
Date: April 15, 2009
New York, New York
ERRATA
On Slip Op. 09-31:
On Page 1: in the caption, “[Judgment for Defendant.]” should
be replaced with “[Judgment for Plaintiff.]”
Dated: April 16, 2009