BRAL Corp. v. United States

Slip Op. 23-
UNITED STATES COURT OF INTERNATIONAL TRADE
BRAL CORPORATION,
Plaintiff,
Before: Jennifer Choe-Groves, Judge
v.
Court No. 20-00154
UNITED STATES,
Defendant.
OPINION AND ORDER
[Denying Plaintiff’s motion for summary judgment and denying Defendant’s
cross-motion for summary judgment.]
Dated: March 20, 2023
Robert Kevin Williams, Clark Hill PLC, of Chicago, IL, for Plaintiff BRAL
Corporation.
Justin R. Miller, Attorney-in-Charge, International Trade Field Office, Aimee Lee,
Assistant Director, and Alexander J. Vanderweide, Senior Trial Counsel,
Commercial Litigation Branch, Civil Division, U.S. Department of Justice, of New
York, N.Y., for Defendant United States. With them on the brief were Brian M.
Boynton, Principal Deputy Assistant Attorney General, and Patricia M. McCarthy,
Director. Of counsel on the brief was Sabahat Chaudhary, Office of the Assistant
Chief Counsel, U.S. Customs and Border Protection.
Choe-Groves, Judge: Plaintiff BRAL Corporation (“Plaintiff” or “BRAL”)
filed this action pursuant to 28 U.S.C. § 1581(a) contesting the denial of its protests
by U.S. Customs and Border Protection (“Customs”) concerning the assessment of
Court No. 20-00154 Page 2
duties on twelve entries of plywood imported from the People’s Republic of China
(“China”). See Compl. at 1, ECF No. 7. Before the Court is Plaintiff’s Motion for
Summary Judgment (“Plaintiff’s Motion”). Pl.’s Mot. Summary J., ECF No. 27.
Also before the Court is Defendant’s Cross-Motion for Summary Judgment and
Response in Opposition to Plaintiff’s Motion for Summary Judgment
(“Defendant’s Cross-Motion”). Def.’s Cross-Mot. Summary J. Resp. Opp’n Pl.’s
Mot. Summary J. (“Def.’s Cross-Mot.”), ECF No. 28. Plaintiff filed Plaintiff’s
Response in Opposition to Defendant’s Cross-Motion for Summary Judgment.
Pl.’s Resp. Opp’n Def.’s Cross-Mot. Summary J., ECF No. 29. Defendant filed
Defendant’s Reply to Plaintiff’s Opposition to Defendant’s Cross-Motion for
Summary Judgment. Def.’s Reply Pl.’s Opp’n Def.’s Cross-Mot. Summary J.,
ECF No. 30. For the following reasons, the Court denies Plaintiff’s Motion for
Summary Judgment and denies Defendant’s Cross-Motion for Summary Judgment.
PROCEDURAL BACKGROUND
The Court presumes familiarity with the procedural history and recounts
briefly the procedural history relevant to this opinion. See BRAL Corp. v. United
States, 45 CIT __, __, 527 F. Supp. 3d 1358, 1360 (2021). This action concerns
twelve entries of plywood imported from China by Plaintiff between 2017 and
2018. See Summons at 1–3, ECF No. 1; Compl. at 1. Plaintiff filed Protest No.
4101-19-100494 challenging the liquidation of three entries. Protest No. 4101-19-
Court No. 20-00154 Page 3
100494, ECF No. 6-1. Plaintiff filed Protest No. 4101-19-100808 challenging the
liquidation of nine entries. Protest No. 4101-19-100808, ECF No. 6-2. Both
protests alleged that the subject plywood imported from China had a latent defect
that caused a melamine coating to separate from the subject plywood, warranting a
reduced value due to defective merchandise pursuant to 19 C.F.R. § 158.12(a). Id.;
Protest No. 4101-19-100494. Customs denied both protests on March 5, 2020.
Protest No. 4101-19-100494; Protest No. 4101-19-100808; see also Summons at 3.
UNDISPUTED FACTS
The Parties have submitted separate statements of undisputed material facts.
Pl.’s R. 56.3 Statement Material Facts Not in Dispute (“Pl.’s SMF”), ECF No 27-2;
Def.’s R. 56.3 Statement Undisputed Material Facts (“Def.’s SMF”), ECF No. 28.
Upon review of Plaintiff’s Rule 56.3 Statement of Material Facts Not in Dispute,
Defendant’s Rule 56.3 Statement of Undisputed Material Facts, and supporting
exhibits, the Court finds the following undisputed material facts:
Plaintiff imported the subject plywood from a Chinese manufacturer. Pl.’s
SMF ¶ 3 at 1; Def.’s SMF ¶¶ 12 at 12; Def.’s Resp. Pl.’s R. 56.3 Statement
Material Facts Not in Dispute (“Def.’s SMF Resp.”) ¶ 3 at 1, ECF No. 28; Pl.’s
Resp. Def.’s R. 56.3 Statement Material Facts Not in Dispute (“Pl.’s SMF Resp.”)
¶¶ 12 at 1, ECF No. 29-1. The subject plywood consisted of seven-ply eucalyptus
with the layers adhered by glue applied by heat and pressure, a hardwood face, and
Court No. 20-00154 Page 4
a melamine coating applied to the face by an exterior glue. Pl.’s SMF ¶ 2 at 1;
Def.’s SMF ¶ 1 at 1; Def.’s SMF Resp. ¶ 2 at 1; Pl.’s SMF Resp. ¶ 1 at 1. The
Chinese manufacturer made, laminated, applied a hardwood face, and sanded the
plywood to the desired dimensions. Def.’s SMF ¶ 2 at 12; Pl.’s SMF Resp. ¶ 2 at
1. The Chinese manufacturer used a subcontractor for additional laminating and
gluing the melamine coating to the face of the plywood. Def.’s SMF ¶ 2 at 12;
Pl.’s SMF Resp. ¶ 2 at 1. Plaintiff expected that the glue used to apply the
melamine coating would be a waterproof phenolic resin, but the specific type of
glue used was unknown to the Parties. Def.’s SMF ¶¶ 34 at 2; Pl.’s SMF Resp.
¶¶ 34 at 1. The subject plywood was produced in three sizes: 48” x 98” x ¾”
(“48” sheets”), 15” x 98” x ¾” (“15” panels”), and 11” x 98” x ¾” (“11” panels”).
Pl.’s SMF ¶ 1 at 1; Def.’s SMF ¶ 8 at 3; Def.’s SMF Resp. ¶ 1 at 1; Pl.’s SMF
Resp. ¶ 8 at 1; see Pl’s SMF at Ex. A (“Sample Invoices”), ECF No. 27-2. After
importation, Plaintiff sold the subject plywood to Transglobal Door, Inc.
(“Transglobal”) for use in the manufacturing of aftermarket roll-up doors and door
panels for trucks, trailers, commercial vehicles, and delivery vehicles. Pl.’s SMF
¶¶ 35 at 1; Def.’s SMF ¶ 6 at 2; Def.’s Resp. ¶¶ 35 at 12; Pl.’s SMF Resp. ¶ 6
at 1.
Court No. 20-00154 Page 5
Development of the Chinese-made plywood began in approximately 2015 as
a replacement for more expensive domestic plywood previously used by
Transglobal in the manufacture of aftermarket roll-up doors and door panels. Pl.’s
SMF ¶ 6 at 2; Def.’s SMF ¶ 12 at 3; Def.’s SMF Resp. ¶ 6 at 2; Pl.’s SMF Resp.
¶ 12 at 2. The development process involved the testing of a variety of plywood
samples of various components and woods, including poplar, birch, and pine,
produced by the Chinese manufacturer. Def.’s SMF ¶ 14 at 4; Pl.’s SMF Resp. at
¶ 14 at 2. Testing occurred over a six-month period and included subjecting the
plywood samples to hundreds of hours in a salt-spray cabinet, hanging samples
outside for multiple months, and manufacturing the samples into roll-up doors and
installing the doors on trucks used by community organizations to gauge
performance. Pl.’s SMF ¶¶ 911 at 2; Def.’s SMF ¶ 14 at 4; Def.’s Resp. ¶ 911
at 23; Pl.’s SMF Resp. ¶ 14 at 2. A sample was selected by the end of 2016 for
production, though Plaintiff and Transglobal continued to import and test
alternative samples of Chinese-made plywood after importation of the subject
eucalyptus plywood began. Def.’s SMF ¶¶ 1516 at 45; Pl.’s SMF Resp.
¶¶ 1516 at 2.
Plaintiff did not open or inspect containers of the subject plywood when the
containers arrived in the United States and forwarded the containers to
Court No. 20-00154 Page 6
Transglobal. Def.’s SMF ¶ 18 at 5; Pl.’s SMF Resp. ¶ 18 at 2. Transglobal
inspected the subject plywood for correct thickness and size but did not test
samples of the subject plywood in a salt-spray cabinet or for quality of glue. Def.’s
SMF ¶ 18 at 5; Pl.’s SMF Resp. ¶ 18 at 2. Manufacturing replacement roll-up
doors and door panels required Transglobal to drill into the subject plywood’s
laminated face and to rivet hardware onto the plywood. Def.’s SMF ¶ 19 at 5; Pl.’s
SMF Resp. ¶ 19 at 3. Roll-up doors and door panels were measured, inspected for
surface defects, packaged, and shipped to customers within five days of
completion. Def.’s SMF ¶ 19 at 5; Pl.’s SMF Resp. ¶ 19 at 3. Installation was
done by the individual customer. Def.’s SMF ¶ 19 at 5; Pl.’s SMF Resp. ¶ 19 at 3.
Transglobal offered a warranty on the roll-up doors and door panels manufactured
with the subject plywood covering any delamination issue that occurred within one
year of installation. Def.’s SMF ¶ 20 at 5; Pl.’s SMF Resp. ¶ 20 at 3.
Transglobal began selling roll-up doors and door panels made from Chinese
manufactured plywood in January 2017. Def.’s SMF ¶ 21 at 6; Pl.’s SMF Resp.
¶ 21 at 3. In approximately July 2017, Transglobal began using the subject
plywood at issue in this litigation to manufacture roll-up doors and door panels.
Pl.’s SMF ¶ 14 at 2; Def.’s SMF Resp. ¶ 14 at 3. In May 2017, Transglobal began
to receive warranty claims from customers complaining that melamine faces were
detaching from roll-up doors and door panels. Pl.’s SMF ¶ 16 at 3; Def.’s SMF
Court No. 20-00154 Page 7
¶¶ 2223 at 6; Def.’s SMF Resp. ¶ 16 at 3; Pl.’s SMF Resp. ¶¶ 2223 at 3; see also
Pl.’s SMF ¶ 15 at 3; Def.’s SMF Resp. ¶ 15 at 3. Between May 9, 2017 and
February 3, 2021, Transglobal received 161 warranty claims for delaminated doors
and 171 warranty claims for delaminated panels. Def.’s SMF ¶ 23 at 6; Pl.’s SMF
Resp. ¶ 23 at 3. The manufacturing of the roll-up doors and door panels associated
with the warranty claims used 1,298 11” and 15” panels and 432⅔ 48” sheets.
Def.’s SMF ¶ 23 at 6; Pl.’s SMF Resp. ¶ 23 at 3. Transglobal speculated that the
allegedly defective plywood began to arrive in the United States in May or July
2017 and was manufactured into roll-up doors and door panels that were first sold
in October or November 2017. Def.’s SMF ¶ 22 at 6; Pl.’s SMF Resp. ¶ 22 at 3.
Transglobal did not become aware of problems with the subject plywood until
March or April 2018. Def.’s SMF ¶ 24 at 6; Pl.’s SMF Resp. ¶ 24 at 3.
Transglobal continued to manufacture and sell roll-up doors and door panels made
with Chinese-manufactured plywood until as late as October 2018. Def.’s SMF
¶ 25 at 6; Pl.’s SMF Resp. ¶ 25 at 3.
There were neither purchase orders for the subject plywood nor documents
or communications from Plaintiff to the Chinese manufacturer providing the
specific quantity and sizes or the requirements and components of the subject
plywood. Def.’s SMF ¶ 10 at 3; Pl.’s SMF Resp. ¶ 10 at 2. The twelve entries at
issue in this litigation included 7,889 48” sheets, 30,238 15” panels, and 5,616 11”
Court No. 20-00154 Page 8
panels. Def.’s SMF ¶ 32 at 8; Pl.’s SMF Resp. ¶ 32 at 3. Transglobal used
5,900.86 48” sheets, 10,334.44 15” panels, and 680.30 11” panels to manufacture
roll-up doors or door panels. Def.’s SMF ¶ 32 at 8; Pl.’s SMF Resp. ¶ 32 at 3.
Plaintiff and Transglobal believed that the delamination issue was the result
of Plaintiff’s Chinese manufacturer or its subcontractor changing to a lower quality
glue to attach the melamine coating to the subject plywood that became ineffective
after being subjected to the freezing temperatures of winter and the subsequent
thaw and drying of spring. Def.’s SMF ¶ 26 at 67; Pl.’s SMF Resp. ¶ 26 at 3. An
undated “Letter of Statement” from Linyi Feixian Plywood Factory1 to Transglobal
conceded that Linyi Feixian Plywood Factory had determined that “the glue
supplier” had lowered the quality of glue due to increasing costs. Pl.’s SMF ¶ 18
at 3; Def.’s SMF ¶ 27 at 7; Def.’s SMF Resp. ¶ 18 at 4; Pl.’s SMF Resp. ¶ 27 at 3;
Pl.’s SMF at Ex. L (“Linyi Feixian Plywood Factory’s Letter of Statement”).
Plaintiff ceased to import plywood from China in June 2018. Def.’s SMF ¶ 28 at
7; Pl.’s SMF Resp. ¶ 28 at 3.
Though the Chinese manufacturer offered to replace the delaminated
plywood, which is customary in the industry, neither Plaintiff nor Transglobal
requested replacement plywood. Def.’s SMF ¶ 29 at 7–8; Pl.’s SMF Resp. ¶ 29 at
1
It is not clear from the evidence before the Court if Linyi Feixian Plywood
Factory is the Chinese manufacturer of the plywood.
Court No. 20-00154 Page 9
3. Plaintiff and Transglobal did not recover any costs from and did not file a legal
action against the Chinese manufacturer or the supplier of the glue. Def.’s SMF
¶ 30 at 8; Pl.’s SMF Resp. ¶ 30 at 3. The subject plywood was not insured and
Transglobal did not make a claim to its product liability insurer for the products
manufactured with the subject plywood. Def.’s SMF ¶ 31 at 8; Pl.’s SMF Resp.
¶ 31 at 3. At the direction of counsel, Plaintiff and Transglobal did not attempt to
resell any of the unused subject plywood. Def.’s SMF ¶ 36 at 9; Pl.’s SMF Resp.
¶ 36 at 3. Plaintiff claimed an 18 percent salvage value based on the value
provided to Transglobal’s President, Mark Schroeder, by Transglobal’s domestic
lumber supplier for the cost to purchase non-grade marine lumber for the making
of crates and skids. Def.’s SMF ¶ 34 at 8–9; Pl.’s SMF Resp. ¶ 34 at 3. Schroeder
later conceded that the wholesale or retail salvage value of the imported plywood
would likely be 2530 percent higher today. Def.’s SMF ¶ 35 at 9; Pl.’s SMF
Resp. ¶ 35 at 3; Def.’s Cross-Mot. at Ex. C Deposition Transcript of Mark
Schroeder (“Schroeder Depo.”) at 166–67, ECF No. 28-3.
Customs liquidated the entries and appraised the subject plywood on the
basis of transaction value pursuant to 19 U.S.C. § 1401a(a)(1)(A), assessing an ad
valorem duty rate. Pl.’s SMF ¶ 22 at 3; Def.’s SMF Resp. ¶ 22 at 5. Plaintiff
protested the liquidation, arguing that the appraisal should be made with an
allowance for the value of the defective merchandise pursuant to 19 C.F.R.
Court No. 20-00154 Page 10
§ 158.12(a). Pl.’s SMF ¶ 23 at 4; Def.’s SMF Resp. ¶ 23 at 5; Protest No. 4101-
19-100494; Protest No. 4101-19-100808. Customs denied Plaintiff’s protests.
Pl.’s SMF ¶ 27 at 4; Def.’s SMF Resp. ¶ 27 at 6.
JURISDICTION AND STANDARD OF REVIEW
The Court has jurisdiction pursuant to 28 U.S.C. § 1581(a). The Court will
grant summary judgment if the movant shows that there is no genuine dispute as to
any material fact and the movant is entitled to judgment as a matter of law. USCIT
R. 56(a). To raise a genuine issue of material fact, a party cannot rest upon mere
allegations or denials and must point to sufficient supporting evidence for the
claimed factual dispute to require resolution of the differing versions of the truth at
trial. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248–49 (1986); Barmag
Barmer Maschinenfabrik AG v. Murata Mach., Ltd., 731 F.2d 831, 835–36 (Fed.
Cir. 1984).
LEGAL STANDARD
Plaintiff entered the subject plywood based on transaction value pursuant to
19 U.S.C. § 1401a(a)(1)(A). Compl. at 3. Plaintiff’s Complaint argues that
Customs erred in denying Plaintiff’s protests and in not granting an allowance
pursuant to 19 C.F.R. § 158.12(a) reducing the appraised value of the subject
plywood to 18 percent of the original value. Id. at 3. 19 C.F.R. § 158.12(a)
provides that: “[m]erchandise which is subject to ad valorem or compound duties
Court No. 20-00154 Page 11
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 C.F.R. § 158.12(a). The U.S. Court of
Appeals for the Federal Circuit (“CAFC”) has recognized that latent manufacturing
defects can qualify as “‘damage’ for purposes of the regulation.” Volkswagen of
Am., Inc. v. United States, 540 F.3d 1324, 1331 (Fed. Cir. 2008); see also Saab
Cars USA, Inc. v. United States, 434 F.3d 1359, 1371 (Fed. Cir. 2006). In order to
claim an allowance under 19 C.F.R. § 158.12(a), “an importer must: (1) show that
it contracted for ‘defect-free’ merchandise; (2) link the defective merchandise to
specific entries; and (3) prove the amount of the allowance for each entry.” Saab
Cars USA, Inc., 434 F.3d at 136465 (citing Samsung Elecs. Am., Inc. v. United
States (“Samsung Electronics I”), 106 F.3d 376, 37980 (Fed. Cir. 1997) and
Samsung Elecs. Am., Inc. v. United States (“Samsung Electronics II”), 195 F.3d
1367, 136869 (Fed. Cir. 1999)).
DISCUSSION
Plaintiff argues that it can satisfy each of the required elements for an
allowance under 19 C.F.R. § 158.12(a). Pl.’s Mem. Points & Auth. Supp. Pl.’s
Mot. Summary J. (“Pl.’s Br.”) at 47, ECF No. 27-1. Defendant contends that
Plaintiff is unable to satisfy any of the requirements for an allowance under 19
Court No. 20-00154 Page 12
C.F.R. § 158.12(a) and that this action should be dismissed. Def.’s Mem. Supp.
Cross-Mot. Summary J. Resp. Opp’n to Pl.’s Mot. Summary J. (“Def.’s Br.”) at
1225, ECF No. 28.
I. Contracted for Defect-Free Merchandise
The first element of 19 C.F.R. § 158.12(a) requires Plaintiff to establish that
it contracted for defect-free merchandise. Though no written contract has been
provided detailing the specifications desired by Plaintiff for the subject plywood,
Plaintiff contends that the Court can infer from the facts of the case that Plaintiff
expected the Chinese manufacturer to provide defect-free plywood. Pl.’s Br. at 5–
6; Pl.’s Resp. Opp’n Def.’s Cross-Mot. Summary J. (“Pl.’s Resp.”) at 2, ECF No.
29. Plaintiff argues that the process of selecting a specific Chinese manufacturer
and plywood involved testing and the installation of roll-up doors made with the
sample plywood on vehicles to monitor performance under actual environmental
conditions. Pl.’s Br. at 56. Plaintiff asserts that orders of larger quantities of
plywood from the Chinese manufacturer following these tests relied on an
expectation that subsequent plywood would meet the same standards as the
samples. Id. at 6.
Defendant argues that no documents exist providing product specifications
communicated between Plaintiff, Transglobal, and the Chinese manufacturer.
Def.’s Br. at 1415. Defendant contends that even after Plaintiff and Transglobal
Court No. 20-00154 Page 13
completed testing of the plywood samples, there was no memorialization in writing
that future shipments would exactly match those tested in every specification. Id.at 1516. Defendant contends that Plaintiff’s testing of plywood samples was not
conducted under all actual environmental conditions and did not include exposure
to a winter freeze or spring thaw. Def.’s SMF Resp. ¶ 10 at 23.
Plaintiff asserts that the Court should infer that Plaintiff contracted for
defect-free merchandise when the samples were tested and orders were placed
based on those tests. Plaintiff essentially asks the Court to determine if a contract
for defect-free merchandise existed between Plaintiff and the Chinese
manufacturer based on an implied contract not memorialized in writing. “Whether
a contract exists is a mixed question of law and fact.” See Barron Bancshares, Inc.
v. United States, 366 F.3d 1360, 1368 (Fed. Cir. 2004). In this case, a genuine
issue of material fact exists regarding whether there was a contract, implied or
otherwise, for defect-free plywood. In Samsung Electronics America, Inc. v.
United States (“Samsung I”), 106 F.3d 376 (Fed. Cir. 1997), the CAFC noted in
considering whether a contract for defect-free goods existed that “[i]n interpreting
a written contract, the intent of the parties, for instance as evidenced by the written
instruments forming the contract, is of primary concern.” Id. at 379. Giving
similar weight to the intentions of the Plaintiff and the Chinese manufacturer in
this case and considering their actions, the facts are disputed as to whether Plaintiff
Court No. 20-00154 Page 14
and the Chinese manufacturer intended for the subject plywood to conform to
certain specifications, to remain unchanged throughout the term of the agreement,
and to be defect-free. The Parties agree that the subject merchandise was
developed according to certain specifications, was tested extensively, and was
produced based on samples. Pl.’s SMF ¶ 9–11 at 2; Def.’s SMF ¶¶ 14–16 at 4–5;
Def.’s Resp. ¶¶ 911 at 23; Pl.’s SMF Resp. ¶¶ 14–16 at 2. The Parties disagree,
however, as to whether an agreement existed that the subject merchandise would
be manufactured according to certain specifications. Thus, because a genuine issue
of material fact exists as to whether Plaintiff contracted for defect-free goods,
summary judgment is not warranted for either Party on the first element.
II. Linking Defective Merchandise to Specific Entries
The second element of 19 C.F.R. § 158.12(a) requires Plaintiff to link the
defective merchandise to specific entries. Plaintiff contends that it is not required
to link specific products to specific entries because Plaintiff alleges that all
plywood imported after May 2017 was defective. Pl.’s Br. at 6. Plaintiff claims
that record evidence shows that the only plywood Plaintiff imported was the
subject plywood and the quantity of that plywood remaining after production was
halted. Id.; Pl.’s SMF at Ex. Q (“Item Stock Inquiry Reports”). Plaintiff argues
that all of the plywood included in the protested entries was linked to the defect.
Pl.’s Br. at 6.
Court No. 20-00154 Page 15
Defendant argues that Plaintiff has not connected any of the alleged defects
to the specific entries covered by Plaintiff’s protests. Def.’s Br. at 1723.
Defendant alleges that Plaintiff imported five shipments of plywood from China
prior to the first entry covered by Plaintiff’s protests. Id. at 1820 (citing Item
Stock Inquiry Reports). Defendant contends that Plaintiff received two shipments
after the first entry covered by Plaintiff’s protests that were not included in
Plaintiff’s protests. Id. at 20 (citing Item Stock Inquiry Reports). Defendant
argues that Plaintiff has provided no explanation as to why allowances under
Section 158.12(a) were not sought for these entries if all entries after May 2017
were presumed to be defective. Id. at 20–21. Defendant asserts that the number of
warranty claims received by Plaintiff complaining of delamination was relatively
small in comparison to the amount of plywood covered by the protested entries.
Id. at 2122; see Def.’s Cross-Mot. at Ex. H (“Warranty Claims”). Defendant
notes that a small number of delamination complaints pre-dated the entries covered
by Plaintiff’s protests or fell within a period in which it was unlikely that products
made from the subject plywood were available for market. Id. at 22.
Section 158.12(a) requires a party seeking an allowance to show a link
between the defective merchandise and specific entries. Saab Cars USA, Inc., 434
F.3d at 136364. Because Customs appraises the value of entries individually at
Court No. 20-00154 Page 16
the time of importation and assesses duties based on the appraised value before
liquidation, establishing a link is necessary for appropriate refunds to be assigned
to duties made. Samsung Electronics II, 195 F.3d at 1371.
In Fabil Manufacturing Co. v. United States (“Fabil”), 237 F.3d 1335 (Fed.
Cir. 2001), the CAFC considered a similar question of whether a party alleging that
entries were defective in their entirety must link specific defective merchandise to
specific entries. Fabil, 237 F.3d at 1339. Fabil involved jackets bearing a
corporate logo that were ordered to be “machine washable.” Id. at 1336. After the
jackets were imported, Fabil discovered a latent defect that caused the logos to
disintegrate and their colors to run when washed. Id. Because of the defect,
Fabil’s customers returned the jackets, which were disposed of at a loss. Id. The
CAFC held that under the facts of Fabil, there was no reason to require the plaintiff
“to tie the allegedly defective merchandise to any entries or group of entries
without which proof the Court (and Customs) cannot determine whether contested
merchandise actually contained a defect at the time of ‘importation.’” Id. at 1339(internal quotation and edit omitted).
Similar to Fabil, Plaintiff alleges that all of the imported merchandise was
defective. Pl.’s Br. at 6. The Parties agree that a portion of the roll-up doors and
door panels manufactured with the subject plywood were the subject of warranty
claims or delamination complaints. See Pl.’s SMF ¶ 16 at 3; Def.’s SMF ¶¶ 2223
Court No. 20-00154 Page 17
at 6; Def.’s SMF Resp. ¶ 16 at 3; Pl.’s SMF Resp. ¶¶ 2223 at 3; see Pl.’s SMF
¶ 15 at 3; Def.’s SMF Resp. ¶ 15 at 3. The Parties dispute whether all of the
plywood was defective. Because genuine issues of material fact exist as to
whether all of the subject merchandise was defective, the Court cannot determine
as a matter of law that Plaintiff connected the allegedly defective plywood to the
subject entries. Summary judgment is not appropriate for either Party on the
second element of Section 158.12(a).
III. Amount of Allowance for Each Entry
The third element of 19 C.F.R. § 158.12(a) requires Plaintiff to establish the
amount of allowance for each entry. Plaintiff alleges that it is entitled to an
allowance for all merchandise covered by the subject entries in the amount of a
reduction in the appraised value to 18 percent of the original value of the subject
plywood. Pl.’s Br. at 6–7; Compl. at 2–3. Plaintiff contends that 18 percent
represents the salvage value for the plywood if used to build crates and skids. Pl.’s
Br. at 6–7. Defendant alleges that Plaintiff has not substantiated its claim of an 18
percent salvage value. Def.’s Br. at 23–25. Defendant also argues that even if 18
percent were an appropriate salvage value, Plaintiff has not established that it
should be applied to all of the imported plywood included in the subject entries.
Id. at 25.
Court No. 20-00154 Page 18
Plaintiff’s claim for an 18 percent salvage value is based on a representation
made by Transglobal’s domestic lumber supplier to Transglobal’s President, Mark
Schroeder, regarding the cost to purchase non-grade marine lumber for the making
of crates and skids. Def.’s SMF ¶ 34 at 8–9; Pl.’s SMF Resp. ¶ 34 at 3; Def.’s
Cross-Mot. at Ex. B Deposition Transcript of Alison Dunbar (“A. Dunbar Depo.”)
at 11, 29–33, ECF No. 28-2; Schroeder Depo. at 158–59. No other support has
been offered for the 18 percent value and Plaintiff did not attempt to resell the
unused plywood. Def.’s SMF ¶ 36 at 9; Pl.’s SMF Resp. ¶ 36 at 3; A. Dunbar
Depo. at 26–27; Schroeder Depo. at 85–86, 160–61. During his deposition for this
case, however, the Court observes that potentially contrary evidence was elicited in
Schroeder’s statement that the value of the plywood had likely increased by 25 to
30 percent. Schroeder Depo. at 166–67. Because there remain genuine issues of
material fact as to the value of the subject plywood and whether an allowance
should be applied to all subject merchandise, summary judgment is not appropriate
for either Party on the third element.
CONCLUSION
For the foregoing reasons, the Court concludes that genuine issues of
material fact exist and that summary judgment is not warranted. Accordingly, it is
hereby
Court No. 20-00154 Page 19
ORDERED that Plaintiff’s Motion for Summary Judgment, ECF No. 27, is
denied; and it is further
ORDERED that Defendant’s Cross-Motion for Summary Judgment and
Response in Opposition to Plaintiff’s Motion for Summary Judgment, ECF No. 28,
is denied; and it is further
ORDERED that a status conference will be scheduled with the Parties to
discuss pre-trial matters.
/s/ Jennifer Choe-Groves
Jennifer Choe-Groves, Judge
Dated: March 20 2023
New York, New York