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UNITED STATES v. ST. PAUL MERCURY INDEM. CO.

March 30, 1951

UNITED STATES
v.
ST. PAUL MERCURY INDEMNITY CO.



The opinion of the court was delivered by: BARD

By this action the government seeks to recover customs duties and internal revenue taxes from the surety on a warehouse entry bond. A stipulation of all material facts had been filed, and the case is now before me on plaintiff's and defendant's motions for summary judgment.

On June 22, 1943 Mark D. Leff, principal, imported 129 barrels of whiskey at the Port of Philadelphia. Leff filed with the Collector of Customs a warehouse entry bond No. 5613 in the penal sum of $ 61,200, on which bond defendant, St. Paul Mercury Indemnity Company, a Delaware corporation, was the surety.

 Upon the arrival of the whiskey in these ports, Leff paid the estimated duties and taxes, and the whiskey was released from customs custody prior to the liquidation of the entry.

 On January 24, 1947 the entry was liquidated. The total duties and taxes were $ 53,993.46, thereby leaving an unpaid balance of $ 5,113.54.

 The present whereabouts of Leff are unknown, and the government is seeking to collect this unpaid balance from defendant surety company.

 The customs laws do not require that liquidation of the entry be made within any specific time, for it is the importer's primary obligation to pay the duties and taxes whenever ascertained. Dumond v. United States, 98 U.S. 142, 25 L. Ed. 65. But when the United States seeks to recover these duties and taxes from the surety, the general principles of suretyship law apply to contracts with the government the same as to those with individuals.

 It is fundamental that a surety's obligation is limited to the terms of his contract, for that is the extent of his risk. The pertinent provisions of this contract, the warehouse entry bond, are:

 'Now, Therefore, the Condition of This Obligation is Such That-

 '(1) If within 3 years from the date of the original importation the above-bounden principal shall pay to the collector of customs the full amount of duties, taxes, charges, and exactions legally due on the said articles, which the collector is required to collect, and shall pay, on demand by the collector, any other duties, taxes, charges, and exactions found legally due on the articles subsequent to withdrawal; * * *.

 'Then this obligation to be void; otherwise to remain in full force and effect.'

 In this case the entry was withdrawn in less than two months but was not liquidated until three years and seven months after the date of the original importation. The sole question.is whether, under the terms of the bond, the surety is released from all liability for duties and taxes that are not liquidated within three years from the date of original importation.

 Under its power to regulate foreign and interstate commerce, Congress protects American business from competition with goods made in foreign countries with cheap labor by imposing import duties and taxes upon such goods.

 To insure payment the government has a lien on imported goods to the extent of these duties and taxes. To enforce this lien the goods are stored in bonded warehouses. But to facilitate the flow of imports to the ultimate consumer, the goods may be withdrawn upon payment of the estimated duties and taxes ...


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