The government will not allow foreign goods to be brought into
this country and then litigate with the importer as to the amount
of duty. The duty, as assessed by the Collector, must be paid in
any event, not only as a condition of entering the goods, but also
as a condition of the right to file a protest. After payment and
protest, the importer may exercise a right of review under the
statutory method and procedure provided therefor.
The assessment and collection of duties is an administrative
matter, no notice or hearing being necessary where the assessment
is in rem
and against the foreign goods sought to be
In case of fraud, inability on the part of the government to
proceed in rem
against goods fraudulently entered would
not prevent it from enforcing the personal liability of the
importer in a suit in personam. United States v.
National Fiber Co.,
133 F. 596, approved.
An importer is not concluded by a reliquidation order made more
than one year after the entry where the complaint contains no
allegation of the presence of a protest or of fraud, but may file
his plea and be heard in his defense as in other cases even though
he did not file a protest and make the payment required in the case
of the original liquidation.
In a suit brought against an importer to recover the amount of
Page 237 U. S. 147
assessed under a reliquidation made more than a year after the
original liquidation, the government must conform to the general
rule of pleading where recovery is sought on the ground of
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. 100, § 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
Page 237 U. S. 148
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. 136), 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
"(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? "
Page 237 U. S. 149
MR. JUSTICE LAMAR, after making the foregoing statement of
facts, delivered the opinion of the Court.
The questions certified by the circuit court of appeals involve
an inquiry as to whether the Collector of Customs, after the
expiration of one year, can make a finding of fraud and thereupon
make a reliquidation of duties which is final unless, within
fifteen days, the importer pays the amount thus
Page 237 U. S. 150
declared to be due so as to secure the right to a hearing (1) on
the finding of fraud and (2) on the correctness of the new
assessment on goods which had been removed for consumption.
On the part of the government, it is claimed that this power is
conferred by § 21 of the Act of 1874, [Footnote 1
] but it is a significant fact that, although
the act has been in force for more than forty years, there are only
two instances reported in which the Collector, after the expiration
of one year, has attempted to reliquidate because of the existence
of fraud. Those two cases (United States v. Vitelli,
Customs Ct. of Appeals (1914) and United States v. Federal
211 F. 1016) are of recent date and in direct
conflict with each other.
The novelty of the practice, the conflict in the two decisions,
and the statement that numerous suits on similar reliquidation
orders are now pending justify a somewhat detailed examination of
the authority conferred upon the Collector by the Tariff Act of
1909, [Footnote 2
] 36 Stat., p.
100, § 14;
Page 237 U. S. 151
p. 98, § 12; the Act of 1874, [Footnote 3
] 18 Stat.190, and the customs regulations
prescribing the method of liquidating duties and defining the
effect of liquidation orders.
An analysis of the various provisions bearing on the subject
shows, that, when foreign merchandise is to be entered at a
domestic port, the owner files his statutory declaration, together
with the invoice, account, and list of the goods sought to be
imported. United States v. Salen, 235 U.
. The Surveyor gives a certificate as to weight or
quantity, and the Appraiser issues a certificate of value. (Customs
Regulations, 861, 1431, 1481, 1484.) With these documents before
him, and with the privilege of examining witnesses "touching any
matter deemed material in ascertaining the dutiable value and
classification of the merchandise," the Collector determines the
rate of duty to be imposed under the Tariff Act, and thereupon
calculates, assesses, and liquidates the amount to be paid. His
decision as to the amount of duty is final unless, within fifteen
days, the importer files a protest and pays the full amount of duty
thus liquidated. In that event, the Collector is required to
transmit the invoice and all the papers connected therewith to the
Board of Nine General Appraisers for their determination of the
questions raised by the protest. From them, the case can be taken
to the Court of Customs Appeals. If the decision
Page 237 U. S. 152
is in favor of the importer, provision is made for a refund of
any overcharge assessed against him.
If, however, there is no such protest, payment, and appeal, the
Collector's decision is final as to the amount of duty
Stat. 100 subsection 14) except that for one year -- certainly when
the goods have not passed beyond his reach (Iasigi v.
1 Wall. 384) -- the Collector, like a
court during the term at which a judgment is entered, has full
control of the assessment, and may, on his own motion, set aside
his first order and make a reliquidation (Robertson v.
Downing, 127 U. S.
). Where there is no such renewal or continuance of
the original proceeding, but where the duty is paid, as assessed,
the statute (18 Stat.190, c. 391, § 21) provides that the
"settlement shall, after the expiration of one year, in the
absence of fraud, be final and conclusive upon all
1. This brief review of the many and detailed provisions of the
statutes will suffice to show that the government will not allow
foreign goods to be brought into this country and then litigate
with the importer as to the amount of duty. Neither bond nor
security nor retention of the goods during litigation will dispense
with the necessity of payment. The duty, as assessed by the
Collector, must be paid in any event -- not only as a condition of
the goods being entered, but also as a condition of the right to
file a protest. When that has been done, Congress, in order to
prevent injustice, has given the importer, who thus pays and
protests, the right to bring the goods into the United States, has
granted him the opportunity to review the finding of the Collector,
and has also given him the promise of a refund in case the
Collector is found to have made an overcharge. (36 Stat. 103,
subsection 23.) But this right of review is not an appeal in
ordinary course of law, and can be exercised only in the statutory
method, on statutory conditions, before special statutory tribunals
of limited jurisdiction.
Page 237 U. S. 153
2. This summary method of collection, and the requirement that
duties be paid as assessed before the right to litigate arises, is
an incident of the fact that the assessment and collection of
duties is an administrative matter, no notice or hearing being
necessary, since the assessment is in rem
and against the
foreign goods which are sought to be entered. The amount is
determined by inspection of experts, and payment is enforced
against the merchandise actually in custody of the customs
officers, who cannot permit its removal until the assessed charges
have been paid.
If, after the duty had been paid and the goods had been removed,
it should be made to appear that they had been fraudulently entered
and were still in the possession of the importer, they could be
retaken and condemned in forfeiture proceedings. Or if, after the
expiration of one year, it should be discovered that, as alleged in
the present case, there had been false invoices, false weights, or
fraud of any kind, by which the United States had been deprived of
its just dues, and if the goods themselves could not be found, so
as to be forfeited, the inability to proceed in rem
not prevent the government from bringing a suit in
to enforce the importer's personal liability for the
debt which accrued and which rightfully should have been paid when
the foreign merchandise was entered at the domestic port.
This is illustrated by the decision in United States v.
National Fiber Board Co.,
133 F. 596, cited by the government
on another branch of the argument. It there appeared that certain
bales of flax had been fraudulently entered as waste-paper stock.
In the suit brought in a federal court to recover the duties that
should have been paid, the importer insisted that the government
was limited to the summary and statutory method of liquidation
above mentioned, claiming that,
"as soon as property is fraudulently withdrawn, the power to
collect the duty
Page 237 U. S. 154
ceases, and fines, penalties, and forfeitures are imposed."
In answering this contention, the court cited Meredith
v. United States,
13 Pet. 486, and quoted the
following correct statement of the law in United States v.
11 F. 78:
"The summary proceedings which the customs officers are required
by law to take against the goods are in the nature of proceedings
but are not the sole remedies of the government
for the collection of its duties. . . . The act makes the duties a
personal debt or charge upon the importer, which accrues to the
government immediately upon the arrival of the goods at the proper
port of entry. They are due although the goods have been smuggled,
or for any reason have never come to the hands of the customs
officers, or the statutory proceedings have never been instituted,
or through accident, mistake, or fraud no duties or short duties
have been paid, and the importer is not discharged from his debt by
a delivery to him of the goods without payment."
3. It is said, however, that even if the United States can bring
a suit against the importer to recover a personal judgment for the
duties on goods fraudulently undervalued, that does not deprive the
Collector of the power to reliquidate impliedly given by the Act of
1874. And it is further argued that, where such statutory method of
liquidation is adopted by the Collector, only the statutory method
of defense, by protest and payment, is available to the importer.
As the importers here filed no protest and made no payment of the
duty reliquidated in 1913, it is said that the Collector's finding
is as conclusive as was his original liquidation in 1909.
But, while the Tariff Act makes the decision of the Collector
final as "to the rates and amount of duties,
" and while
the Act of 1874 provides that, when such duties have been paid,
"such settlement, after the expiration of one year, and in the
absence of fraud, shall be final and conclusive,
Page 237 U. S. 155
in neither of these laws did Congress authorize the Collector to
make findings of fraud. Those statutes relate to a power to be
exercised when the foreign merchandise was in the custody of the
customs officers. By virtue of that possession, they were not
obliged to hear testimony, but by inspection could determine
weight, value, classification, and, as experts (In re
49 F. 831), perform the administrative function of
liquidating the amount of duty that must be paid before such
foreign goods could be brought into the country.
To that judgment in rem,
against particular goods in
custody, the statute gave a certain quality of finality. But a
wholly different situation, and one not provided for by statute,
would arise if, after the expiration of the year, the Collector, or
his successor in office, who had no knowledge of the original
transaction, should undertake to reliquidate duties on goods that
had been removed and consumed. In such case, the merchandise not
being in possession of the customs officers, the essential facts as
to weight, value, and classification could not be determined by the
inspection of experts, as contemplated by law, but would depend
upon the testimony of witnesses. If, in addition to this new and
nonstatutory method of fixing the amount of duty, there is to be
added a jurisdiction authorizing the Collector to declare that
there had been fraud in the procurement of the original
liquidation, it will be seen that the limited administrative power
to make a quasi-
judgment in rem,
against goods in
possession, has grown with the lapse of time, and that the
authority claimed for the Collector on reliquidation is far more
extensive than that exercised when the original order was entered.
For, according to the argument now made, he can, after the
expiration of one year, not only hear testimony as to the value of
goods not in possession, but, without notice to the importer, can
declare him to have been guilty of fraud, and make that finding of
fraud and value
Page 237 U. S. 156
conclusive unless, within fifteen days, the importer protests
and pays the amount of the reassessment as the condition of the
right to defend. If, within fifteen days, the importer protests,
but is unable to make such payment, it is claimed that such
reliquidation becomes conclusive, so that in a suit to collect the
sum thus declared to be due, the government is not only relieved
from the burden of proving the Collector's charge of fraud, but the
importer would not be permitted to defend, even to establish his
The statement of the proposition is well calculated to raise a
doubt as to its correctness. Sabariego v. Maverick,
124 U. S. 261
124 U. S.
-293. For if the Collector, after one year, can
determine that there had been fraud, and thereupon can make a
reliquidation having such characteristics of finality as is here
claimed for his finding, he can, as in the present case, do so at
the end of four years; or, as in the Vitilli
seven years; or, as in other pending cases referred to in the
argument, after fifteen years. If, after such a lapse of time, in
which parties may die, witnesses may remove, or documents be lost,
the Collector can make a finding of fraud which can be resisted
only upon condition of paying the amount of the reliquidated
duties, then there will be many instances in which the importer,
and many more instances in which his heirs, will be unable to make
the cash payment so as to secure the right to prove that there was
no fraud either in fact or in law.
Whether such right to defend, granted on such onerous and
sometimes impossible conditions, would afford due process of law to
the citizen, otherwise liable to be bound in personam
such reliquidation, need not be discussed. For certainly such a
power will not be implied and none such can be found in the Tariff
Act of 1909 or in § 21 of the Act of 1874. They provide that in the
absence of protest a finding of value
is conclusive, and
that the settlement,
Page 237 U. S. 157
in accordance with that finding, is, " . . . in the absence of
fraud, final, and conclusive."
But there is no provision as to the method in which, or the
tribunal before which, the existence of the nullifying fraud can be
determined. The silence of Congress on that subject, however,
cannot be construed as the expression of an intent to enlarge the
administrative function of the Collector into power and
jurisdiction to declare that, years before, there had been fraud in
the procurement of the order liquidating duties on goods
On the contrary, the failure to make special provision, as to
the method of setting aside such orders for fraud was a recognition
of the fact that the determination of the question as to whether
there was fraud involved an exercise of the judicial, rather than
the executive, function, and that therefore such orders were
subject to the general provisions of law by which any other
fraudulent judgment can be set aside by the courts in proceedings
seasonably begun. Bailey v.
21 Wall. 342. By such general law, the
party sought to be affected must be informed of the nature of the
fraud which the complainant undertakes to establish, and must be
given notice and opportunity to be heard in his defense, before the
old order can be set aside and a new order entered.
This conclusion is not in conflict with the principle which
recognizes that the government may proceed in rem
foreign goods sought to be entered, or, without a judicial hearing,
may determine the amount of taxes due by a citizen, and make that
administrative finding a lien, which can be resisted only on
condition that bond and security be given to pay what is prima
a valid lien on the property of the taxpayer.
McMillen v. Anderson, 95 U. S. 37
. For it
is not claimed that the reliquidation order here is a general or a
special lien, but only that it forms the basis of a suit in which a
judgment in personam
can be obtained. In such a suit, the
fraud relied on must
Page 237 U. S. 158
be alleged and proved. To sustain the government's contention
that the Collector's finding was conclusive unless protest and
payment had been made would be equivalent to saying that a charge
of fraud in procuring goods, whether made by a Collector or by a
grand jury, could be made conclusive, unless, before the trial, the
defendant restored the goods or their value.
These conclusions indicate the general nature of the answer to
be given to the questions certified by the circuit court of appeals
-- though their form is such as to make it impossible to give a
categorical answer of Yes or No.
1. As to the question marked 1, we hold that the importer is not
concluded by the reliquidation order, and when suit is brought for
the amount claimed to be due, he may file his plea and be heard in
his defense as in other cases, even though he did not file a
protest and make the payment required in the case of the original
2. The question marked 2 we answer No.
3. To the question marked 3, we answer No, the government in
such a suit being obliged to conform to the general rule of
pleading where recovery is sought on the ground of fraud.
MR. JUSTICE McREYNOLDS took no part in the consideration or
decision of this case.
"That whenever any goods . . . shall have been entered and
passed free of duty, and whenever duties upon any imported goods .
. . shall have been liquidated and paid, and such goods . . . shall
have been delivered to the owner, . . . such entry and passage free
of duty and such settlement of duties shall, after the
expiration of one year from the time of entry, in the absence of
fraud and in the absence of protest by the owner, importer, agent,
or consignee, be final and conclusive upon all parties.
Act of June 22, 1874, 18 Stat.190, § 21.
"Subsec. 14. The decision of the Collector as to the rate
and amount of duties chargeable upon imported merchandise, . . .
shall be final and conclusive
against all persons interested
therein unless the owner . . . shall, within fifteen days after . .
. ascertainment and liquidation of duties, . . . if dissatisfied
with such decision, give notice in writing to the Collector . . .
[of] the reasons for his objections thereto, and if the
merchandise is entered for consumption shall pay the full amount of
the duties and charges ascertained to be due thereon.
such notice and payment, the Collector shall transmit the invoice
and all the papers and exhibits connected therewith to the board of
nine general appraisers for due assignment and determination . . .
; such determination shall be final . . . except in cases where an
application shall be filed in the . . . Court of Customs Appeals
within the time and in the manner provided for in this act."
§ 28, Subsec. 14, Tariff Act of 1909, 36 Stat. 100.
"All notices in writing to Collectors of dissatisfaction of any
decision thereof as to the rate or amount of duties chargeable upon
imported merchandise . . . with the invoice and all papers and
exhibits shall be forwarded to the Board of Nine General
Appraisers. . . ."
36 Stat. 98, subsec. 12.
See note 1