Carlingswitch, Inc. v. United States

• Decision Date: 20 August 1981
• Docket Number: No. 80-41.,80-41.
• Citation: 651 F.2d 768
• Parties: CARLINGSWITCH, INC., Appellant, v. The UNITED STATES, Appellee.
• Court: U.S. Court of Customs and Patent Appeals (CCPA)

651 F.2d 768

CARLINGSWITCH, INC., Appellant, v. The UNITED STATES, Appellee.

No. 80-41.

United States Court of Customs and Patent Appeals.

June 18, 1981.

Rehearing Denied August 20, 1981.

Charles P. Deem, New York City, for appellant.

Thomas S. Martin, Acting Asst. Atty. Gen., Washington, D. C., David M. Cohen, Director, Joseph I. Liebman, Attorney in charge, Jerry P. Wiskin, New York City, for appellee.

Before MARKEY, Chief Judge, and RICH, BALDWIN, MILLER, and NIES, Judges.

RICH, Judge.

This appeal is from the judgment of the United States Customs Court (now the United States Court of International Trade) in Carlingswitch, Inc. v. United States, 85 Cust.Ct. ___, C.D. 4873, 500 F.Supp. 223 (1980), granting the United States' motion for summary judgment and denying Carlingswitch's cross-motion for summary judgment. We affirm.

This apparently being a case of first impression, we devote substantial discussion to its background and to elucidation of the arguments of both parties.

Background

Appellant was under investigation in 1974 for allegedly understating the actual costs of certain electrical articles assembled in Mexico from United States products and subsequently imported into the United States. On May 28, 1974, Carlingswitch, through its accountants, voluntarily and without demand paid $41,992.35 to the United States Customs Office in Brownsville, Texas, stating that the funds represented "additional tariff." On April 23, 1976, Carlingswitch, through its attorneys, paid the Customs Service an additional $50,000, designated as "withheld duties," stating:

This tender is not to be interpreted as an admission that any particular additional duties are due, that fact not having yet been determined by us. Rather, the tender is made in the spirit of demonstrating our client's intentions to cooperate fully with your office with respect to the fulfillment of its recognized obligation under the law to pay appropriate duty on its importations.

The trial court stated it to be "undisputed" that the payments were made pursuant to the Customs Service "voluntary disclosure" practice. That practice, now embodied in 19 CFR 171.1(a), is, briefly, that a voluntary disclosure of violations of the customs laws, accompanied by a deposit of an amount equal to the total loss of revenue to the government will, in specified circumstances, result in mitigation of the penalty to an amount not exceeding the government's total loss of revenue.

Customs subsequently completed its investigation of appellant and on January 6, 1977, demanded $7,926,778 as forfeiture value on the basis of (1) the undervaluation of the merchandise; (2) false freight figures; and (3) the failure to report the true constructed value figures. Customs notified appellant on June 15, 1979, however, that the statute of limitations had run and that the claim was remitted in its entirety. Appellant requested a refund on June 29, 1979, of the $91,992.35 it had paid. That request was denied by Customs which stated that although the statute of limitations had run on the claimed money, the actual revenue loss to the government was $174,573.21, and it assumed that appellant's voluntary payments were made to cover part of that loss. Appellant filed a protest on October 22, 1979, against this refusal to refund the money, which protest was denied on December 11, 1979. This suit followed.

The Trial Court Opinion

Carlingswitch contended below that by virtue of 19 U.S.C. § 1520(a)(3),¹ which relates to refunds, Customs' refusal to refund the monies paid amounted to a "charge or exaction" within the meaning of 19 U.S.C. § 1514(a)(3).² It further argued that the trial court therefore had jurisdiction over the dispute pursuant to 28 U.S.C. § 1582,³ and that its cross-motion for summary judgment should be granted. The government, of course, argued otherwise, and had previously moved for summary judgment in its favor.

The motion by the government was granted. In support of its decision that it lacked jurisdiction over the case, the trial court cited a number of dictionary definitions of the word "exaction," concluding that some element of demand or compulsion is necessary for a payment to have been "exacted." The court further noted that past cases have utilized the term only with regard "to actual assessments of specific sums of money." Alberta Gas Chemicals, Inc. v. Blumenthal, 82 Cust.Ct. 77, 81-2, C.D. 4792, 467 F.Supp. 1245, 1249-50 (1979). Accordingly, the court declined to extend the meaning of the word "exaction" to include a refusal to refund money voluntarily paid. The trial court noted, finally, that an appropriate district court, rather than it, had jurisdiction in this type of case (a "penalty case") pursuant to 19 U.S.C. § 1592, citing Sheldon & Co. v. United States, 8 Ct.Cust.App. 215, 218, T.D. 37455 (1917); M. M. Scher & Sons, Inc. v. United States, 24 Cust.Ct. 243, C.D. 1241 (1950); and the Senate Finance Committee Report on H.R. 8149, the Customs Procedural Reform and Simplification Act of 1978 (S.Rep.No.95-778, 95th Cong., 2d Sess. 17-21).

Appellant's Arguments

Appellant states that the only issue before us "is whether protests will lie against an administrative decision under 19 U.S.C. 1520(a)(3)." In support of its case, appellant asserts that the Court of International Trade, rather than "an appropriate district court," has jurisdiction over the case because it is not a "penalty case" as that term is typically employed. The usual penalty case is one brought by the government in a district court pursuant to 19 U.S.C. § 1604 and 28 U.S.C. § 1355 to enforce a claim under 19 U.S.C. § 1592 or some related statute, or a case arising under 19 U.S.C. § 1608. In this case, the penalty has been mooted and there is no issue relating to the merits of the penalty claim.

Appellant contends that the cases cited by the trial court in support of its decision are inapposite. M. M. Scher & Sons, Inc. v. United States, supra, it argues, spoke of a "sum arrived at by the Secretary of the Treasury in mitigation of the penalty fixed by law under the provisions of section 592 of the Tariff Act of 1930," clearly not the case here, and jurisdiction was proscribed in Sheldon & Co. v. United States, supra, because:

If the moneys received by the collector were paid to him as a representative of the United States attorney, or in compromise of a threatened suit in forfeiture and not in satisfaction of duties or of a customs fee, charge, or exaction, then no relief can be granted the importers in this proceeding * * *.

Thus, the latter opinion also has no relevance, appellant says, because in this case monies were paid in "satisfaction of duties." The Senate Report relied on by the trial court relates, it is said, only to government suits to enforce penalty claims, "i. e., suits relating to the merits of such claims."

Appellant also asserts that "every other decision under 19 U.S.C. 1520 is protestable, and it would seem unlikely that the legislature would have intended that only 1520(a)(3) be singled out for denial of review by the trial court." Appellant says that § 1514 should be interpreted broadly to cover such a decision "in one or more of its categories. The courts have not hesitated to so interpret section 1514 when justice has required that review be available." See, e. g., United States v. C. J. Tower & Sons of Buffalo, Inc., 61 CCPA 90, C.A.D. 1129, 499 F.2d 1277 (1974).

Additionally, appellant argues that, although the trial court felt it was "undisputed," the payment of money was not made pursuant to the "voluntary disclosure" practice. The initial deposit was made only after a Customs audit "disclosed" alleged duty deficiencies and payment was demanded. The second deposit was made after a formal investigation was commenced, thus negating "voluntary disclosure" under the Customs Regulations referenced by the trial court. As further support for this conclusion, appellant notes that there "is nothing in the letters accompanying the deposits reflecting any disclosure of violation of 19 U.S.C. 1592."

In any event, even if the deposits were made pursuant to "voluntary disclosure," appellant contends they were obviously deposited "on account of a potential penalty" as contemplated by 19 U.S.C. § 1520(a)(3). Further, since mitigation of a penalty is dependent upon payment of monies, these must be characterized as "exactions." The word "deposited" in § 1520(a)(3) is not qualified and it must be assumed that it refers to duties or other receipts deposited on account of penalty. Whether that money is voluntarily tendered or exacted is not made a condition therein.

It is also argued by appellant that the deposits in this case may be charged as duties as that term is used in 19 U.S.C. § 1514(a)(2).

Lastly, appellant questions what would happen in a case where money was tendered pursuant to a voluntary disclosure and Customs subsequently found no violation. Does not Customs have the authority to refund the voluntary deposit under 19 U.S.C. § 1520(a)(3)?

Appellee's Arguments

The government argues that we should adopt the decision of the trial court that a refusal to refund monies voluntarily deposited does not constitute a "charge or exaction" under 19 U.S.C. § 1514(a)(3). In addition to repeating the court's reasoning, appellee states that it has been held that customs duties are outside the scope of § 1514(a)(3) and that a demand for payment of duties found due is not an exaction under which a 1514 protest may be filed. If this is so, then neither can a tender labeled as "withheld duties" be a protestable "exaction."

Further, 19 U.S.C. § 1520(a)(2) specifically provides for refunds of "fees, charges, or exactions, other than duties and taxes * *." Congress thus clearly did not intend that customs duties be considered a charge or exaction. This distinction in § 1520 between duties and charges or exactions should apply with equal force to § 1514.

The government...