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United States v. Utex International

Decided: September 8, 1988; As Amended November 15, 1988.


Appealed from: U.S. Court of International Trade, Judge Tsoucalas.

Friedman, Davis,*fn* and Newman, Circuit Judges.


NEWMAN, Circuit Judge.

In this action on a surety bond brought under 28 U.S.C. § 1582(2), Sentry Insurance Company appeals the judgment of the United States Court of International Trade, awarding liquidated damages to the United States in the amount of $11,718.*fn1 We reverse.


Utex International Inc. ("Utex") imported from India, through the Port of New York, 115 cartons of frozen shrimp. On February 1, 1980 the goods were released to Utex on the posting by Sentry Insurance Company ("Sentry") of a Single Entry Immediate Delivery and Consumption Entry Bond.

The Customs Service provided samples to the Food and Drug Administration ("FDA"). On February 6, 1980, a "Notice of Detention and Hearing" was issued to Utex by the FDA, copy to the Customs Service, stating that "the merchandise must be held intact pending final decision as to whether it shall be admitted or refused admission." The Notice also bore the statement: "The article is violative within the meaning of 801(a)(3) [of the Food, Drug and Cosmetics Act of 1938 as amended, 21 U.S.C. § 381(a) (3)] in that it appears to contain Salmonella, and/or filth, and/or appears to be decomposed."*fn2

Despite this Notice, the entry was liquidated by the Customs Service on February 29, 1980. The entry was not reliquidated.

On March 12, 1980 the Customs Service issued to Utex a "Notice of Refusal of Admission", which stated that the goods were in violation of Section 801(a)(3) and required Utex to export the shrimp under Customs' supervision within 90 days. Utex did not comply. On December 9, 1980 Customs sent Utex, with a copy to Sentry, a "Notice of Penalty or Liquidated Damages Incurred and Demand for Payment." The sum was not paid.

On June 27, 1984 Customs demanded payment of liquidated damages from Utex and/or Sentry, and on June 5, 1986 the government filed suit against both Utex and Sentry. Utex made no answer or appearance. Sentry was held liable on the entry bond, and takes this appeal.

The controlling question of law is whether the final liquidation of the goods discharged the surety from liability on the entry bond.

A. Liquidation

19 U.S.C. § 1514(a) provides that all administrative decisions as to value, classification, duty, exclusion, liquidation, etc., including the legality of all orders and findings entering into such decisions, are "final and conclusive upon all persons (including the United States and any officer thereof)" unless the decision is timely protested. Sentry asserts that these decisions are subsumed in the final liquidation and that, because the goods were neither reliquidated nor a protest filed, the government as well as the surety are bound thereby.

The Court of International Trade held that liquidation and reliquidation relate only to the computation and imposition of duties, and thus that the finality expressed in § 1514(a) does not apply to decisions on admissibility. Utex, 659 F. Supp. at 252. The court cites in support United States v. American Motorists Insurance Co., 10 CIT 19, slip op. 86-7 (1986), wherein the surety was held liable for payment of customs duties when the importer's checks were dishonored, despite intervening liquidation. The issues are not at all comparable, for the obligation to pay the duties owed had vested, and the only question was that of the dishonored checks. 19 U.S.C. § 1648; 19 CFR § 141.1(b). This decision sheds no light on the issues raised herein -- other than to point up the absence of authority for the court's holding that liquidation is unrelated to admissibility.

It is long-standing customs law that when goods are finally liquidated they are deemed admissible, as summarized in R. Sturm, Customs Law & Administration § 8.3 Finality of Liquidation at 32, (3d ed. 1982), discussing 19 U.S.C. § 1514(a):

All findings involved in a district director's decision merge in the liquidation. It is the liquidation which is final and subject to protest, not the preliminary findings or decisions of customs officers. Commonwealth Oil Refining Co., Inc. v. United States, 67 Cust. Ct. 155, 332 F. Supp. 203, C.D. 4267 (1971) and cases cited; Dart Export Corp. v. United States, 43 CCPA 64, C.A.D. 610 (1956), cert. denied, 352 U.S. 824, 77 S. Ct. 33, 1 L. Ed. 2d 48 (1956).

In harmony with the finality of liquidation, the customs regulations require that liquidation be suspended when the goods are food, drugs, and ...

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