U.S. v. Cherry Hill Textiles, Inc., 96-1097

CourtUnited States Courts of Appeals. United States Court of Appeals for the Federal Circuit
Citation112 F.3d 1550
Docket NumberNo. 96-1097,96-1097
PartiesThe UNITED STATES, Plaintiff-Appellee, v. CHERRY HILL TEXTILES, INC., Defendant, and International Cargo and Surety Insurance Company, Defendant-Appellant.
Decision Date05 May 1997

Wayne Jarvis, Hodes & Pilon, Chicago, IL, argued, for defendant-appellant. With him on the brief were Michael G. Hodes and James L. Sawyer.

Barbara Silver Williams, Commercial Litigation Branch, Civil Division, Department of Justice, International Trade Field Office, New York City, argued, for plaintiff-appellee. With her on the brief were Frank W. Hunger, Assistant Attorney General, and David M. Cohen, Director, Washington, D.C., and Joseph I. Liebman, Attorney in Charge, International Trade Field Office. Of counsel on the brief was Ted Kundrat, Office of Assistant Chief Counsel, United States Customs Service, Indianapolis, IN.

Before LOURIE, CLEVENGER, and BRYSON, Circuit Judges.

BRYSON, Circuit Judge.

This case requires us to construe 19 U.S.C. § 1514, which provides that, with certain narrowly defined exceptions, the Customs Service's liquidation of an entry is "final and conclusive" as to all parties unless an administrative protest is filed challenging the liquidation. International Cargo & Surety Insurance Co. (IC & S), the surety for importer Cherry Hill Textiles, Inc. (Cherry Hill), argues that the protest requirement of section 1514 applies to actions brought by importers or sureties for the refund of duties paid, but does not apply to enforcement actions brought by the government to collect underpayments of duties. For that reason, IC & S contends that it should be allowed to challenge the liquidation at issue in this government enforcement action, even though it did not file a timely protest of the liquidation with the Customs Service. The Court of International Trade rejected that argument, and so do we.

We agree, however, with IC & S's less sweeping contention that it was not required to file a protest in the particular circumstances of this case, i.e., when Customs purported to liquidate the entry after it had already been liquidated by operation of law. The trial court therefore should not have granted summary judgment in favor of the government on the ground that IC & S's failure to protest the second liquidation of the entry barred it from challenging that liquidation.


Cherry Hill was the importer of record of textile dyeing machines from Taiwan that were entered as duty free through the Port of Newark, New Jersey, on September 18, 1987. After a delay of more than 13 months from the date of entry, Customs on October 28, 1988, liquidated the entry as dutiable in the amount of $12,220.62. The government gave notice of the liquidation to Cherry Hill and subsequently demanded payment from Cherry Hill's surety, appellant IC & S, under the surety bond. IC & S refused to make the payment. It did not, however, file a formal protest under 19 U.S.C. § 1514 of either the liquidation or the demand for payment.

After the passage of the 90-day period within which a protest could be filed, the government filed an enforcement action in the Court of International Trade seeking recovery of the claimed $12,220.62 in assessed duties. IC & S interposed several defenses to the enforcement action. The government then moved for summary judgment, contending that IC & S's failure to file a protest against either the liquidation or the demand for payment under the bond rendered the October 28, 1988, liquidation "final and conclusive" within the meaning of 19 U.S.C. § 1514 and therefore precluded judicial review of IC & S's affirmative defenses to the liquidation. In response, IC & S argued that the provision of section 1514 that makes unprotested liquidations "final and conclusive" applies to actions brought by importers or sureties to recover excess duty deposits, but not to government enforcement actions for unpaid duties. The court rejected that argument and granted summary judgment to the government for the full amount of its claim for duties, plus interest. IC & S then perfected an appeal to this court.


Section 514 of the Tariff Act of 1930, as amended, 19 U.S.C. § 1514, plays a central role in the system for adjudicating rights under the Customs laws. With certain specified exceptions, it requires that an administrative protest be filed if an importer or surety wishes to challenge the Customs Service's liquidation of a particular entry, and it provides that if such a protest is not filed, the Customs Service's decision, "including the legality of all orders and findings entering into the same ... shall be final and conclusive." 19 U.S.C. § 1514(a). It is undisputed that an administrative protest must be filed if an importer or surety wishes to file suit in the Court of International Trade challenging the liquidation of a Customs entry. The principal issue in this case is whether an importer or surety must file such an administrative protest if the importer or surety wishes to defend against a government enforcement action for the underpayment of duties by challenging the lawfulness of the liquidation.


IC & S argues that section 1514 is the product of history, and so it is. We therefore turn to the history of section 1514 for guidance as to its proper construction. While IC & S claims that there is no historical support for applying the protest requirement of section 1514 in the context of government enforcement actions, our study of the historical materials leads us to the opposite conclusion; indeed, we find that the historical materials provide compelling evidence that the Court of International Trade reached the correct conclusion on that issue. Moreover, while there is no binding judicial authority on this point, the court decisions that touch on the issue support the conclusion reached by the Court of International Trade.

The first tariff statutes contained no mechanism for importers to challenge excessive duty charges. See Act of July 4, 1789, ch. 2, 1 Stat. 24; Act of July 31, 1789, ch. 5, 1 Stat. 29; Act of Aug. 4, 1790, ch. 35, 1 Stat. 145; Act of Mar. 2, 1799, ch. 22, 1 Stat. 627. For years, therefore, an importer who objected to a duty as excessive had to pay the duty and then sue the customs collector for a refund in a common law court. As that practice developed, the courts required the importer to give notice of the claim for a refund at the time the duties were paid so that the collector could retain the duties in order to be able to refund them in the event of an adverse court ruling. See Elliott v. Swartwout, 35 U.S. (10 Pet.) 137, 153, 9 L.Ed. 373 (1836). In 1845, Congress codified the protest requirement by requiring, as a prerequisite to a refund suit against the collector, that the importer submit a protest in writing at the time of paying the duties. Act of Feb. 26, 1845, ch. 22, 5 Stat. 727; see Nichols v. United States, 74 U.S. (7 Wall.) 122, 126-27, 19 L.Ed. 125 (1868).

The "final and conclusive" clause that is at the heart of this case first appeared in section 14 of the Tariff Act of 1864, ch. 171, 13 Stat. 202, 214-15, which is a direct predecessor of the current section 1514. The 1864 statute provided that on the entry of any goods, the decision of the collector of customs as to the rate and amount of duties to be paid would become "final and conclusive against all persons interested therein" unless the importer or other interested party gave notice in writing of its dissatisfaction with the collector's decision within 10 days, followed by an appeal to the Secretary of the Treasury and a suit in court against the collector.

IC & S argues that this background demonstrates that the protest requirement originated and was intended to apply only as a condition to a suit brought by an importer or other interested party to recover overpayments of duties, and that it was not meant to foreclose any party from defending against a claim for additional duties brought by the United States. While it is true that the legislation does not refer to enforcement suits brought by the United States, a number of cases decided shortly after the enactment of the 1864 Act applied the "final and conclusive" clause to government enforcement actions. See, e.g., Westray v. United States, 85 U.S. (18 Wall.) 322, 329-30, 21 L.Ed. 763 (1873); United States v. Schlesinger, 14 F. 682, 685 (C.C.D.Mass.1882), aff'd, 120 U.S. 109, 7 S.Ct. 442, 30 L.Ed. 607 (1887); Chase v. United States, 9 F. 882, 883 (C.C.D.Mass.1882) , aff'g United States v. Chase, 25 F. Cas. 410, 411-12 (D.Mass.1879) (No. 14,787); United States v. Phelps, 27 F. Cas. 521, 522-23 (C.C.S.D.N.Y.1879) (No. 16,039), aff'd, 107 U.S. 320, 2 S.Ct. 389, 27 L.Ed. 505 (1883); Watt v. United States, 29 F. Cas. 441, 442 (C.C.S.D.N.Y.1878) (No. 17,292); United States v. Cobb, 11 F. 76, 79 (C.C.Mass.1882); United States v. McDowell, 21 F. 563, 565-66 (S.D.N.Y.1884); United States v. Earnshaw, 12 F. 283, 285-86 (S.D.N.Y.1882); United States v. Campbell, 10 F. 816, 819 (S.D.N.Y.1882); United States v. Comarota, 2 F. 145, 146-47 (S.D.N.Y.1880); United States v. Sowers, 27 F. Cas. 1276, 1277 (E.D.Pa.1879) (No. 16,363); United States v. Cousinery, 25 F. Cas. 677, 677-78 (S.D.N.Y.1874) (No. 14,878).

In many of those cases, the courts explicitly addressed the question whether the "final and conclusive" clause was applicable in the context of enforcement actions, and they uniformly held that it was. In the Cousinery case, for example, Judge (later, Justice) Blatchford analyzed in detail and rejected precisely the claim that IC & S is now making, a century and a quarter later:

It is contended, for the defendants, that [section 14 of the 1864 Act] has relation only to duties which have been paid; that its sole object is to regulate suits to recover back such duties after they have been paid; that it has no application to a suit by the United States to recover unpaid duties.... But...

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