Volkswagen of America, Inc. v. United States

Slip Op. 07–26

UNITED STATES COURT OF INTERNATIONAL TRADE

VOLKSWAGEN OF AMERICA, INC.,
Before: Richard W. Goldberg,
Plaintiff, Senior Judge

v. Court No. 06-00222

UNITED STATES,

Defendant.

OPINION

[Defendant’s motion to dismiss is granted; Plaintiff’s motion to
consolidate is denied.]

Dated: February 21, 2007

Law Offices of Thomas J. Kovarcik (Thomas J. Kovarcik), for
Plaintiff Volkswagen of America, Inc.

Peter D. Keisler, Assistant Attorney General; Barbara S.
Williams, Attorney in Charge, International Trade Field Office,
Commercial Litigation Branch, Civil Division, U.S. Department of
Justice; Yelena Slepak, Office of Assistant Chief Counsel,
International Trade Litigation, U.S. Customs and Border
Protection, Of Counsel, for Defendant United States.

GOLDBERG, Senior Judge: This matter is before the Court on the

defendant’s motion to dismiss for lack of subject matter

jurisdiction pursuant to USCIT Rule 12(b)(1) and for failure to

state a claim upon which relief can be granted pursuant to USCIT

Rule 12(b)(5). The plaintiff Volkswagen of America, Inc.,

(“Volkswagen”) alleges in its complaint that U.S. Customs and

Border Protection (“Customs”) failed to grant Volkswagen an
Court No. 06-00222 Page 2

allowance in value for imported merchandise that was later found

to be defective. Volkswagen asserts jurisdiction under 28

U.S.C. § 1581(i). Volkswagen has also filed a cross-motion to

consolidate this case with the test case Volkswagen of America,

Inc. v. United States, Court No. 96-132 (CIT filed Jan. 17,

1996).

I. BACKGROUND

In this action, Volkswagen seeks an allowance in the

appraised value of automobiles entered in 1994 and 1995.

Customs liquidated those entries in 1994 and 1995. After

importation, Volkswagen discovered that some of the automobiles

were defective. Volkswagen filed protests with Customs arguing

that under 19 C.F.R. § 158.12, it was entitled to an allowance

in the appraised value of the automobiles because they were

“damaged at the time of importation.” 19 C.F.R. § 158.12

(2006). Customs denied these protests, and Volkswagen brought

an action before this Court under 28 U.S.C. § 1581(a). The

parties filed cross-motions for summary judgment. In deciding

these motions, this Court held that it did not have jurisdiction

over automobiles repaired after the date Volkswagen filed its

protests because Volkswagen was not aware of the defects at the

time the protests were made. See Volkswagen of Am., Inc. v.

United States, 27 CIT 1201, 1206, 277 F. Supp. 2d 1364, 1369

(2003) (“Volkswagen I”); accord Saab Cars USA, Inc. v. United
Court No. 06-00222 Page 3

States, 434 F.3d 1359, 1368 (Fed. Cir. 2006) (affirming the

lower court’s dismissal because Saab provided no evidence that

it was aware of defects at the time of protest). The Court

found § 1581(a) jurisdiction over the automobiles that were

repaired before the date of protest. See Volkswagen I, 27 CIT

at 1203-06, 277 F. Supp. 2d at 1367-69.

On January 31, 2006, Volkswagen sent letters to Customs

requesting an allowance in the value of the automobiles whose

repairs occurred after the date of protest. As mentioned above,

these claims had been dismissed in Volkswagen I. Customs did

not respond to these letters, and indicated that it would never

issue a decision concerning the letters. Volkswagen

subsequently filed this action.

II. STANDARDS OF REVIEW

Once a defendant moves to dismiss for lack of subject

matter jurisdiction under USCIT Rule 12(b)(1), the plaintiff has

the burden of establishing the basis for jurisdiction. See

Duferco Steel, Inc. v. United States, 29 CIT __, __, 403 F.

Supp. 2d 1281, 1284 (2005); Nufarm America’s, Inc. v. United

States, 29 CIT __, __, 398 F. Supp. 2d 1338, 1342 (2005). On a

motion to dismiss for failure to state a claim pursuant to USCIT

Rule 12(b)(5), the defendant is entitled to dismissal where it

appears beyond doubt that no set of facts can be proven that
Court No. 06-00222 Page 4

would entitle the plaintiff to relief. See Nufarm America’s, 29

CIT at __, 398 F. Supp. 2d at 1342.

III. DISCUSSION

A. Jurisdiction under 28 U.S.C. § 1581(i)

In its complaint, Volkswagen alleges that it “was affected

and aggrieved by” Customs’ failure to recognize Volkswagen’s

claims for a § 158.12 allowance, and “accordingly, has standing

to prosecute this action.” Pl.’s Compl. ¶ 4. For the purposes

of considering Customs’ motion to dismiss, the Court will

construe this language as alleging a cause of action under § 702

of the Administrative Procedure Act (“APA”). See Tokyo Kikai

Seisakusho, Ltd. v. United States, 29 CIT __, __, 403 F. Supp.

2d 1287, 1292 (2005) (construing complaint as bringing an APA

cause of action when complaint did not expressly state that

plaintiffs were suing under the APA, but relied on the APA in

its allegation of standing).

The APA is not a jurisdictional statute. See Califano v.

Sanders, 430 U.S. 99, 107 (1977) (“[T]he APA does not afford an

implied grant of subject-matter jurisdiction permitting federal

judicial review of agency action.”). In order for Volkswagen’s

case to proceed, this Court must have an independent basis for

jurisdiction under 28 U.S.C. § 1581. Volkswagen claims subject

matter jurisdiction over its APA cause of action pursuant to 28

U.S.C. § 1581(i), which is this Court’s “residual”
Court No. 06-00222 Page 5

jurisdictional grant. See Motions Sys. Corp. v. Bush, 437 F.3d

1356, 1370 (Fed. Cir. 2006) (en banc) (per curiam) (quoting H.R.

Rep. No. 96-1235, at 47 (1980), reprinted in 1980 U.S.C.C.A.N.

3729, 3745). Section 1581(i) states that this Court has

exclusive jurisdiction over

[A]ny civil action commenced against the United
States, its agencies, or its officers, that arises out
of any law of the United States providing for—

(1) revenue from imports or tonnage;

(2) tariffs, duties, fees, or other taxes on the
importation of merchandise for reasons other than the
raising of revenue;

(3) embargoes or other quantitative restrictions on
the importation of merchandise for reasons other than
the protection of the public health or safety; or

(4) administration and enforcement with respect to the
matters referred to in paragraphs (1)—(3) of this
subsection and subsections (a)—(h) of this section.

28 U.S.C. § 1581(i) (2000). Because Volkswagen’s action

challenges the administration and enforcement of the

collection of import duties, it falls under the language in

paragraphs (1) and (4) of § 1581(i).1

1
Customs is correct to point out that § 1581(i) was not intended
to create new causes of action. See Asociacion Colombiana de
Exportadores de Flores v. United States, 13 CIT 584, 586, 717 F.
Supp. 847, 849-50 (1989), aff’d 903 F.2d 1555 (1990). In this
case, Volkswagen has elected to assert an APA cause of action.
This Court can have 1581(i) jurisdiction over an APA cause of
action. See, e.g., Shinyei Corp. of Am. v. United States, 355
F.3d 1297, 1312 (Fed. Cir. 2004). In fact, the Federal Circuit
has suggested that a plaintiff is required to assert an APA
cause of action or some form of nonstatutory review in order to
Court No. 06-00222 Page 6

Customs argues that there is no jurisdiction under §

1581(i) because Congress specifically intended that an importer

may only challenge the appraised value of merchandise in

accordance with the procedures set forth in 19 U.S.C. § 1514.

Here, Customs conflates its jurisdictional argument with its

claim that Volkswagen did not state a valid cause of action.

Section 1514 is not a jurisdiction-granting statute; it defines

the types of actions that are potentially reviewable under §

1581(a). Cf. Trs. in Bankr. of N. Am. Rubber Thread Co. v.

United States, Slip Op. 06-154, 2006 Ct. Intl. Trade LEXIS 158,

at *22-23 (CIT Oct. 18, 2006) (“NART Co.”) (preclusion of a

cause of action due to an amendment of § 1516a does not divest

the CIT of subject matter jurisdiction). The fact that a cause

of action is not specified in § 1514 does not completely strip

this Court of subject matter jurisdiction because jurisdiction

under § 1581(i) could still be available. Rather, it simply

means there is no § 1581(a) jurisdiction. Volkswagen’s claim

falls within the plain language of § 1581(i), which supports the

existence of jurisdiction. See Conoco, Inc. v. United States

Foreign-Trade Zones Board, 18 F.3d 1581, 1590 (Fed. Cir. 1994)

(exercising jurisdiction when action is “facially embraced” by §

1581(i)).

invoke § 1581(i) jurisdiction. See Motions Sys., 437 F.3d at
1359.
Court No. 06-00222 Page 7

There is one more obstacle that Volkswagen must overcome to

establish jurisdiction under § 1581(i). Jurisdiction is not

appropriate under § 1581(i) when “another subsection of § 1581

is or could have been available, unless the remedy provided

under that other subsection would be manifestly inadequate.”

Miller & Co. v. United States, 824 F.2d 961, 963 (Fed. Cir.

1987). In the present case, no other proceedings under other

subsections of § 1581 could have provided effective review of

Volkswagen’s APA claim. Section 1581(a) is the traditional

route for challenging a Customs decision concerning the

appraisement of goods. In order to invoke jurisdiction under

subsection (a), Volkswagen would have had to file a valid

protest within ninety days of liquidation and Customs would have

to deny the protest. See 19 U.S.C. §§ 1514(c)(3) & 1515(a)

(2000). Volkswagen could not have protested the liquidation

within ninety days of liquidation, because the defects were not

discovered until after this time limit had passed. In fact,

Volkswagen already attempted to bring this action under §

1581(a) in Volkswagen I, but this Court dismissed the case for

lack of jurisdiction. See 27 CIT at 1206, 277 F. Supp. 2d at

1369.

In light of the above, the Court has subject matter

jurisdiction over Volkswagen’s claim pursuant to § 1581(i).

Congress has not foreclosed judicial review of Volkswagen’s
Court No. 06-00222 Page 8

claim by divesting this Court of jurisdiction, but it can

preclude judicial review of a specific cause of action. See

NART Co., 2006 Ct. Intl. Trade LEXIS 158, at *20 (citing Whitman

v. DOT, 126 S. Ct. 2014, 2015 (2006)). We now turn to the

question of whether Congress has precluded judicial review of

this particular cause of action.2

B. Failure to State a Claim upon which Relief Can Be Granted

The APA 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 (2000). This

right of review is not available if judicial review is precluded

by another statute. See id. § 701(a). There is a general

presumption in favor of judicial review that can be overcome by

2
The existence of judicial preclusion results in a Rule 12(b)(5)
dismissal for failure to state a claim upon which relief can be
granted as opposed to a Rule 12(b)(1) dismissal for lack of
subject matter jurisdiction. The Supreme Court has recently
“instruct[ed the] courts of appeals to properly distinguish
between subject-matter jurisdiction and other limits on a
court’s authority.” Cobb v. Contract Transp., Inc., 452 F.3d
543, 550 (6th Cir. 2006) (citing, inter alia, Arbaugh v. Y & H
Corp., 546 U.S. 500 (2006)). For example, res judicata, or
claim preclusion, “while having a somewhat jurisdictional
character, does not affect the subject matter jurisdiction of
the district court.” Smalls v. United States, No. 05-5052, 2006
U.S. App. LEXIS 31130, at *6 (D.C. Cir. Dec. 19, 2006)
(quotation marks and citations omitted). Additionally, the
Supreme Court has noted that “congressional preclusion of
judicial review is in effect jurisdictional . . . .” Block v.
Cmty Nutrition Inst., 467 U.S. 340, 353 n.4 (1984). This
language suggests that preclusion of judicial review under the
APA has the same effect as a jurisdictional rule, but is not in
fact a question of jurisdiction.
Court No. 06-00222 Page 9

congressional intent to preclude that is “fairly discernable”

from the legislative scheme. See Block v. Cmty Nutrition Inst.,

467 U.S. at 351. The Supreme Court has stated that “[w]hether

and to what extent a particular statute precludes judicial

review is determined not only from its express language, but

also from the structure of the statutory scheme, its objectives,

its legislative history, and the nature of the administrative

action involved.” Id. at 345. In the present case, 19 U.S.C. §

1514 expressly precludes judicial review of Volkswagen’s cause

of action.

Section 1514 sets forth the procedures governing protests

against decisions made by Customs. It provides, in relevant

part, the following:

[D]ecisions of the Customs Service, including the
legality of all orders and findings entering into the
same, as to—

(1) the appraised value of merchandise;

. . .

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

19 U.S.C. § 1514(a) (2000) (emphasis added). This language was

added with the enactment of the Customs Courts Act of 1970, and

fulfilled Congress’s intent to have a “single, continuous

procedure for deciding all issues in any entry of merchandise,
Court No. 06-00222 Page 10

including appraisement and classification issues.” S. Rep. No.

91-576, at 11 (1969). Additionally, the Customs Courts Act of

1970 lengthened the time period in which an importer may protest

a Customs decision from thirty to ninety days. An importer

would “no longer be pressured by an unrealistically short time

limit into filing a protest for protective purposes only.” Id.

Congress apparently believed that an importer would be

“pressured” into filing a premature protest because it would not

have the option to file an APA cause of action to challenge an

appraisement decision. Congress chose to alleviate this

pressure by increasing the time limits, and not by providing

importers with an alternative cause of action. By lengthening

the time period, Congress struck a balance between commercial

reality and the finality of liquidation. The clear language of

§ 1514 and its legislative history demonstrate that Congress did

not envision that an importer could avoid the § 1514 time limits

and obtain judicial review of a Customs appraisement decision.

Volkswagen’s cause of action consists of the following

claim: After the time limits set forth in 19 U.S.C. § 1514 had

expired, Volkswagen sent a letter to Customs requesting an

allowance pursuant to 19 C.F.R. § 158.12. When Customs refused

to act, Volkswagen “had become a ‘person’ who was ‘aggrieved’ by

‘final agency action’ in the form of ‘withholding relief.’”

Pl.’s Br. 13-14 (quoting 5 U.S.C. §§ 551, 702, 704). Volkswagen
Court No. 06-00222 Page 11

argues that this cause of action is valid because in order to

seek an allowance under § 158.12, it is not required to file a

protest pursuant to § 1514. The relevant language in § 158.12

reads as follows:

(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 (2006). Volkswagen asserts that § 158.12

gives an importer an alternative procedure to challenge a

Customs decision concerning appraisement of imported

merchandise. Unlike § 1514, § 158.12 includes no time limits.

Thus, Volkswagen argues, § 158.12 creates a cause of action to

directly challenge the appraisement of its merchandise without

resorting to a challenge to Customs’ decision to liquidate.3

3
To support its argument that § 158.12 claims are not intended
to have time limits, Volkswagen points out that in contrast to §
158.12, other regulations that deal with damaged or defective
merchandise contain specific time limits. For example, 19
C.F.R. § 158.14 deals with perishable merchandise that has been
condemned by health officers. This regulation requires the
importer to file written notice of the condemnation with the
port director within five days of the condemnation. 19 C.F.R. §
158.14(a). If the port director is satisfied that the claim is
valid, an allowance in duties will be made in the liquidation.
See id. § 158.14(b). The five-day time limit is due to the
perishable nature of the goods. Customs succinctly points out
that “the time limitations are necessary in [158.11, 158.13, and
158.14] in order to base the allowances on the condition of such
goods at importation, not at some later point in time when the
condition of the goods deteriorates even further.” Def.’s Reply
8. These regulations do not conflict with 19 U.S.C. § 1514 and
Court No. 06-00222 Page 12

Volkswagen’s expansive interpretation of § 158.12 is

incorrect. Any decision made by Customs concerning the

appraisement of imported merchandise merges with liquidation.

See United States v. Utex Int'l, Inc., 857 F.2d 1408, 1410 (Fed.

Cir. 1988) (“‘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 at 32 (3d ed. 1982)); Dal-Tile Corp. v.

United States, 24 CIT 939, 945 n.12, 116 F. Supp. 2d 1309, 1315

(2000) (stating that “all decisions and findings [made] by

Customs are merged in and become part of the liquidation or

reliquidation against which a protest will lie”). Congress

specifically permits an importer to challenge the appraised

value of merchandise by filing a protest. See 19 U.S.C. §

1514(a) (2000). If no protest is filed, the Customs decision

concerning appraisement, and all other decisions, become final.

See id.; Shinyei Corp., 355 F.3d at 1311 (noting that § 1514 is

“fairly construed to prohibit a challenge to ‘decisions’ of the

Customs Service ‘as to’ liquidation outside the protest

provisions of § 1514(a)” and that the “statute’s discussion of

finality relates to decisions of Customs” (quoting 19 U.S.C. §

they do not support Volkswagen’s contention that an action based
on § 158.12 is not governed by § 1514.
Court No. 06-00222 Page 13

1514)). This congressional mandate of finality cannot simply be

overridden by a Customs regulation that does not specifically

include time limitations.4

Volkswagen cites to Swisher International, Inc. v. United

States, 205 F.3d 1358 (Fed. Cir. 2000), to support its assertion

that § 158.12 creates a separate cause of action to challenge an

appraisement decision beyond the procedures set forth in § 1514.

The Swisher decision is not in any way applicable to the present

case. The Swisher court held that the denial of a Harbor

Maintenance Tax refund request is protestable, despite the fact

that 19 C.F.R. § 24.24 did not contain any time limit for

requesting the refund. Id. at 1368-69. As a result,

jurisdiction was proper under 19 U.S.C. § 1581(a). Swisher does

not provide support for the proposition that a Customs

regulation can permit a plaintiff to challenge the appraisement

of merchandise outside of the procedures set forth in § 1514.

In fact, the Swisher court came to the opposite conclusion in

dicta:

4
Additionally, it does not matter that § 158.12 does not mention
the word “liquidation.” As discussed above, appraisement
decisions are subsumed in the liquidation. This fact is evident
from the regulations themselves. 19 C.F.R. § 159 is entitled
“Liquidation of Duties.” Under that heading, § 159.8 states
that “[a]llowance in duties for any merchandise which is lost,
stolen, destroyed, abandoned, or short-shipped shall be made in
accordance with the provisions in part 158 of this chapter.” In
other words, the procedures set forth in § 158 must be followed
in order to for Customs to properly appraise the value of
imported merchandise and liquidate accordingly.
Court No. 06-00222 Page 14

[I]t is not at all clear that refunds on import
duties, which comprise the vast majority of the money
collected by Customs, would or could be requested
outside the bounds of the liquidation or reliquidation
procedures. With regard to imports, most fees . . .
are collected at liquidation. Any fee collected at
liquidation is considered merged with the liquidation.
A legal challenge to a liquidation decision must be
made as a protest within 90 days of liquidation.

Id. at 1368 n.8 (citations omitted) (emphasis added). This

language reinforces the claim that any challenge to

appraisement, which is merged with the liquidation, must be

challenged pursuant to § 1514.5

Volkswagen also claims that the Federal Circuit decision in

Saab held that “it is not liquidation, but the first repair of

the defective automobile, that gives rise to a § 158.12

allowance claim . . . .” Pl.’s Br. 11 (emphasis omitted). The

Saab court made no such statement. Instead, the Saab court

affirmed the dismissal of “those claims relating to cars as to

which no repair existed at the time of protest, because Saab

provided no evidence that it was aware of those defects at that

time.” Saab, 434 F.3d at 1368. The fact that Saab was not

aware of the defects rendered its protests invalid, so no §

5
Swisher stated that there is not a “generic limitation period
on requesting refunds generally” because 19 U.S.C. § 1520, which
sets forth the cases in which refunds are authorized, contains
no time limits. 205 F.3d at 1368. Volkswagen cannot make use
of § 1520 because its particular claim does not fit within any
of the categories listed therein. By contrast, challenges to
liquidation orders (which includes appraisement decisions) are
constrained by clear time limits set forth in 19 U.S.C. § 1514.
Court No. 06-00222 Page 15

1581(a) jurisdiction existed over those claims. No language in

the Saab opinion supports the proposition that § 158.12

allowance claims are not subject to the requirements set forth

in § 1514.

In light of the foregoing, Volkswagen has failed to state a

claim upon which relief can be granted because judicial review

of its APA cause of action is precluded by 19 U.S.C. § 1514.

Volkswagen cannot challenge, based on 19 U.S.C. § 158.12, an

appraisement decision made by Customs outside of the protest

procedures and time limits set forth in § 1514.

IV. CONCLUSION

Because Volkswagen has failed to state a claim upon which

relief can be granted by this Court, this action will not be

consolidated with Volkswagen of America, Inc. v. United States,

Court. No. 96-132. Additionally, the Court need not address the

government’s argument that this action is time-barred by the

statute of limitations in 28 U.S.C. § 2636(i). Customs’ motion

to dismiss is granted and judgment will be entered accordingly.

/s/ Richard W. Goldberg
Richard W. Goldberg
Senior Judge

Date: February 21, 2007
New York, New York
 UNITED STATES COURT OF INTERNATIONAL TRADE

VOLKSWAGEN OF AMERICA, INC.,

Plaintiff, Before: Richard W. Goldberg,
Senior Judge
v.
Court No. 06-00222
UNITED STATES,

Defendant.

JUDGMENT ORDER

Upon consideration of defendant’s motion to dismiss,
plaintiff’s motion to consolidate, and all accompanying papers,
and upon due deliberation, it is hereby:

ORDERED that Defendant’s motion to dismiss is granted; and
it is also

ORDERED that Plaintiff’s motion to consolidate is denied;
and it is also

ORDERED that this action is dismissed.

IT IS SO ORDERED.

/s/ Richard W. Goldberg
Richard W. Goldberg
Senior Judge

Date: February 21, 2007
New York, New York