## Facts

- Saab Cars USA, Inc. imported automobiles from its Swedish manufacturer in 1996–1997 and declared dutiable transaction value based on the prices it paid, believing the vehicles were defect-free at entry.
- After importation, Saab identified defects it characterized as latent (not apparent at entry) and sought duty allowances under 19 C.F.R. § 158.12 for merchandise partially damaged at the time of importation.
- U.S. Customs denied Saab’s protests, taking the position that § 158.12 applies only to damage discovered or readily discoverable at importation, not latent defects found later.
- Saab’s claimed allowances were based largely on post-importation repair activity under two programs: a goodwill program (discretionary customer-relations repairs) and a dealer warranty program (warranty repairs).
- The Court of International Trade granted Saab limited relief for certain warranty-related claims but rejected most claimed allowances, and final judgment entered in 2004.
- Saab appealed and the United States cross-appealed; the Federal Circuit reviewed the case under its appellate jurisdiction over the Court of International Trade.

## Issues

1. Whether 19 C.F.R. § 158.12 permits duty allowances for latent defects that existed at the time of importation but were discovered after entry.
2. What proof an importer must provide to show that claimed defects existed at importation and that a requested allowance accurately measures any diminution in value.
3. Whether Saab’s evidence tied its goodwill and dealer warranty repairs to import-time defects and supported the specific allowances sought.

## Decision

- The Federal Circuit affirmed the Court of International Trade’s judgments in all respects.
- The court held that § 158.12 is not limited to damage apparent or readily discoverable at importation; latent defects may qualify if they existed at entry.
- The court upheld the Court of International Trade’s determination that Saab failed to meet its burden for most claimed allowances, particularly those based on goodwill repairs.
- The court sustained the limited allowances the Court of International Trade granted for certain dealer warranty repairs supported by adequate proof.
- The court reviewed the regulation’s interpretation de novo and upheld the trial court’s fact findings under clear-error review.

## Legal Principles

- 19 C.F.R. § 158.12 allows an allowance when merchandise was partially damaged at the time of importation, and “partially damaged” can include latent defects existing at entry but discovered later.
- The importer bears the burden to prove (1) the defect existed at the time of importation and (2) the claimed allowance reflects the reduction in value attributable to that defect.
- Post-importation repair records and aggregate or statistical methodologies are insufficient without a reliable link between the specific repair conditions and defects present at importation.
- Discretionary or policy-driven repairs (such as goodwill accommodations) do not, without more, establish that the merchandise was damaged at importation or quantify the corresponding diminution in value.

## Conclusion

Latent defects are eligible for duty allowances under 19 C.F.R. § 158.12 when the importer proves the defect existed at importation and substantiates the value reduction, but Saab’s largely program-based repair data did not adequately establish those elements for most of its claims, so the limited relief granted below was affirmed.


Saab Cars USA, Inc. v. United States, 434 F.3d 1359 (Fed. Cir. 2006)