Thursday, February 02, 2006

Still want to buy a Saab?

I have always liked Saabs. Really. They have quirky good looks that stand out in the parking lot and what appears to be good performance. I recently drove a 9-3 2.0t and enjoyed the ride.

What does this have to do with Customs law? Read Saab Cars USA, Inc. v. U.S. and you'll get an interesting look at the inner workings of the auto industry. Saab, like other car companies, is aware that the customs regulations permit an importer to seek an adjustment in the value of merchandise that is, at the time of importation, damaged. This comes from 19 C.F.R. § 158.12, for those following along. Saab also knows that it has warranty expenses for the cars it imports. There is a reasonable argument to be made that if a car needs a repair covered by a warranty, that the car was--shall we say--less than perfect when imported. After all, if the car was not latently defective, it would not have needed a repair.

So, Saab filed some protests seeking a value adjustment. This is where the details get complicated. Some of the repairs were made right at the port immediately after importation. Others were made at some time later. But, in all cases, Saab knew the specific car repaired (based on VIN) and the exact cost of the repair. Consequently, Saab was able to link the cost of the repair to a specific entry of merchandise. Accordingg to Saab, that should permit a value adjustment.

But, there were all sorts of issues in the case. It is hard to decide where to start. One issue related to the protests. Some of the repairs were actually done after the date of the protest. Given that a protest must be specific enough to inform Customs of the issue and also clear enough to show the Court what the importer had in mind, it is hard to see how an importer can legitimately file protest about something it has not yet discovered. How would it have that defect in mind or communicate it to Customs? The Federal Circuit held that Saab could not properly file a protest covering undiscovered defects because importers would then be able "to file blanket protests of the appraisal of all its entries based solely on a probability that some portion of the entries will, in the future, turn out to be defective."

Another new question was what standard of review applies when the CIT makes its decision based on an agreed statement of facts in lieu of a trial. This is technical, feel free to skip ahead. On a motion for summary judgment, the Federal Circuit looks at everything de novo; looking only for errors in the interpretation of the law. That is because no disputed facts are involved. But following a trial, the Federal Circuit applies that standard only to questions of law. On questions of fact, the Federal Circuit gives greater deference to the CIT and applies a "clearly erroneous" standard. Until now, it has been unclear whether a decision after an agreed statement of fact in lieu of trial was more like summary judgment or more like a trial. Now it is clear. According to the Federal Circuit, the proper thing to do is treat it like a trial because the CIT has to draw inferences from the stipulated facts in a way not permissible in a summary judgment proceeding. Thus, the factual determinations should be over turned only if clearly erroneous.

One more thing, there was an interesting tussle over what the government has to do to overcome a motion for summary judgment. When the plaintiff supports its motion with affidavits or other evidence, it is not enough for the government to simply deny that the plaintiff is right. It has to come forward with something to counter the evidence. Unless, and this was the problem for Saab, what the plaintiff put forward is not enough to cover its own burden of proof. In that case, the defendant is able to sit back and say, essentially, "So what?" to all the evidence.

The question now is whether anyone wants to buy a Saab knowing that they come into this country with latent defects that need repair. The way this is discussed in the opinion, it would lead one to believe there were lot of such defects on lots of Saabs. I doubt it. There is nothing in the opinion about the scope of the defects. Are we talking scratched paint or are we talking warped heads? Don't know. My guess: far more minor things than big problems. Moreover, I still like the looks of that 9-3. Still, I am not sure about a car in which the average person can't find the ignition switch. For now, maybe I'll nurse my 10 year old Camry along.


Swade said...

Larry, after reading such an eloquent post that even a numbers man like me could somewhat understand, I feel assured that you are indeed 'above average' and capable of finding the ignition.

Ditch the whitegoods-on-wheels. Buy the 9-3.

Anonymous said...

WOW! That explains the general junkiness of my car. We're not talking minor defects here! All in all a total of 12 problems, some of which are safety related! This is truly sickening!