United States v. Sherman Sons Company

• Decision Date: 05 April 1915
• Docket Number: No. 541,541
• Citation: 35 S.Ct. 520,59 L.Ed. 883,237 U.S. 146
• Parties: UNITED STATES v. SHERMAN & SONS COMPANY
• Court: U.S. Supreme Court

237 U.S. 146

35 S.Ct. 520

59 L.Ed. 883

UNITED STATES

v SHERMAN & SONS COMPANY.

No. 541.

Argued December 17 and 18, 1914.

Decided April 5, 1915.

These two test cases raise the question of the power of the collector of customs to make a reliquidation more than a year after the duty on foreign merchandise has been paid and the imported goods have been removed for consumption. The cases are here on a certificate which shows that in 1909 Sherman & Sons Company imported certain laces from Syria and Egypt. The merchandise was entered at the port of New York, and the duty thereon was assessed by the collector. The amount of duty thus liquidated was paid by the importer and the goods were removed in 1909.

More than four years thereafter the collector made a new assessment or reliquidation, by which he increased the amount of duties to be paid on the laces. Notice of the reliquidation was given by the collector to Sherman & Sons Company. They filed no protest within the fifteen day period mentioned in the tariff act of 1909 (36 Stat. at L. 100, chap. 6, § 28, sub-sec. 14), and thereafter two suits were brought by the government, in the United States district court for the southern district of New York, for the recovery of the difference between the duty assessed and paid in 1909 and that fixed by the reliquidation in 1913.

The only substantial difference between the two cases is that in No. 1 the suit was on a liquidation order which contained no charge that the importer had been guilty of fraud; while in No. 2 the action is based on a reliquidation order which contained a statement that the 'entries were reliquidated by the said collector, as aforesaid, pursuant to his findings and decisions that they, as well as the consular invoices presented with them, upon the basis of which the said entries were originally liquidated, as aforesaid, were false and fraudulent, and that the original liquidations and the delivery of the said goods, wares, and merchandise, aforesaid, had been effected by and through the fraud of the defendant.'

In both suits the district court sustained the demurrer, and the United States electing not to plead over, both actions were dismissed. The cases were then taken to the circuit court of appeals, which certified the following questions:

'(1) Can an importer of dutiable merchandise, when sued by the United States for a balance of duties found to be due upon a reliquidation of the entry, attack the validity of the reliquidation, where it appears upon the face of the complaint that the reliquidation was made more than a year after the entry, and where the complaint contains no allegation of the presence of a protest or of fraud, or is the remedy provided by the customs administrative act (act of June 10, 1890, and act of August 5, 1909, 26 Stat. at L. 136, chap. 4078 Comp. Stat. 1913, § 5593, and 36 Stat. at L. 100, chap. 6), viz., of protest, payment of the full amount of duties ascertained to be due upon the reliquidation, and appeal to the board of general appraisers, and thence to the courts, the only way in which he may attack the validity of the reliquidation?

'(2) Does the complaint in action No. 1 herein, all of the allegations in which, with the exception of the formal allegations of sovereignty and incorporation, are hereinabove set forth, state a good cause of action?

'(3) If the foregoing question is answered in the negative, then is it sufficient for the United States, in order to state a good cause of action, to allege the finding or decision of the collector that there was fraud, as in action No. 2 herein, without alleging in what connection the collector had made his finding or decision of fraud, i. e., whether he had found fraud in the dutiable value, or in the classification, or in the quantity of the merchandise, and without alleging the presence of fraud as a fact, or the facts constituting the fraud?'

Assistant Attorney General Warren for the United States.

Messrs. Thomas M. Lane and James M. Beck for Sherman & Sons Company.

Mr. Justice Lamar, after making the foregoing statement of facts, delivered the opinion of the court:

The questions certified by the circuit court of appeals involve an inquiry as to whether the collector of customs, after the expiration of one year, can make a finding of fraud and thereupon make a reliquidation of duties which is final unless, within fifteen days, the importer pays the amount thus declared to be due so as to secure the right to a hearing (1) on the finding of fraud and (2) on the correctness of the new assessment on goods which had been removed for consumption.

On the part of the government it is claimed that this power is conferred by § 21 of the act of 1874;¹ but it is a significant fact that although the act has been in force for more than forty years, there are only two instances reported in which the collector, after the expiration of one year, has attempted to reliquidate because of the existence of fraud. Those two cases (United States v. Vitelli, customs ct. of appeals (1914) and United States v. Federal Sugar Ref. Co. 211 Fed. 1016) are of recent date and in direct conflict with each other.

The novelty of the practice, the conflict in the two decisions, and the statement that numerous suits on similar reliquidation orders are now pending, justify a somewhat detailed examination of the authority conferred upon the collector by the tariff act of 1909 ² (36 Stat. at L. p. 100, chap. 6. § 28, subsec. 14 p. 98, subsec. 12); the act of 1874¹ (18 Stat. at L. 190, chap. 391, Comp. Stat. 1913, § 5714), and the customs regulations prescribing the method of liquidating duties and defining the effect of liquidation orders.

An analysis of the various provisions bearing on the subject shows, that when foreign merchandise is to be entered at a domestic port, the owner files his statutory declaration, together with the invoice, account, and list of the goods sought to be imported. United States v. Salen, 235 U. S. 237, 59 L. ed. ——, 35 Sup. Ct. Rep. 51. The surveyor gives a certificate as to weight or quantity, and the appraiser issues a certificate of value. (Customs Regulations, 861, 1431, 1481, 1484.) With these documents before him,—and with the privilege of examining witnesses 'touching any matter deemed material in ascertaining the dutiable value and classification of the merchandise,'—the collector determines the rate of duty to be imposed under the tariff act, and thereupon calculates, assesses, and liquidates the amount to be paid. His decision as to the amount of duty is final, unless within fifteen days the importer files a protest and pays the full amount of duty thus liquidated. In that event the collector is required to transmit the invoice and all the papers connected therewith to the board of nine general appraisers for their determination of the questions raised by the protest. From them the case can be taken to the court of customs appeals. If the decision is in favor of the importer, provision is made for a refund of any overcharge assessed against him.

If, however, there is no such protest, payment, and appeal, the collector's decision is final as to the amount of duty (36 Stat. at L. 100, chap. 6, § 28, subsec. 14) except that for one year—certainly when the goods have not passed beyond his reach (Iasigi v. The Collector (Iasigi v. Whitney) 1 Wall. 384, 17 L. ed. 688)—the collector, like a court during the term at which a judgment is entered, has full control of the assessment, and may, on his own motion, set aside his first order and make a reliquidation (Robertson v. Downing, 127 U. S. 613, 32 L. ed. 271, 8 Sup. Ct. Rep. 1328). Where there is no such renewal or continuance of the original proceeding, but where the duty is paid, as assessed, the statute (18 Stat. at L. 190, chap. 391, § 21, Comp. Stat. 1913, § 5714) provides that the 'settlement shall, after the expiration of one year, in the absence of fraud, be final and conclusive upon all parties.'

1. This brief review of the many and detailed provisions of the statutes will suffice to show that the government will not allow foreign goods to be brought into this country and then litigate with the importer as to the amount of duty. Neither bond, nor security, nor retention of the goods during litigation, will dispense with the necessity of payment. The duty, as assessed by the collector, must be paid in any event,—not only as a condition of the goods being entered, but also as a condition of the right to file a protest. When that has been done, Congress, in order to prevent injustice, has given the importer, who thus pays and protests, the right to bring the goods into the United States, has granted him the opportunity to review the finding of the collector, and has also given him the promise of a refund in case the collector is found to have made an overcharge. (36 Stat. at L. 103, chap. 6, § 28, subsec. 23.) But this right of review is not an appeal in ordinary course of law, and can be exercised only in the statutory method, on statutory conditions, before special statutory tribunals of limited jurisdiction.

2. This summary method of collection, and the requirement that duties be paid as assessed before the right to litigate arises, is an incident of the fact that the assessment and collection of duties is an administrative matter,—no notice or hearing being necessary, since the assessment is in rem and against the foreign goods which are sought to be entered. The amount is determined by inspection of experts, and payment is enforced against the merchandise actually in custody of the customs officers, who cannot permit its removal until the assessed charges have been paid.

If, after the duty had been paid and the goods had been removed, it should be made to appear that they had been...