Slip Op. 99 - 3

          UNITED STATES COURT OF INTERNATIONAL TRADE

             BEFORE:   RICHARD W. GOLDBERG, JUDGE


                                   
                                   
SAMSUNG ELECTRONICS                
     AMERICA, INC.,                
                                   
                    Plaintiff,     
                                   
               v.                  
      Court No. 91-04-00288
                                   
UNITED STATES,                     
                                   
                    Defendant.     
                                   
                                   

[Plaintiff’s motion for partial summary judgment is denied.
Defendant’s cross-motion for summary judgment is granted.
Judgment entered for defendant.]


                                       Dated: January 6, 1999


     Irving A. Mandel; Thomas J. Kovarcik and Jeffrey H.
Pfeffer, of counsel, for plaintiff.

     Frank W. Hunger, Assistant Attorney General; Joseph I.
Liebman, Attorney-in-Charge, International Trade Field Office,
Commercial Litigation Branch, Civil Division, United States
Department of Justice; Bruce N. Stratvert, Commercial
Litigation Branch, Civil Division, United States Department of
Justice; Office of the Assistant Chief Counsel, International
Trade Litigation, United States Customs Service (Mark G.
Nackman), of counsel, for defendant.
Court No. 91-04-00288                                    Page 2


                              OPINION

 GOLDBERG, Judge: This case comes before the Court on cross-

 motions for summary judgment following a decision by the

 United States Court of Appeals for the Federal Circuit,

 reversing and remanding this Court’s opinion in Samsung

 Electronics America, Inc. v. United States, 

, 

(1996) ("Samsung I").     See Samsung Elecs. Am.,
 Inc. v. United States, __ Fed. Cir. (T) __, 

 (1997) ("Samsung II").   Plaintiff Samsung Electronics America

 Inc. ("Samsung") challenges defendant the United States

 Customs Service’s ("Customs") refusal to grant an allowance in

 the appraised value of imported electronic equipment under 19

 C.F.R. § 158.12.   Specifically, Samsung asserts that because

 the merchandise contained latent defects at the time of

 importation, Customs should have granted Samsung an allowance

 in value and refund of duties pursuant to section 158.12.

 Samsung claims an allowance in value of $1,938,451, the

 alleged difference between the appraised value at the time of

 importation and Samsung’s own post-importation appraisal of

 the defective merchandise.

      Because the Court concludes that Samsung cannot establish

 either the existence of latent defects in the subject entries

 with any specificity or the value of such claimed defects, it

 grants summary judgment in favor of defendant.    The Court

 exercises jurisdiction in this matter under 28 U.S.C.
Court No. 91-04-00288                                   Page 3


 § 1581(a) (1994).


                               I.
                           BACKGROUND
      Plaintiff, among other business ventures, imports

 substantial quantities of electronic goods manufactured by its

 foreign parent company, Samsung Electronics Company, Ltd.

 ("SEC").   This case involves merchandise Samsung entered

 between 1987 and 1990.   The merchandise at issue is an array

 of electronic equipment, including televisions, stereos, video

 cassette recorders, and microwave ovens.   According to

 Samsung, the subject merchandise "comprise[s] virtually all of

 the merchandise that [Samsung] imported for the period

 December 1987 to October 1990."   Pl.’s Statement of Undisputed

 Facts Pursuant to USCIT R. 56.1, dated April 14, 1993 ("Pl.’s

 Undisputed Facts I"), at ¶ 2.   Upon entry, Customs appraised

 the subject merchandise based on transaction value pursuant to

 19 U.S.C. § 1401a (1988).   See Samsung 

, 904

 F. Supp. at 1404.   After importation, Samsung sold the

 merchandise to customers throughout the United States.    And

 periodically, customers would return the subject merchandise

 to Samsung, claiming the goods were defective.

      On these general facts, Samsung filed a claim with

 Customs seeking an allowance for latent defects, and

 concomitant refund of duties, pursuant to 19 C.F.R. § 158.12.

 The cornerstone of its allowance claim is the fact that
Court No. 91-04-00288                                     Page 4


 Samsung sold all the subject merchandise with a consumer

 warranty that specifically covered latent defects.    Under the

 warranty, when Samsung confirmed that returned merchandise

 contained a latent defect, the company repaired or replaced

 the goods at no charge to the customer.    Samsung’s warranty

 was effective for a period ranging from ninety days to one

 year from the date of sale to the customer, and longer

 warranties were provided for isolated components of the

 merchandise.   See Pl.’s Undisputed Facts I, at ¶¶ 14-15.
      Typically, Samsung processed the defective merchandise

 claims through two channels: (1) it sold the defective

 merchandise "as is" to outside "jobbers" at a discount, who

 then repaired the merchandise, removed the Samsung labels, and

 resold the merchandise for their own accounts; or (2) Samsung

 either performed in-house repairs or contracted with unrelated

 service centers to repair defective merchandise, and then

 returned the repaired goods to the customers.    See Pl.’s

 Undisputed Facts I, at ¶ 22; Pl.’s Statement of Undisputed

 Material Facts Pursuant to USCIT R. 56(i), dated May 26, 1997

 ("Pl.’s Undisputed Facts II"), at ¶ 9.    Importantly, the

 consumer warranty at issue excluded coverage for all damage

 caused by mishandling or consumer misuse.    See Pl.’s
 Undisputed Facts II, at ¶ 3; Pl.’s Br. in Supp. of Mot. for

 Summ. J. ("Pl.’s Br."), at Ex. 1.

      Samsung and SEC also entered service agreements related
Court No. 91-04-00288                                    Page 5


 to the subject merchandise, whereby SEC reimbursed Samsung for

 costs associated with defective merchandise purchased from

 SEC.    Under the service agreements, SEC limited potential

 reimbursement to an amount equal to five percent of SEC’s

 annual sales to Samsung.    For the years in question, SEC

 reimbursed Samsung for an amount equal, on average, to 4.7% of

 total annual sales of subject merchandise.    See Samsung II, __

 Fed. Cir. (T) __, 106 F.3d at 378 (1997).

         For purposes of this case, Samsung derived an allowance

 figure from three separate accounting records that track

 warranty costs and losses: (1) a combined record of total in-

 house repair costs and costs paid to unrelated service centers

 to repair merchandise; (2) a record of the cost of replacement

 goods; and (3) a record of the discount prices at which

 defective goods were sold.     From this data, Samsung calculated

 its total warranty costs and losses for the year.1    Samsung

 then used the total warranty costs and losses figure to

 calculate the "Defective Merchandise Factor" ("DMF"), derived

 "by dividing the total warranty costs and losses per year by

 the total FOB value of merchandise for that year."    Pl.’s

 Undisputed Facts II, at ¶ 17.    Samsung claims that the DMF is

 an accurate measure of the value allowance it should receive



     1
          To compute its losses on discounted sales, Samsung
subtracted the discounted resale prices and any applicable
refurbishing costs from the original sale prices for defect-free
merchandise.
Court No. 91-04-00288                                    Page 6


 from Customs on the protested entries.     It asserts that the

 average DMF for the years 1987 through 1990 is 6.37%, and

 using that DMF, it should be awarded an allowance, and

 concomitant refund of duties, in the amount of $ 1,938,451.

 See Pl.’s Undisputed Facts II, at ¶ 21.

         On prior cross-motions for summary judgment, this Court

 ruled that Samsung was not due a section 158.12 allowance.

 The Court held that when Samsung purchased the subject

 merchandise from SEC, it contracted for merchandise that

 contained latent defects and, hence, no allowance from

 transaction value was appropriate.2    See Samsung 

, 904 F. Supp. at 1405.     The Federal Circuit reversed this

 decision, concluding that Samsung had ordered defect-free

 goods and therefore could maintain an allowance claim for

 latent defects.    See Samsung II, __ Fed. Cir. (T) at __, 106

 F.3d at 379.     The Federal Circuit, however, did not reach the

 question of whether particular entries actually contained

 defective merchandise and, if so, what the appropriate

 allowance should be for the defects.     Instead, the Federal

 Circuit remanded the case for this Court to ascertain whether



     2
          The Court also rejected Samsung’s claim that the
repairs to the merchandise constituted post-importation
maintenance costs and, hence, should be deducted from the
appraised value of the goods pursuant to 19 U.S.C. §
1401a(b)(3)(A)(i) (1988). 

, 904 F. Supp. at
1405-06. Although Samsung also appealed this aspect of
Samsung I, the Federal Circuit declined to address the argument
on appeal. See __ Fed. Cir. (T) at __, 106 F.3d at 378 n.1.
Court No. 91-04-00288                                    Page 7


 "defects [were] in existence at the time of importation," id.

 at __, 106 F.3d at 380 n.4, and "for a determination of the

 'allowance [to be] made in value to the extent of the

 damage.’"    Id. at __, 106 F.3d at 380 (quoting 19 C.F.R.

 § 158.12).

      On remand, Samsung filed a partial summary judgment

 motion, requesting that the Court endorse the average DMF of

 6.37% as the appropriate measure of allowance.   Customs’ filed

 a cross-motion for summary judgment, contending that,

 notwithstanding Samsung II, plaintiff is still not entitled to
 an allowance in value because (1) Samsung’s evidence fails to

 demonstrate that subject entries actually contained latent

 defects at the time of importation; and (2) the evidence fails

 to establish the extent to which any defects that may have

 been present decreased the value of the merchandise.


                               II.
                       STANDARD OF REVIEW
      This test case is before the Court on cross-motions for

 summary judgment.   The court will grant summary judgment "if

 the pleadings, depositions, answers to interrogatories, and

 admissions on file, together with the affidavits, if any, show

 that there is no genuine issue as to any material fact and

 that the moving party is entitled to a judgment as a matter of

 law."   USCIT R. 56(d); Anderson v. Liberty Lobby, Inc., 

, 247 (1986).    Summary judgment, however, is not
Court No. 91-04-00288                                   Page 8


 appropriate when a party presents "a dispute about a fact such

 that a reasonable trier of fact could return a verdict against

 the movant."    Ugg Int’l, Inc. v. United States, 

, 83,

 

, 852 (1993) (citation omitted).    And, a party

 opposing summary judgment must "go beyond the pleadings and by

 her own affidavits, or by the ‘depositions, answers to

 interrogatories, and admissions to file’, designate ‘specific

 facts showing that there is a genuine issue for trial.’"

 Celotex Corp. v. Caterett, 

, 324 (1986) (citing
 Fed. R. Civ. P. 56(e)).

        While it is true that Customs’ appraisal decisions are

 entitled to a statutory presumption of correctness, see 28

 U.S.C. § 2639(a)(1), when a question of law is before the

 Court, the statutory presumption of correctness does not

 apply.    See, e.g., Universal Elecs., Inc. v. United States, __

 Fed. Cir. (T) __, __, 

, 492 (1997).    There are no

 genuine issues of material fact at issue in this case nor are

 there factual elements of Customs’ decision at issue and,

 hence, the statutory presumption of correctness is

 inapplicable.    Thus, the Court must consider whether Customs’

 underlying appraisal decision here is correct as a matter of

 law.


                                III.
                             DISCUSSION
        Under 19 C.F.R. § 158.12, a protestant qualifies for an
Court No. 91-04-00288                                    Page 9


 allowance in dutiable value where (1) imported goods are

 determined to be partially damaged at the time of importation,

 and (2) the allowance sought is commensurate to the diminution

 in the value of the merchandise caused by the defect.

 Specifically, section 158.12 provides as follows:

          Merchandise partially damaged at time of
          importation. (A) Allowance in value.
          Merchandise which is subject to ad valorem or
          compound duties and found by the district
          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 (emphasis added).

      To qualify for an allowance, a protestant must also

 satisfy both elements of the above provision by clear and

 convincing evidence.   The clear and convincing standard is not

 provided for in 19 C.F.R. § 158.12.    Rather, Customs has

 interpreted the regulation as requiring clear and convincing

 evidence.   See C.S.D. 84-11, 

, 852

 (1984) (requiring that "the importer must provide the

 concerned Customs officer with clear and convincing evidence

 to support a claim that merchandise purchased and appraised as

 one quality was in fact of a lesser quality, thus warranting

 an allowance in duties); see also HQ 546354 (July 19, 1996);
 HQ 544986 (Feb. 28, 1994); HQ 545231 (Nov. 5, 1993).    The

 Federal Circuit also endorsed this evidentiary standard in

 Samsung II.   See __ Fed. Cir. (T) at ___, 106 F.3d at 378

 (deferring to Customs’ interpretation of section 158.12).
Court No. 91-04-00288                                    Page 10


 Because the Court gives deference to Customs’ interpretation

 of the evidentiary standard corresponding to section 158.12,

 see Chevron U.S.A. Inc. v. Natural Resources Defense Council,

 Inc., 

, 843 (1984), the Court reviews whether

 Samsung’s proffered evidence satisfies both elements of the

 allowance provision by clear and convincing evidence.

      As the Federal Circuit cautioned in its remand

 instructions, the amount of the allowance is limited to "those

 defects in existence at the time of importation, and not for
 instance, those caused by [Samsung’s] own mishandling or by

 consumer misuse of the equipment."   Samsung II, __ Fed.Cir.(T)

 at __, 106 F.3d at 380 (emphasis added).   After reviewing the

 evidence, the Court grants Customs’ motion for summary

 judgment.

      It is uncontested that some of the merchandise Samsung

 entered between 1987 and 1990 contained latent defects.     That

 is, simply by virtue of the fact that all merchandise entered

 between 1987 and 1990 was covered by the warranty and that

 claims were made on this warranty between 1987 and 1990, it

 follows that some of the merchandise contained in the subject

 entries was defective.   Yet, Samsung’s evidence fails to

 establish with any specificity which of the subject entries

 contained merchandise with latent defects at the time of

 importation.

      More importantly, even if Samsung were able to identify
Court No. 91-04-00288                                   Page 11


 those entries that contained defective merchandise at the time

 of importation, its claim still fails because it offers no

 measure of precision upon which an appropriate allowance in

 value can be derived.    That is, Samsung simply offers no

 evidence to suggest that it can link diminution in the value

 of specific merchandise to specific entries.    Without some

 evidence that the allowance claimed actually relates to the

 specific entries at issue, a section 158.12 claim is lost.

 Consequently, Samsung’s motion for partial summary judgment

 must fail, and defendant’s cross-motion for summary judgment

 prevails.


      A.     Samsung Fails to Establish by Clear and Convincing
             Evidence Which Entries Had Latent Defects at the
             Time of Importation.
      In lieu of specific descriptions or samples to illustrate

 damage at the time of importation, Samsung presents the

 consumer warranty for the subject merchandise as its principle

 evidence that entries contained defective merchandise at the

 time of importation.    In relevant part, the warranty at issue

 states the "Samsung product is warranted by [Samsung] against

 manufacturing defects in materials or workmanship."    Pl.’s

 Br., at Ex. 1.   Samsung also offers an internal document to

 show that it rejected warranty repair on certain returned

 merchandise and, therefore, asserts this is proof that the

 company only repaired latent defects under the relevant

 warranty.   Pl.’s Br., at Ex. 3.
Court No. 91-04-00288                                     Page 12


      The Court is unpersuaded that Samsung’s evidence

 establishes by clear and convincing evidence which subject

 entries had latent defects at the time of importation, as

 required by section 158.12.   As noted earlier, it is

 uncontested that at least some of the merchandise contained

 latent defects.   The consumer warranty, and the corresponding

 claim records, indeed amount to conclusive proof of this fact.

 Yet, the warranty, and the claim records, fail to demonstrate

 with any particularity the precise entries that contained

 defects.   Because the warranty covers all merchandise
 contained in all subject entries, it is impossible to accept

 the warranty, standing alone, as evidence of which particular

 entries had defects.   And Samsung does not contend that all

 entries contained defective merchandise at the time of

 importation.   Therefore, while establishing that some

 merchandise was defective, the warranty, in and of itself,

 does not establish which particular entries contained

 defective merchandise.

      Moreover, the warranty indicates that the defects were

 not detected in the subject merchandise until customers made

 returns under warranty, quite some time after importation.

 Evidence provided in reappraisal cases, such as a 19 C.F.R.

 § 158.12 claim, is of greater weight when gathered

 contemporaneous with importation, and less so when time has

 passed between importation and protest.   See Parmentier’s
Court No. 91-04-00288                                    Page 13


 Roses v. United States, 

, 173, 

,

 at *3 (Cust. Ct. 1957) (noting that remoteness in time goes to

 the weight of evidence presented in reappraisal cases).       The

 logic underpinning this rule is clear.     Once Customs has

 liquidated merchandise, it can be damaged through a number of

 causes, including misuse or mishandling.     This makes it

 difficult, or in some cases impossible, to identify the root

 cause of the damage or defect.    Consequently, the more remote

 that an inspection is to the time of importation, the less

 persuasive that inspection is as evidence of the condition of

 the merchandise at the time of importation.

      Here, the defects were only discovered when a customer

 submitted a warranty claim.    Given the term of the warranty,

 this might be anywhere from ninety days to one year after the

 merchandise was sold to the customer.     It is true that

 Samsung’s warranty only covers repairs for defective

 merchandise, not merchandise damaged through misuse or

 mishandling.   See Pl.’s Br., at Ex. 1.    A Samsung executive

 also has stated that under the warranty, only merchandise with

 latent defects was repaired or replaced.     See Pl.’s Br.,
 Affidavit of Kang Bae Park, Samsung Tax and Accounting

 Manager, at ¶¶ 4-8.    Although the Court has no reason to doubt

 the veracity of Samsung’s assertions, without additional,

 independent evidence to corroborate the assertions, the Court

 cannot verify that the merchandise was actually defective at
Court No. 91-04-00288                                    Page 14


 the time of importation, as opposed to damaged later through

 misuse or mishandling.

      A warranty surely may be used as supplementary evidence

 that a defect existed at the time of importation.    Yet, to

 prevail on a section 158.12 claim, more objective and

 verifiable evidence with some semblance of specificity must

 also be proffered.     Indeed, to make a section 158.12 claim, a

 claimant should provide specific descriptions of the damage or

 defect alleged and, in some manner, relate that defective

 merchandise to a particular entry.    Such descriptions are

 necessary because both the Court and Customs must

 independently confirm the validity of an allowance claim.

 And, descriptions or samples provide a reasonably objective

 basis upon which to assess such a claim.    For example,

 descriptions can be reviewed by the Court and by independent

 experts to confirm that the alleged damage existed at the time

 of importation, or that the damage is recognizable as a true

 manufacturing defect.    An undocumented assertion that damage

 existed, such as a warranty, cannot amount to clear and

 convincing evidence that defects existed at the time of

 importation.   See Esformes Packing Corp. v. United States, 

, 

, at *2 (Cust. Ct. 1968) (denying

 protests because it was impossible to deduce from the record

 evidence the existence of damage at the time of importation);

 see also HQ 546354 (July 19, 1996) (denying protests because
Court No. 91-04-00288                                  Page 15


 alleged defects in imported yarn and alkathene powder,

 respectively, were undetected in samples submitted to Customs,

 and claimants failed to submit any other independent testing).

      For these reasons, the Court concludes that while it is

 uncontested that some of the subject entries had latent

 defects at the time of importation, Samsung fails to identify

 those particular entries that had latent defects at the time

 of importation.   Accordingly, the Court grants defendant’s

 summary judgment motion on this issue.


      B.    Samsung Fails to Show by Clear and Convincing
            Evidence That an Appropriate Allowance in Value Can
            be Calculated for the Alleged Defects in the Subject
            Entries.
      Even assuming arguendo that Samsung has proved by clear

 and convincing evidence that defects existed in all entries at

 the time of importation, its section 158.12 claim still fails

 because Samsung cannot demonstrate with any precision what the

 claimed allowance in value should be for the defective

 merchandise.   Here, Samsung argues that its total warranty

 cost and loss data provide an accurate measure from which an

 appropriate allowance for defective merchandise can be

 derived.   The Court concludes that it does not.

      As evidence of the post-importation appraised value of

 the subject merchandise, Samsung offers its total warranty

 costs and losses for the year.   This data, however, fails to

 illuminate the extent of damage to merchandise contained in
Court No. 91-04-00288                                    Page 16


 subject entries for a number of reasons.    Samsung’s repair

 records are not detailed enough to ascertain whether the costs

 incurred actually relate to the subject entries.    Most

 importantly, it is not apparent from Samsung’s records that

 repair costs for the subject merchandise are segregated from

 repair costs for merchandise contained in other, non-subject

 entries.    That is, the total warranty cost and loss figure

 does not appear to segregate the costs and losses related to

 the subject merchandise from the costs and losses associated

 with other Samsung merchandise, whether by model or by year of

 sale.    For example, Samsung claims that its total warranty

 costs associated with 1987 claims is $4,243,033.16.    See Pl.’s
 Br., at Ex. 4.    Yet, Samsung claims an allowance on entries

 made between December 1987 and October 1990.     See Pl.’s

 Undisputed Facts I, at ¶ 2.     Samsung has not made it clear

 what portion, if any, of the warranty costs for the whole of

 1987 corresponds to the entries made in December 1987.

         Moreover, Samsung includes warranty costs for the years

 1987 to 1990 in its DMF factor calculation.     As Samsung itself

 acknowledges, the warranty typically lasts for between ninety

 days to one year after the date of sale.     See Pl.’s Undisputed
 Facts I, at ¶¶ 14-15.    It is theoretically possible, though

 not likely, that all of the subject merchandise was sold out

 of inventory by the end of 1990.    Yet, the Court cannot

 envision how warranty claims for this same merchandise could
Court No. 91-04-00288                                    Page 17


 also have been made before the close of 1990, in which case

 the warranty costs and losses for 1990 do not correlate to all

 of the subject entries.    In other words, it is most likely

 that merchandise contained in a 1990 entry was actually sold

 in 1991 or even later, and warranty claims were actually made

 in 1992 or even later.    As such, the warranty cost and loss

 data for 1990 bear no direct relationship to the entries made

 in 1990.   And, Samsung offers no evidence, or any indication

 that it could, to correlate the warranty claims to the date of

 sale and, in turn, to the subject entries.    Without some more

 concrete temporal connection between the subject entries, and

 the submitted warranty costs, only vague assumptions can be

 made about the appropriate allowance for the defects in

 subject entries.

      If the Court were to accept otherwise, it runs the risk

 of illegally assigning to the protested entries value

 allowances for merchandise in non-protested entries and, in so

 doing, would contravene the rule from Alyeska Pipeline Serv.
 Co. v. United States, 

, 

(1986),

 reh’g granted, 

(1987), vacated as moot on other

 grounds, unpublished order (May 19, 1988).    In Alyeska

 Pipeline, Customs had advanced the value of merchandise in a

 single entry to cover value advances (i.e., reappraisements)

 relating to twenty four additional entries of identical

 merchandise, including two of which were not before the court.
Court No. 91-04-00288                                   Page 18

 

, 643 F. Supp. at 1132.   The court rejected

 this action, finding that "[t]he law does not permit the

 Customs Service to assign one entry the values of merchandise

 in other entries or the duties owing to them."   

F. Supp. at 1132.   The court went on to conclude that "a

 value adjustment to imported merchandise may be reflected only

 on the entry or entries which cover the imported merchandise.

 It follows that the only proper value increase for the entry

 in question would be one reflecting the value of the

 merchandise covered by that entry and no other merchandise."

 

F. Supp. at 1133.   Similarly, it also follows

 here that a value allowance must relate to the merchandise

 entered under a specific entry(ies).3   Instead, Samsung

     3
          Samsung argues against the entry-by-entry approach,
noting that the value statue allows Customs to allocate the costs
of assists over as many entries as are impacted by the assist
and, hence, Customs should also be allowed to allocate an
allowance in value for defective merchandise over more than one
entry. See Pl.’s Br. in Opp’n to Def.’s Mot. for Summ. J., at
14-15 ("Assists" are defined, inter alia, as materials,
components, parts, tools, or artwork supplied free of charge by
the buyer of the imported merchandise. See 19 U.S.C. §
1401a(h)(1)(A)). Yet, Samsung neglects to note that while the
value statute expressly provides for the apportionment of
assists, the statute is silent with respect to apportionment of
value allowances for defective merchandise. See 19 U.S.C. §
1401a(b)(1)(C) ("The transaction value of imported merchandise is
the price actually paid or payable for the merchandise when sold
for exportation to the United States, plus amounts equal to . . .
the value, apportioned as appropriate, of any assist."). In this
case, it is impossible for Samsung to tie the extent of damage
due to the defects to the subject entries with any particularity.
Yet, in those cases where it is possible to show that the amount
of damage claimed actually relates to a particular set of
entries, the Court takes no position on whether it is ever
permissible for Customs to calculate an allowance for defective
Court No. 91-04-00288                                    Page 19


 requests that a value allowance be granted to cover allegedly

 defective merchandise contained in a slew of entries,

 regardless of the fact that it cannot show which particular

 entries contained defective merchandise, which contained more

 or less defective merchandise, and which contained no

 defective merchandise.   The Court cannot grant a blanket

 allowance when the extent of damage claimed does not actually
 correspond to the merchandise contained in a particular entry

 or set of entries.

      In addition, the total warranty cost and loss data

 include the discounted sales made to outside jobbers.    The

 value of discounted sales Samsung made to repurchasers of

 damaged and refurbished merchandise bears, at best, a remote

 relation to the difference in value resulting from the

 defects.   Samsung fails to demonstrate that the discounted

 price is an accurate measure of the extent of damage.    To

 establish an appraisal by clear and convincing evidence, there

 must be some way to segregate the diminution in value

 attributable to the damage to the merchandise, from that

 attributable to other discounts, e.g., volume discounts.       See

 HQ 545534 (May 15, 1995) (rejecting an allowance for defective

 merchandise under section 158.12 based on the difference

 between the original sale price and the resale price because

 there was no evidence to suggest that the discount bore any



merchandise using an allocation methodology.
Court No. 91-04-00288                                     Page 20




 relation to the extent of damage).

      In sum, Samsung fails to show that it is possible to link

 the diminution in value due to defects in specific merchandise

 to any particular entry(ies).     Hence, it is impossible to

 calculate an appropriate allowance in value for the defective

 merchandise.   Accordingly, even if the Court were to accept

 that Samsung has established which entries contained defective

 merchandise at the time of importation, the Court still would

 grant summary judgment to defendant because Samsung cannot

 establish an appropriate allowance by clear and convincing

 evidence.


                               V.
                           CONCLUSION
      For the foregoing reasons, Customs’ decision not to grant

 plaintiff an allowance for defective merchandise is sustained,

 and summary judgment is granted in favor of defendant.

 Judgment will be entered accordingly.




                                   ________________________________

                                          Richard W. Goldberg
                                                JUDGE
 Date:       January 6, 1999
             New York, New York.
Court No. 91-04-00288   Page 21