United States v. Desiree Intern. USA, Ltd.

• Decision Date: 31 July 1980
• Docket Number: No. 79 Civ. 2646 (RLC).,79 Civ. 2646 (RLC).
• Parties: UNITED STATES of America, Plaintiff, v. DESIREE INTERNATIONAL U. S. A., LTD., and St. Paul Fire & Marine Insurance Co., Defendants.
• Court: U.S. District Court — Southern District of New York

497 F. Supp. 264

UNITED STATES of America, Plaintiff, v. DESIREE INTERNATIONAL U. S. A., LTD., and St. Paul Fire & Marine Insurance Co., Defendants.

No. 79 Civ. 2646 (RLC).

United States District Court, S. D. New York.

July 31, 1980.

John S. Martin, Jr., U. S. Atty., S. D. N. Y., New York City, for plaintiff; Janis P. Farrell, Asst. U. S. Atty., New York City, Harvey Barrison, Staff Atty., U. S. Customs Service, of counsel.

Hart & Hume, New York City, for defendant St. Paul Fire and Marine Ins. Co.; Paul E. Dahlman, New York City, of counsel.

OPINION

ROBERT L. CARTER, District Judge.

This is an action by the United States to recover liquidated customs duties from an importer of foreign goods, Desiree International U.S.A., Ltd. ("Desiree"), and its surety, St. Paul Fire & Marine Insurance Company ("St. Paul"). The government, arguing that defendants' obligation to pay the duties in question has become final under section 514 of the Tariff Act of 1930, as amended ("Act"), 19 U.S.C. § 1514, has moved for summary judgment pursuant to Rule 56, F.R.Civ.P. For the reasons given below, the motion is denied, summary judgment is ordered in defendants' favor, and the complaint is dismissed.

Factual and Statutory Background

There is no dispute as to the facts underlying this lawsuit. In January, 1972, Desiree imported certain goods into the United States, initiating the chain of events culminating in this lawsuit. Pursuant to 19 U.S.C. § 1623 and 19 C.F.R. § 113, Desiree had filed a bond with the U.S. Customs Service ("Customs"), with St. Paul as its surety, to insure payment of all duties it incurred during the period relevant to this lawsuit. By virtue of this bond, the goods in question were released to Desiree upon its payment of estimated duties of $8,875. See 19 C.F.R. § 141.

Subsequently, on November 30, 1973, Customs liquidated¹ the entry pertaining to Desiree's goods, and determined that $33,150.38 in additional duties was owed. It is that sum, less a set-off of $7,714.03 resulting from refunds due Desiree on an unrelated transaction, that the government seeks to recover by this action. Both Desiree and St. Paul are liable for any amounts finally determined to be due. See 19 C.F.R. § 113.3. Desiree has not contested or objected to the liquidation in any way, nor appeared in this action.

There are two ways an importer or surety may contest a liquidation entered by Customs. The first is to file an administrative protest under section 514 of the Act, 19 U.S.C. § 1514. The second, which St. Paul pursued, is provided for in section 520: the importer or its surety may request reliquidation to correct "a clerical error, mistake of fact, or other inadvertence not amounting to an error in the construction of a law ... when the error, mistake, or inadvertence is brought to the attention of the appropriate customs officer within one year after the date of liquidation ...." 19 U.S.C. § 1520(c)(1). St. Paul, claiming a clerical error was made, filed the necessary petition to request reliquidation on May 31, 1974, well within the statutory time limit.

Thereafter, St. Paul and Customs exchanged a series of letters in which Customs said it was unable to locate the original documents relevant to St. Paul's petition and asked St. Paul to reconstruct them; St. Paul, which never had custody of the file, responded that it was unable to do so. On July 14, 1978, this exchange culminated in a letter from Customs to St. Paul which informed St. Paul that "in the absence of the required documentation, this office will take no further action on your letter of protest."²

The matter lay dormant thereafter until the United States filed its complaint in this case in May, 1979. Plaintiff's theory, as explained in its papers supporting the motion now under consideration, is that the July 14 letter constituted a denial of St. Paul's request for reliquidation and triggered the next steps in the administrative appeal process. Specifically, section 514 of the Act provides that a refusal to reliquidate becomes "final and conclusive" unless an administrative protest is filed within ninety days. 19 U.S.C. § 1514(a)(7), (c)(2)(B). A party who files such a protest may seek review of its denial in the United States Customs Court by filing an action within 180 days of the denial. 28 U.S.C. §§ 1582(a), 2631(a). The Customs Court has exclusive jurisdiction to review denials of protests taken under section 514. Fritz v. United States, 535 F.2d 1192, 1193-94 (9th Cir. 1976); 28 U.S.C. § 1582(a). The government argues that by virtue of St. Paul's failure to protest the denial of its request for reliquidation, that denial has become a final decision under section 514, St. Paul therefore has lost the opportunity to contest the liquidation further, as the Customs Court is the only forum empowered to hear its claim and that court is now closed to it.

St. Paul contends that the July 14 letter was not a denial of its request, but rather just another in a continuing series of communications from Customs about its ongoing proceeding. Thus, St. Paul argues, the request for reliquidation is still pending and this suit is premature. St. Paul asserts that if and when its request is formally rejected, it will file a protest pursuant to section 514, and if necessary will pursue its remedies in the Customs Court for resolution of its underlying dispute with Customs over the amount of duties owed by Desiree.

Determination

The crucial question presented by this case is the legal effect to be given the letter of July 14, 1978, from Customs to St. Paul. If the government's interpretation is correct, then Customs' action on the liquidation in question has become final, and summary judgment in the government's favor is appropriate. If, however, St. Paul's version is adopted, this court's intervention, prior to completion of the administrative appeal process, would be premature and the action should be dismissed.

Neither the Act nor the customs regulations provide any guidance as to what form a refusal to reliquidate must take,³ and the case law is sparse. The only decision discovered that deals with a refusal to reliquidate is Colonna & Co., Inc. v. United States, 399 F.Supp. 1389 (Cust.Ct.1975). The plaintiff-importer in Colonna, pursuant to section 514 of the Act, 19 U.S.C. § 1514, had filed a protest of a liquidation action by Customs and Customs had responded with certain form letters. The question for the court was whether these letters "constituted notices of denial within the meaning of section 515(a) ... so as to commence the running of the 180-day period of limitations within which to invoke the jurisdiction of the Customs Court ...." Id. at 1393. The court determined the meaning of the letters "from the words used, and what the letters actually stated. ... and the expressed or manifest intent of the author." Ibid. Applying this standard, the court held that the form letters were denials of section 520 requests for reliquidation, which had not been filed, rather than section 514 administrative protests, that Customs erroneously had treated the importer's section 514 protest as a section 520 request for reliquidation, and that the original protest thus had not been acted upon and was still pending. The action was therefore premature and was dismissed. Id. at 1393-94.

Colonna thus provides a judicial interpretation of a valid refusal to reliquidate: the crucial letters there were the only basis for the Customs Court's holding that Customs had treated the protest there as a request for reliquidation, and accordingly are useful guides to the form a denial of such a request normally should take. The first paragraph of the Colonna letters, like the one in this case,⁴ simply makes reference to the party's request for review. Id. at 1390. The second paragraph specifically states that the contested Customs decision has been reviewed and upheld, and describes the procedure for filing a section 514 protest of this action.⁵Ibid. In contrast, the July 14, 1978 letter to St. Paul does not claim that any review of the merits of St. Paul's claim was made, nor does it indicate that a final determination had been rendered on its request or describe available protest or appeal procedures.⁶ In fact, the letter in this case that the government argues was a denial of St. Paul's request for reliquidation bears practically no substantive resemblance to the form letters used by Customs for that purpose in Colonna.

Applying the Colonna standard of interpretation to the July 14 letter, "the words used, and what the letter actually stated," id. at 1393, do not support the government's position. Nor can an "expressed or manifest intent of the author" to deny St. Paul's request, ibid., be found in the letter. Absent any explicit statement of denial, the plainest interpretation of the letter is that unless and until the necessary documentation was provided, Customs would not act on St. Paul's request. This construction is particularly reasonable in light of its consistency with prior Customs actions on this case. For example, on August 11, 1975, almost three years before sending the letter now in question, Customs wrote St. Paul directing that the missing documents be submitted. The letter concluded: "If documents are not submitted within 20 days, your claim will be considered closed." Despite the fact that St. Paul provided no documents in response to this letter, the case obviously was kept open, and St. Paul thus had no reasonable basis for expecting that the July 14, 1978 letter was intended to close the case any more than had the letter of August 11, 1975.

Customs' use in Colonna of a form letter of denial suitable for the disposition of section 520 requests for reliquidation clearly indicates that Customs has available and makes use of explicit denials in cases like St. Paul's. No such explicit denial has ever been issued in this case, however. Rather, four years after...