Syva Co. v. US

• Decision Date: 08 March 1988
• Docket Number: Court No. 86-04-00476.
• Citation: 681 F. Supp. 885,12 CIT 199
• Parties: SYVA COMPANY, Plaintiff, v. UNITED STATES, Defendant.
• Court: U.S. Court of International Trade

681 F. Supp. 885

12 CIT 199

SYVA COMPANY, Plaintiff, v. UNITED STATES, Defendant.

Court No. 86-04-00476.

United States Court of International Trade.

March 8, 1988.

Adduci, Dinan, Mastriani, Meeks & Schill, Jeffrey A. Meeks and Ralph H. Sheppard, Washington, D.C., for plaintiff.

James M. Spears, Acting Asst. Atty. Gen., Washington, D.C., Joseph I. Liebman, Atty. in Charge, Intern. Trade Field Office, Commercial Litigation Branch, U.S. Dept. of Justice, Michael P. Maxwell, New York City, for defendant.

MEMORANDUM OPINION AND ORDER

TSOUCALAS, Judge:

The central issue in this matter is whether plaintiff's failure to remit interest, which had accrued upon unpaid liquidated duties, constitutes a jurisdictional defect in that "all charges and exactions" were not paid before plaintiff commenced this action. The Court concludes that such an omission is fatal and thus, does not have jurisdiction over this action.

BACKGROUND

The subject goods were entered in May 1984, and plaintiff claimed duty free treatment under item 800.00, TSUS, as American goods returned. However, Customs rejected that claim and liquidated the entry at the applicable duty rate on December 28, 1984. In January 1986, plaintiff paid $9,113.21, reflecting the liquidated duties assessed, and thereafter initiated this action to contest Customs' refusal to accord a duty allowance for the imported merchandise. However, on November 29, 1984, one month before the liquidation, 19 U.S.C. § 1505(c) became effective. This amendment prescribes the time when liquidated duties are due and provides that duties considered delinquent will bear interest from the 15th day after liquidation. See 19 U.S.C. § 1505(c) (Supp. II 1984). Prior to this revision, no interest was assessed for late payment.

Plaintiff has not remitted $1,137.52 in accrued interest assessed on the delinquent payment of liquidated duties. It is alleged that plaintiff relied on information from a Customs official, who advised plaintiff that the new § 1505(c) would only be enforced for new entries and no enforcement action would be taken on existing entries. Defendant alleges, and plaintiff has not refuted, that plaintiff was on notice of the outstanding interest owing as reflected in past due bills sent by Customs to plaintiff. Defendant has moved to dismiss the action for lack of jurisdiction pursuant to USCIT R. 12(b)(1).

DISCUSSION

Before commencing its analysis of the jurisdictional prerequisites, the Court deems it appropriate to briefly discuss two relevant issues. The first pertains to defendant's failure to timely answer the complaint despite extensions of time. Therefore, on March 30, 1987, default was entered against defendant in accordance with plaintiff's application pursuant to USCIT R. 55(a). Plaintiff thus sought default judgment from the court. Concurrent with its opposition to that application, with leave of the court, the government filed a motion to dismiss for lack of jurisdiction. Plaintiff subsequently moved for judgment on the pleadings.

The Court declined to enter default judgment against the government in accordance with USCIT R. 55(e), which dictates that:

No judgment by default shall be entered against the United States or an officer or agency thereof unless the claimant establishes his claim or right to relief by evidence satisfactory to the court.

In the absence of cases applying USCIT R. 55(e), it is relevant to refer to those cases construing Fed.R.Civ.P. 55(e) which is identical in language to our rule. Consistently it has been held that default judgment against the government cannot be granted based simply on the failure to file within a prescribed deadline. Mason v. Lister, 562 F.2d 343 (5th Cir.1977); Fedor v. Ribicoff, 211 F.Supp. 520 (E.D.Pa.1962); accord United States v. Zulli, 418 F.Supp. 252, 253 (E.D.Pa.1975). It is essential that plaintiff establish its right to relief by satisfactory evidence before default judgment may be entered against the government. See e.g., Poe v. Mathews, 572 F.2d 137, 138 (6th Cir.1978). In light of the government's motion to dismiss for lack of jurisdiction, it is clear that plaintiff has not overcome this hurdle and, therefore, the Court set aside the entry of default.

The second preliminary matter involves defendant's motion to dismiss out of time. Plaintiff had urged this Court to exercise its discretion to strike some or all of the late pleadings by defendant as out of time, in order to reach a just decision on the merits. Nonetheless, the Court is cognizant of the dictates of USCIT R. 12(h)(3) which permits a jurisdictional question to be raised at any time and requires the court to dismiss the action if such a defect exists. "Questions of jurisdiction may be raised at any time `for clearly a decision of a court without jurisdiction is a nullity.'" Glamorise Foundations, Inc. v. United States, 11 CIT ___, ___, 661 F.Supp. 630, 633 (1987) (quoting BASF Colors & Chemicals, Inc. v. United States, 57 Cust.Ct. 541, 543, R.D. 11195 (1966), aff'd 59 Cust.Ct. 834, A.R.D. 228 (1967), aff'd 56 CCPA 47, C.A.D. 952, 420 F.2d 763 (1969)).

Therefore, in fulfilling its inherent duty to determine the jurisdictional propriety of the action, pursuant to USCIT R. 12(h)(3), the Court must address defendant's motion to dismiss before any disposition on the merits. See e.g., Bethlehem Steel Corp. v. United States, 6 CIT 164, 165, 571 F.Supp. 1265, 1266-67 (1983); Feudor, Inc. v. United States, 79 Cust.Ct. 179, 181, C.R.D. 77-13, 442 F.Supp. 544, 546 (1977) (on a motion to dismiss for lack of jurisdiction, it is inappropriate to resolve an inquiry addressed to the merits of the action).

The government's motion to dismiss is premised on the failure of plaintiff to satisfy the requirements of 28 U.S.C. § 2637(a) (1982), which sets forth that an action may be commenced in this court only if "all liquidated duties, charges, or exactions have been paid at the time the action is commenced." It is well settled that this court's jurisdiction to entertain a challenge such as plaintiff's (under 28 U.S.C. § 1581(a)) is conditioned upon the payment of liquidated duties, charges, and exactions. United States v. Boe, 64 CCPA 11, 18, C.A.D. 1177, 543 F.2d 151, 156 (1976); American Air Parcel Forwarding Co., Ltd. v. United States, 6 CIT 146, 150, 573 F.Supp. 117, 120 (1983). The terms conferring jurisdiction are mandatory and the statute does not afford an opportunity to exercise discretion in this matter. Boe, 64 CCPA at 16, 543 F.2d at 155; see NEC Corp. v. United States, 806 F.2d 247, 249 (Fed.Cir.1986).

The question as to whether this jurisdictional hurdle was satisfied arises as a result of the 1984 enactment of subsection (c) to 19 U.S.C. § 1505, which provides:

Duties determined to be due upon liquidation or reliquidation shall be due 15 days after the date of that liquidation or reliquidation, and unless payment of the duties is received by the appropriate customs officer within 30 days after that date, shall be considered delinquent and bear interest from the 15th day after the date of liquidation or reliquidation....

Pub.L. 98-573, Title II, § 210(a), 98 Stat. 2977 (1984).

As the liquidated duties were paid more than one year after liquidation, interest had accrued. The Court will first dispose of defendant's argument that plaintiff failed to pay all liquidated duties. The government asserts that plaintiff's failure to pay the accrued interest results in an outstanding duty balance as a result of applying 19 C.F.R. § 24.3a(c)(4), which provides:

In the case of any late payment, the payment received will first be applied to the interest charge on the delinquent principal amount and then to payment of the delinquent principal amount.

Yet, this regulation was published in the Federal Register on October 1, 1986 and its effective date is October 31, 1986. 51 Fed. Reg. 34954. As this regulation was not in existence in January 1986 when plaintiff paid the liquidated duties, it does not operate to retroactively transform monies paid and credited toward duties into payments toward interest.

Thus, the main issue is whether interest may properly be considered a charge or exaction. Plaintiff asserts that interest is not a "charge" or "exaction" as those terms have special meaning within the customs realm and argues that interest is a separate financial consideration, distinguishable from such charges as storage or overtime charges, and exactions, such as penalties or liquidated damages.

The Court has examined several lexicons in an attempt to discern whether "interest" is considered a "charge" or "exaction". Consistently, interest is defined as the basic cost, or the price paid, for borrowing money, or for the use of money. Webster's Third New Int'l Dictionary 1178 (1981); Black's Law Dictionary 729 (5th Ed. 1979); C. Ammer and D.S. Ammer, Dictionary of Business and Economics 210 (1977). A "charge" encompasses a broad range of meanings including: an obligation or duty, a liability, an expense or the price of an object; an entry in an account of what's due from one party to another. 1 West's Law & Commercial Dictionary in Five Languages 237 (1985); Webster's, supra, at 377; Black's, supra, at 211. Finally, an "exaction" has been described as the wrongful demand for payment under color of official authority, where no payment is due; an unjust compulsory levy. Webster's, supra, at 790; Black's, supra, at 500; accord Carlingswitch, Inc. v. United States, 85 Cust.Ct. 63, 66, C.D. 4873, 500 F.Supp. 223, 226-27 (1980), aff'd 68 CCPA 49, C.A.D. 1264, 651 F.2d 768 (1981).

There is ample support in these sources for concluding that interest, as an incidental expense to maintaining an unpaid debt, would be categorized as a charge; it is an entry in an account of what is due from one party to another. There appears no basis for a distinction between interest and other account liabilities. While the specific question of whether interest is a charge or...