Volkswagen of America, Inc. v. United States

United States Court of Appeals for the Federal Circuit

2007-1285

VOLKSWAGEN OF AMERICA, INC.,

Plaintiff-Appellant,

v.

UNITED STATES,

Defendant-Appellee.

Thomas J. Kovarcik, of New York, New York, argued for plaintiff-appellant.

Barbara S. Williams, Attorney in Charge, International Trade Field Office,
Commercial Litigation Branch, Civil Division, United States Department of Justice, of New
York, New York, argued for defendant-appellee. With her on the brief were Peter D.
Keisler, Assistant Attorney General, and Jeanne E. Davidson, Director. Of counsel on the
brief was Yelena Slepak, Office of Assistant Chief Counsel, International Trade Litigation,
United States Customs and Border Protection, of New York, New York.

Appealed from: United States Court of International Trade

Senior Judge Richard W. Goldberg
 United States Court of Appeals for the Federal Circuit

2007-1285

VOLKSWAGEN OF AMERICA, INC.,

Plaintiff-Appellant,

v.

UNITED STATES,

Defendant-Appellee.

Appeal from the United States Court of International Trade in case no. 06-00222, Senior
Judge Richard W. Goldberg.
___________________________

DECIDED: July 16, 2008
___________________________

Before RADER, Circuit Judge, FRIEDMAN, Senior Circuit Judge, and PROST, Circuit
Judge.

Opinion for the court filed by Circuit Judge RADER. Concurring opinion filed by Senior
Circuit Judge FRIEDMAN.

RADER, Circuit Judge.

Volkswagen of America, Inc. (“VW”) seeks an allowance in the appraised value

of automobiles entered and liquidated by the U.S. Customs Service (“Customs”) 1 in

1994 and 1995, but later determined by VW to be partially defective. VW invokes a

Customs regulation, 19 C.F.R. § 158.12, as a cause of action independent from the

protest procedures in 19 U.S.C. § 1514 for challenges to appraisals of these allegedly

1
The U.S. Customs Service is now the Bureau of Customs and Border
Protection under the Homeland Security Act of 2002, § 1502, Pub. L. No. 107-296, 116
Stat. 2135, 2308-09 (Nov. 25, 2002), and the Reorganization Plan Modification for the
Department of Homeland Security, H.R. Doc. 108-32, p. 4 (Feb. 4, 2003).
defective imports. Because neither § 1514 nor Customs’ regulations create a cause of

action for some defective goods, this court affirms the grant of summary judgment for

failure to state a claim.

I

In 1994 and 1995, VW imported automobiles from Volkswagen

Aktiengesellschaft and Audi Aktiengesellschaft. VW sold the imported automobiles in

the United States with consumer warranties. Under those warranties, VW eventually

repaired purported hidden defects. VW made some repairs within a few months of

liquidation; others years later.

At the relevant time, 19 U.S.C. § 1514 provided:

(a) Finality of decisions; return of papers. Except as provided in
subsection (b) of this section, section 501 (relating to voluntary
reliquidations), section 516 (relating to petitions by domestic interested
parties), section 520 (relating to refunds and errors), and section 521
(relating to reliquidations on account of fraud), decisions of the Customs
Service, including the legality of all orders and findings entering into the
same, as to--

(1) the appraised value of merchandise

...

(4) the exclusion of merchandise from entry or delivery or a demand for
redelivery to customs custody under any provision of the customs laws, except
a determination appealable under section 337 of this Act [19 U.S.C. § 1337];

...

shall be final and conclusive upon all persons (including the United States and
any officer thereof) unless a protest is filed in accordance with this section, or
unless a civil action contesting the denial of a protest, in whole or in part, is
commenced in the United States Court of International Trade . . . .

...

(c) Form, number, and amendment of protest; filing of protest.

2007-1285 2
 (3) A protest of a decision, order, or finding described in subsection (a) shall be
filed with the Customs Service within ninety days after but not before--

(A) notice of liquidation or reliquidation, . . . .

19 U.S.C. § 1514 (1995). 2

Faced with an apparent 90-day post-liquidation deadline under § 1514, VW put

both its feet in the door. It filed protests with Customs challenging the appraised value

of the repaired automobiles and other protests against the value of automobiles that it

expected would need repair later. VW based these latter requests on statistical models,

which suggested that each imported automobile would, on average, have some latent,

or hidden, defects. Invoking 19 C.F.R. § 158.12(a), VW sought an allowance in the

appraised value for both classes of automobiles:

(a) Allowance in value. Merchandise which is subject to ad valorem or
compound duties 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 (2007).

Customs denied many of VW’s protests, including all of those for repairs made

after the protest filing date. VW appealed Customs’ denial by filing an action with the

United States Court of International Trade (“CIT”) under 28 U.S.C. § 1581(a), the

statutory section giving the trade court “exclusive jurisdiction of any civil action

commenced to contest the denial of a protest, in whole or in part, under section 515 of

the Tariff Act of 1930.” 28 U.S.C. § 1581(a) (2007). The trial court held that it did not

have jurisdiction over automobiles repaired after the date VW filed its protests because

VW was not aware of the defects at the time of the protests. Volkswagen of Am., Inc. v.

2
In 2004, Congress extended the deadline from 90 to 180 days. 19 U.S.C.
§ 1514(c)(3), amended by Pub.L. 108-429, § 2103, Dec. 3, 2004.

2007-1285 3
United States, 277 F. Supp. 2d 1364, 1369 (Ct. Int’l Trade 2003) (“Volkswagen I”) (citing

Mattel v. United States, 377 F. Supp. 955, 959 (Cust. Ct. 1974) (“a protest . . . must

show fairly that the objection afterwards made at the trial was in the mind of the party at

the time the protest was made”); accord Saab Cars USA, Inc. v. United States, 434 F.3d

1359, 1368 (Fed. Cir. 2006) (affirming the lower court’s dismissal for lack of jurisdiction

claims related to certain automobile because Saab provided no evidence that it was

aware of defects in the automobiles at the time of protest). The trial court reasoned:

Section 158.12, which provides for a refund of duties if the goods were
defective at the time of importation, has no time limit to request the refund.
Because VW filed its request as a protest, the Court does not opine at this
time on whether VW could have filed a request for reconsideration under
§ 1520 or directly under § 158.12, and then protest a denial of that
request.
Volkswagen I, 277 F. Supp. 2d at 1369 n.2.

At the same time, the trial court took jurisdiction over the automobiles that were

repaired before the date of protest. See Volkswagen I, 277 F. Supp. 2d at 1367-69.

However, the trial court found that VW did not show that many defects existed in its

automobiles at the time of importation. Volkswagen of Am., Inc. v. United States, 484 F.

Supp. 2d 1314 (Ct. Int’l Trade 2007). This decision is the subject of a separate appeal.

In early 2006, VW sent letters to Customs requesting an allowance in the value

of the automobiles whose repairs occurred after the date of protest, again citing a claim

for allowance under § 158.12. Customs stated at a pretrial conference that it would not

issue a decision concerning the letters.

VW filed another appeal with the Court of International Trade under the

Administrative Procedure Act (“APA”), alleging jurisdiction under 28 U.S.C. § 1581(i),

the trade court’s “residual” jurisdictional grant. The United States moved to dismiss for

2007-1285 4
lack of subject matter jurisdiction under CIT Rule 12(b)(1); for failure to state a claim

upon which relief can be granted under CIT Rule 12(b)(5); and because the claims were

time barred by the statute of limitations applicable to 28 U.S.C. § 2636(i). The trial court

denied the United States’ motion to dismiss for lack of subject matter jurisdiction,

holding that VW’s action falls under the language of paragraphs (1) and (4) of § 1581(i),

and that jurisdiction was not available under any other subsection of § 1581.

Volkswagen v. of Am., Inc. v. United States, 475 F. Supp. 2d 1385 (Ct. Int’l Trade 2007)

(“Volkswagen II”). The trial court noted that VW could not have filed a valid protest

under § 1581(a) because VW had not discovered the defects until after the 90-day time

limit had passed. Id. at 1389.

Thus, the trade court granted the Government’s motion to dismiss for failure to

state a claim. The trial court reasoned that § 1514 precludes judicial review of VW’s

cause of action under the APA, which otherwise grants a right of review to “[a] person

suffering legal wrong because of agency action, or adversely affected or aggrieved by

agency action . . . .” 5 U.S.C. § 702. Volkswagen II, 475 F. Supp. 2d at 1390. It further

explained that § 1514 sets forth the procedures governing protests against Customs

decisions. Thus, all of Customs’ appraisals merge into the liquidation. As a result, the

trial court held that any VW protests under § 158.12 had to comply with the procedures

applicable to 19 U.S.C. § 1514. Id. at 1390-91. Thus, VW could not avoid the time

limits imposed by § 1514 by bringing a separate cause of action under § 158.12. Id. at

1390. In essence, this decision meant that VW had no way to challenge the appraisal

of goods with latent defects discovered after the expiration of the protest period.

2007-1285 5
 The trial court did not reach the United States’ motion to dismiss based on the

statute of limitations applicable to 28 U.S.C. § 2636(i). Id. at 1392. VW appeals the

dismissal. This court has jurisdiction under 28 U.S.C. § 1295(a)(5).

DISCUSSION

This court reviews grants of summary judgment as a matter of law. Gen. Elec.

Co. - Med. Sys. Group v. United States, 247 F.3d 1231, 1234 (Fed. Cir. 2001) (citation

omitted). Thus, legal determinations receive no deference, Home Depot USA, Inc. v.

United States, 491 F.3d 1334, 1553 (Fed. Cir. 2007) (citations omitted). The same is

true for statutory interpretations. Superior Fireplace Co. v. Majestic Prods. Co., 270

F.3d 1358, 1369 (Fed. Cir. 2001).

If § 158.12 provides an independent cause of action for appraisal of imports that

were partially damaged at time of importation, then VW need not comply with the

procedures and deadlines for a protest under § 1514. On its face, § 158.12 does not

impose a time limit on an allowance for the partial damage. Nor does the regulation

refer to § 1514 or its procedures. VW builds its argument on this ambiguity.

As a threshold matter, this court agrees with the Court of International Trade that

VW’s claim for an allowance under § 158.12 is really an action based on the APA. See

Volkswagen II, 475 F. Supp. 2d at 1387-88. The APA provides a cause of action for

persons “adversely affected or aggrieved by agency action within the meaning of a

relevant statute.” 6 U.S.C. § 702 (2007). Although it did not invoke the APA in its

complaint, VW effectively relied on that Act to show standing. Specifically, VW alleged

that it “was affected and aggrieved by” Customs’ refusal to recognize VW’s claims for a

§ 158.12 allowance, and “accordingly, has standing to prosecute this action.” Pl.’s

2007-1285 6
Compl., Court No. 06-00222, at ¶ 4 (Ct. Int’l Trade, Jun. 29, 2006) (“Complaint”). In its

appellate briefs, VW challenged the “final agency action’ . . . under applicable

Administrative Procedure Act parlance.” VW emphasized that only by exhausting its

administrative remedies with respect to its § 158.12 claims could it commence the

action.

Because VW’s § 158.12 claim relies on the APA, this court must determine

whether § 1514 precludes judicial review of the cause of action under 5 U.S.C.

§ 701(a)(1). Preclusion of judicial review by § 1514 is a function of “its express

language . . .[,] the structure of the statutory scheme, its objectives, its legislative

history, and the nature of the administrative action involved.” Block v. Cmty. Nutrition

Inst., 467 U.S. 340, 345 (1984).

The express language of the statute in 1995 provided that “decisions of the

Customs Service, including the legality of all orders and findings entering into same, as

to--(1) the appraised value of merchandise; . . . shall be final and conclusive upon all

persons . . . unless a protest is filed” within 90 days of liquidation, or “unless a civil

action contesting the denial of a protest” is filed with the Court of International Trade.

19 U.S.C. § 1514(a), (c) (1995). On its face, § 1514 applied to challenges to Customs’

appraisals. Section 158.12 directs Customs to adjust those appraisals to account for

partial damage at the time of importation. If an importer believes that Customs did not

properly appraise the value of the import, § 1514 provides the importer 90 days to file a

protest. Otherwise, the appraisal becomes final. Section 158.12 does not say anything

to the contrary.

2007-1285 7
 As this court and its predecessor have confirmed, the language of § 1514

establishes liquidation as a final challengeable event in Customs’ appraisal process.

Findings related to liquidation—including valuation—merge with the liquidation. If an

importer wishes to challenge the appraised value of merchandise, the importer must

protest the liquidation. See Travenol Labs., Inc. v. United States, 118 F.3d 749, 753

(Fed. Cir. 1997) (stating that liquidation is “long honored in customs procedure as the

final reckoning of an importer’s liability on an entry” (citing Farrell Lines, Inc. v. United

States, 667 F.2d 1017, 1020 (CCPA 1982))); United States v. Utex Int’l, Inc., 857 F.2d

1408, 1409-10, 1412 (Fed. Cir. 1988) (finding that all aspects of entry were merged in

the liquidation and that “absent timely reliquidation or protest” the liquidation was final,

and stating: “‘All findings involved in a district director’s decision merge in the

liquidation. It is the liquidation which is final and subject to protest, not the preliminary

findings or decisions of customs officers.’” (quoting R. Sturm, Customs Law &

Administration § 8.3 Finality of Liquidation at 32, (3d ed. 1982))); United States v. Boe,

64 CCPA 11, 16 (CCPA 1976) (finding that filing a protest pursuant to § 1514 is

“mandatory” for jurisdiction).

The language of § 158.12 and 19 U.S.C. § 1503 also demonstrates that an

allowance under the regulation merges into liquidation. Section 158.12 provides that

merchandise partially damaged at importation “shall be appraised in its condition as

imported.” 19 C.F.R. § 158.12 (2007) (emphasis added). The final appraisal occurs at

liquidation. See 19 U.S.C. § 1503 (2007) (“[T]he basis for the assessment of duties on

imported merchandise . . . shall be the appraised value determined upon liquidation . . .

.”). Because § 158.12 grants an allowance on the value of merchandise, and because

2007-1285 8
the final valuation occurs at liquidation, the allowance under the regulation merges into

liquidation. Thus, the procedures of § 1514 govern a claim under § 158.12.

Section 1514 provides several exceptions to the general procedures for

challenging of Customs’ decisions. Therefore, this court must evaluate whether a claim

under § 158.12 can fit within any of those exceptions. In 1995, § 1514 provided that

Customs’ determinations falling under subsection (b) are not governed by the protest

procedures and deadlines of subsections (a) and (c). Subsection (b), however, a

provision dealing with countervailing and antidumping remedies, does not apply to a

claim for an allowance under § 158.12. Section 1514 also provided that sections 337

(relating to unfair practices in import trade), 501 (relating to voluntary reliquidations),

516 (relating to petitions by domestic interested parties), 520 (relating to refunds and

errors), and 521 (relating to reliquidations on account of fraud) of the Tariff Act remain

exceptions from the general protest procedures and deadline prescribed in subsections

(a) and (c). None of these listed exceptions involves the question of latent defects at

time of importation. Thus, the exceptions in § 1514 do not apply to such goods.

In addition to the exceptions listed in § 1514, the Tariff Act provides other

avenues to offset calculated duties. However, these exceptions apply to specific

situations, none of which encompass an allowance for goods that are partially damaged

at time of importation but remain in the U.S. stream of commerce. For example, 19

U.S.C. § 1520(c) provides that even if a claimant failed to file a valid protest under

§ 1514, Customs could reliquidate an entry if “a clerical error, mistake of fact, or other

inadvertence . . . adverse to the importer” affected liquidation of the entry, and “the

error, mistake, or inadvertence is brought to the attention of [Customs] within one year

2007-1285 9
after the date of liquidation.” 19 U.S.C. § 1520(c) (1995). This court sees no way to

attribute a latent defect to a clerical error or mistake of fact. To its credit, VW did not

attempt to do so in its complaints or in its requests to Customs. Indeed the repairs on

the automobiles at issue were not completed until 2000.

As another example, 19 U.S.C. § 1313 provided a drawback claim for 99 percent

of the duty paid on nonconforming or defective merchandise that is re-exported or

destroyed under Customs’ supervision within three years after importation. 19 U.S.C.

§ 1313(c) (1995). This section gives a claimant three years after re-export or

destruction to file a drawback claim. 19 U.S.C. § 1313(r) (1995). VW argues that a

claim under § 158.12 is similar to a drawback claim under § 1313 because both focus

on the condition of the merchandise at importation. According to VW, both types of

claims differ from typical appraisals under 19 U.S.C. § 1401a. VW argues that typical

valuation claims fall under the protest procedures of § 1514, but that claims under

§ 158.12 and § 1313 receive different procedures.

To the contrary, however, like typical appraisals, § 158.12 provides a partial

allowance for damaged goods that remain in the U.S. stream of commerce.

Section 1313 covers goods removed from that stream, justifying a nearly complete

refund of duties paid. See Saab, 434 F.3d at 1370-71 (finding that § 1313 and § 158.12

address different circumstances and provide different remedies). Moreover, § 1313

provides clear procedures for filing a drawback claim. By contrast, § 158.12 is silent

with respect to procedure, leaving the typical § 1514 procedures in play.

Another trade provision, 19 U.S.C. § 1401a, provides no escape from the time

limitations imposed by § 1514. Section 1401a provides the basis for appraising

2007-1285 10
imported merchandise under the Tariff Act. In part, it provides that “imported

merchandise shall be appraised . . . on the basis of . . . transaction value.” 19 U.S.C.

§ 1401a(a)(1)(A) (2007). According to VW, § 1401a and § 158.12 fall from the same

tree because they contain the term “appraised,” but not “liquidation.” VW argues that

§ 1514 does not cover fruit from this “appraisement” tree. Rather, according to VW,

§ 1514 covers only liquidation, which refers to the computation of duties, not to the

valuation of merchandise—the focus of § 158.12. To support its argument, VW also

cites to 19 U.S.C. § 1500, which discusses in separate subsections that Customs shall

“fix the final appraisement of merchandise” and “liquidate the entry.” 19 U.S.C.

§ 1500(a)-(b) (2007). VW also argues that Congress confirmed that claims can be

brought under § 158.12 at any time when it allegedly incorporated the regulation into

§ 1401a. Section 158.12 was promulgated in 1972, and in 1979 Congress adopted the

Trade Agreements Act of 1979, which included the current version of § 1401a. To

support its argument, VW refers to the legislative history accompanying the Trade

Agreement Act: “Where it is discovered subsequent to importation that the

merchandise being appraised is defective, allowances will be made. (Regulation).”

Statement of Administrative Action (“SAA”), H.R. Doc. No. 153 (96 Cong., 1st Sess., pt.

2 (1979)), reprinted in Department of the Treasury, Customs Valuation Under the Trade

Agreements Act of 1979, at 47. The term “(Regulation)” is a reference to § 158.12.

The similarities between § 158.12 and § 1401a do not, however, remove

defective goods valuations from the procedures of § 1514. Rather, as noted above, the

language of § 1514 governs. In 1995, section 1514 provided the generally requisite

procedure for challenging Customs’ decisions related to “the appraised value of

2007-1285 11
merchandise.” 19 U.S.C. § 1514(a) (1995). Moreover, the SAA that accompanied the

Trade Agreements Act of 1979 supports the proposition that the procedures of § 1514

cover claims brought under § 158.12. Specifically, the SAA provided that an importer

must file a protest to challenge Customs’ appraisals:

The right to appeal determinations of the customs value of imported
merchandise will remain essentially the same as under current law and
practice. The principal new feature is a requirement that the notice of
decision include a written statement of the reasons for the decision. In
addition, although the current notice of decision on protest advises the
party of his right to judicial review, a specific requirement of this notice is
included in the legislation.

SAA at 65 (emphasis added). While recognizing that Customs should make allowances

in appraisal for latent defects, id. at 47, the SAA also confirmed that a claimant could

only challenge an appraisal by filing a protest.

VW also argues that several regulations promulgated at the same time as

§ 158.12 show that the time restrictions of § 1514 should not apply in this case. VW

points to 19 C.F.R. §§ 158.11, 158.13, and 158.14, which grant allowances in the

valuation of certain goods. See 19 C.F.R. §§ 158.11, 158.13, 158.14 (2007).

Specifically, § 158.11 provides an allowance for damaged merchandise with no

commercial value, § 158.13 for moisture-and-impurities-damaged merchandise, and

§ 158.14 for condemned, perishable merchandise. To claim an allowance under each

regulation, the importer must file an application with the port director within a relatively

short deadline: four days for perishable merchandise under § 158.11, ten days for

§ 158.13, and five days for § 158.14. VW argues that the Secretary of the Treasury and

Customs set different time limitations in these regulations, but not in § 158.12

The Secretary of the Treasury, however, cannot promulgate regulations for

Customs contrary to the law. 19 U.S.C. § 66 provides: “The Secretary of the Treasury

2007-1285 12
shall prescribe . . . rules and regulations not inconsistent with law, to be used in carrying

out the provisions of law relating to raising revenue from imports, or to duties on imports

. . . .” 19 U.S.C. § 66 (2007) (emphasis added). And 19 U.S.C. § 1500 provides: “The

Customs Service shall, under rules and regulations prescribed by the Secretary--(a) fix

the final appraisement of merchandise by ascertaining or estimating the value thereof,

under section 402 [19 U.S.C. § 1401a].” 19 U.S.C. § 1500 (2007). The Secretary of the

Treasury had no authority under these mandates to promulgate a regulation that would

violate the time limitations and protest requirements of § 1514.

Furthermore, the procedures and deadlines provided in the regulations cited by

VW suggest that the Secretary of the Treasury followed these mandates when it

promulgated those regulations. Those deadlines are within the deadlines set by § 1514.

Moreover, the normal time limit set by § 1514 would be inappropriate given the nature of

the goods, whose condition could deteriorate rapidly. Thus, the regulations cited by VW

comport with the time limitations and protest requirements of § 1514. Similarly, the

Treasury Department made § 158.12 consistent with § 1514.

As the trial court correctly noted in Volkswagen II, the legislative history of § 1514

supports the application of those provisions to goods covered by § 158.12. A Senate

Report accompanying the Customs Courts Act of 1970 explained that § 1514

establishes a “single, continuous procedure for deciding all issues in any entry of

merchandise, including appraisement and classification issues.” S. Rep. No. 91-576, at

11 (1969). Given the clear mandate in 19 U.S.C. §§ 66 and 1500 to promulgate

regulations “not inconsistent with law” to “fix final appraisement,” the Secretary of the

2007-1285 13
Treasury presumably did not intend that § 158.12 would set forth an independent cause

of action that would frustrate the “single procedure” purpose of § 1514.

The law has continued to consolidate challenges to appraisement of

merchandise into § 1514. For example, the repeal of 19 U.S.C. § 1520(c) in 2004, Act

of Dec. 3, 2004, Pub. L. No. 108-429, § 2105, 118 Stat. 2598 (2004), simultaneously

amended 1514(a) to cover the clerical errors and mistakes of fact previously covered by

§ 1520(c), Act of Dec. 3, 2004, Pub. L. No. 108-429, § 2103, 118 Stat. 2597 (2004). As

the scope of § 1514 has expanded over the years, no change has recognized a new

exception for appraisal of goods with latent defects. Rather the law has reduced

exceptions.

This court’s decision in Saab does not alter this reasoning. VW submits that

under Saab , claims under § 158.12 can be brought at any time. 434 F.3d at 1371

(“§ 158.12, by its terms, permits allowances for ‘goods partially damaged when

imported,’ whenever that damage is discovered.”). In context, however, Saab

addressed only the narrow issue of identifying the damage at the time of importation for

an allowance under § 158.12. Id. at 1369-70. This court found that the words “at the

time of importation” modify the phrase “partially damaged,” not the verb “found.” Id. at

1370. Thus, the statement from the opinion that VW cites reflects this court’s holding

that a § 158.12 claim is not limited to instances when the port director discovers the

partial damage at the moment of importation. See id. Saab did not address the

relationship between § 158.12 allowance claims and the requirements of § 1514. In

particular, Saab did not address whether § 1514 imposes a time limit to claim a partial

2007-1285 14
allowance under § 158.12 by filing a protest. Nor did Saab address this court’s

precedent that appraisal issues merges into liquidation.

Finally, VW’s assertion that § 158.12 is not governed by § 1514 would lead to

unworkable results. If § 158.12 provides an independent cause of action, an importer

would be able to claim an allowance for partially damaged goods at any time and in any

way it chooses. Entries would potentially stay open indefinitely, making liquidation

meaningless and a protest optional. This impractical outcome would defeat the concept

of § 1514 as the “single, continuous procedure for deciding all issues in any entry of

merchandise, including appraisement and classification issues.” S. Rep. No. 91-576, at

11 (1969).

Because this court finds that § 1514 precludes judicial review of VW’s APA

action, this court affirms the trial court’s finding that VW did not state a cause of action

for which relief could be granted. Even if VW’s claim for an allowance under § 158.12 is

not characterized as an APA action, its complaint does not state a claim for relief under

CIT Rule 12(b)(5). VW alleged that “Customs appraised the subject merchandise under

Transaction Value, pursuant to 19 U.S.C. § 1401(a(b),” and that “Customs did not grant

plaintiff an allowance, pursuant to 19 C.F.R. § 158.12, in the Transaction Value for the

latent manufacturing defects” in the imported automobiles. Complaint at ¶¶ 11, 12.

VW also alleged that it “is entitled to an allowance, pursuant to 19 C.F.R. § 158.12 in

the value of the subject merchandise due to the latent manufacturing defects therein.”

Id. at ¶ 15. VW did not, however, file a timely protest of the liquidations of the entries of

the automobiles at issue in this suit. For these reasons, VW has not shown entitlement

to any independent cause of action outside the typical protest procedure. A claim for

2007-1285 15
valuation of partially damaged goods must be brought in a protest of liquidation under

§ 1514. Here, VW did not plead a necessary fact to state a claim under § 1514.

AFFIRMED

2007-1285 16
 United States Court of Appeals for the Federal Circuit

2007-1285

VOLKSWAGEN OF AMERICA, INC.,

Plaintiff-Appellant,

v.

UNITED STATES,

Defendant-Appellee.

Appeal from the United States Court of International Trade in case no. 06-00222, Senior
Judge Richard W. Goldberg.

FRIEDMAN, Senior Circuit Judge, concurring.

The result the court reaches is a harsh one. Under 19 C.F.R. § 158.12(a),

imported merchandise “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.” In the present case, the imported automobiles

were concededly “partially damaged at the time of importation” because of their latent

defects. The kind and extent of those defects in particular vehicles, however, were not

discoverable or the cost of repairing them determinable until after Customs had

liquidated the duties and the time for protesting such liquidation or filing a judicial

challenge thereto had expired. The effect of the court’s decision, therefore, is that

Volkswagen has had to pay duties based on the appraised value of the automobiles,

although the actual amount Volkswagen received on the sale of the vehicles necessarily

was reduced by its cost of making the repairs.
 The court determines that this result is required by 19 U.S.C. § 1514, which

provided that, with exceptions not here relevant, Customs “decisions . . . as to - - (1)

the appraised value of merchandise . . . shall be final and conclusive upon all persons

(including the United States and any officer thereof) unless a protest is filed in

accordance with this section, or unless a civil action contesting the denial of a protest, in

whole or in part, is commenced in the United States Court of International Trade.” On

its face, this language supports the court’s conclusion.

Even clear statutory language, however, may not always mean what it appears to

say. For many years the Declaratory Judgment Act, 28 U.S.C. § 2201, had provided

that “any court of the United States” could issue such a judgment. In 1969, there was

no question that the United States Court of Claims was a “court of the United States.”

In United States v. King, 395 U.S. 1 (1969), however, the Supreme Court held that the

Court of Claims had no “authority to issue declaratory judgments.” 395 U.S. at 5. It

reasoned that “cases seeking relief other than money damages from the Court of

Claims have never been ‘within its jurisdiction,’” and that “[t]here is not a single

indication in the Declaratory Judgment Act or its history that Congress, in passing that

Act, intended to give the Court of Claims an expanded jurisdiction that had been denied

to it for nearly a century.” 395 U.S. at 4, 5.

It is arguable that, similarly, the provision in § 1514(a) making Custom’s appraisal

of the value of merchandise “final and conclusive” in the absence of a timely protest or a

judicial challenge of the denial of the protest, assumes that such protest or judicial

challenge could produce adequate relief to the protesting importer. Here, however,

there is nothing Volkswagen could have done, either in a timely protest or a judicial

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challenge to its denial, that would have enabled it to obtain a refund of the portions of

the duties it paid that represented its cost of repairing the latent defects that came to

light only after liquidation had become final. Under this reasoning, § 1514(a) would not

bar Volkswagen’s suit in the Court of International Trade.

Analogy also could be drawn to the principle that exhaustion of administrative

remedies is not required if it would have been futile to pursue that course. Glover v. St.

Louis–San Francisco Ry. Co., 393 U.S. 324 330 (1969) (noting an “obvious exception[]

to the exhaustion requirement—the situation where the effort to proceed formally with . .

. administrative remedies would be wholly futile”). In the present case, it would have

been futile for Volkswagen to have followed the protest and judicial review path.

I join the court’s decision because of what I view as Congress’ overarching

design in this statutory scheme that once the time for filing a protest and judicial

challenge of its denial has expired, that marks the end of any administrative and judicial

proceedings seeking to overturn Customs’ appraisal of the merchandise. Volkswagen’s

attempts to prolong such proceedings, until possibly many years after Customs’

appraisal action has become final, appear inconsistent with this basic statutory design.

If the result in this case does not accord with Congress’ intent and design and the

problem appears to Congress to be sufficiently significant to warrant changing the

statutory scheme, Congress may do so. Such a change, however, is for the legislative

and not the judicial branch.

2007-1285 3