United States v. Sherman & Sons Company (237 U.S. 146)

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: