Faber, Coe & Gregg, Inc. v. United States

delivered the opinion of the court: The defendant’s demurrer to plaintiff’s petition is directed to two defenses in law, either of which, if sustained, is sufficient to warrant a dismissal of plaintiff’s petition.

The plaintiff, a New York corporation, is engaged in the business of buying, importing, manufacturing, and selling *297cigars, cigarettes, and tobacco products in various forms. From 1923 to 1927 the plaintiff imported from Cuba, through the port of New York, large consignments of the above merchandise, about which there is no dispute. The importations were accomplished in the usual manner and the plaintiff complied with the orders, regulations, and directions of the Collector of Customs and the Treasury Department. At the time the importations were accomplished there was in full force and effect a commercial treaty between the United States and Cuba (33 Stat. 2136) concluded December 11,1902, the pertinent articles of which we quote:

“Art. I. During the term of this convention, all articles of merchandise being the product of the soil or industry of the United States which are now imported into the Republic of Cuba free of duty, and all articles of merchandise being the product of the soil or industry of the Republic of Cuba which are now imported into the United States free of duty, shall continue to be so admitted by the respective countries free of duty.

“Art. II. During the term of this convention, all articles of merchandise not included in the foregoing Article I and being the product of the soil of industry of the Republic of Cuba imported into the United States shall be admitted at a reduction of twenty per centum of the rates of duty thereon as provided by the tariff act of the United States approved July 24,1897, or as may be provided by any tariff law of the United States subsequently enacted.

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“Art. V. It is understood and agreed that the laws and regulations adopted, or that may be adopted, by the United States and by the Republic of Cuba, to protect their revenues and prevent fraud in the declarations and proofs that the articles of merchandise to which this convention may apply are the product or manufacture of the United States and the Republic of Cuba, respectively, shall not impose any additional charge or fees therefor on the articles imported, excepting the consular fees established, or which may be established, by either of the two countries for issuing shipping documents, which fees shall not be higher than those charged on the shipments of similar merchandise from any other nation whatsoever.

$ ‡ ‡ $

“Art. YIII. The rates of duty herein granted by the United States to the Republic of Cuba are and shall con*298tinue during the term of this convention preferential in respect to all like imports from other countries, and, in return for said preferential rates of duty granted to the Republic of Cuba by the United States, it is agreed that the concession herein granted on the part of the said Republic of Cuba to the products of the United States shall likewise be, and shall continue, during the term of this convention, preferential in respect to all like imports from other countries. * * *

“ART. IX. In order to maintain the mutual advantages granted in the present convention by the United States to the Republic of Cuba and by the Republic of Cuba to the United States, it is understood and agreed that any tax or charge that may be imposed by the national or local authorities of either of the two countries upon the articles of merchandise embraced in the provisions of this convention, subsequent to importation and prior to their entering into consumption in the respective countries, shall be imposed and collected without discrimination upon like articles whencesoever imported.

“Art. X. It is hereby understood and agreed that in case of changes in the tariff of either country which deprive the other of the advantage which is represented by the percentages herein agreed upon, on the actual rates of the tariffs now in force, the country so deprived of this protection reserves the right to terminate its obligations under this convention after six months’ notice to the other of its intention to arrest the operations thereof.

“And it is further understood and agreed that if, at any time during the term of this convention, after the expiration of the first year, the protection herein granted to the products and manufactures of the United States on the basis of the actual rates of the tariff of the Republic of Cuba now in force, should appear to the Government of the said Republic to be excessive in view of a new tariff law that may be adopted by it after this convention becomes operative, then the said Republic of Cuba may reopen negotiations with a view to securing such modifications as may appear proper to both contracting parties.”

On December 17, 1903 (U. S. Code, secs. 124, 125, Title 19), the following act of Congress was approved:

“Sec. 124. Products of Cuba; reduction of duties on.— So long as the convention between the United States and the Republic of Cuba, signed on the 11th day of December, in the year 1902, shall remain in force, all articles of merchandise being the product of the soil or industry of the Repub-*299lie of Cuba, which on December 17, 1903, were imported into the United States free of duty, shall continue to be so admitted free of duty, and all other articles of merchandise being the product of the soil or industry of the Republic of Cuba imported into the United States shall be admitted at a reduction of 20 per centum of the rates of duty thereon, as provided by this chapter, or as may be provided by any tariff law of the United States subsequently enacted. The rates of duty herein granted by the United States to the Eepublic of Cuba are and shall continue during the term of said convention preferential in respect to all like imports from other countries. Nothing contained in this section shall be held or construed as an admission on the part of the House of Eepresentatives that customs duties can be changed otherwise than by an act of Congress, originating in said House. (Dec. 17, 1903, c. 1, § 1, 33 Stat. 3; Oct. 3, 1913, c. 16, § IV B, 38 Stat. 192.)

“ Sec. 125. Same; no additional charges on-; equal treatment of imports. — So long as the convention mentioned in section 124 of this title shall remain in force, the laws and regulations adopted, or that may be adopted by the United States to protect the revenues and prevent fraud in the declarations and proofs, that the articles of merchandise to which said convention may apply are the product or manufacture of the Eepublic of Cuba, shall not impose any additional charge or fees therefor on the articles imported, excepting the consular fees established, or which may be established, by the United States for issuing shipping documents, which fees shall not be higher than those charged on the shipments of similar merchandise from any other nation whatsoever. Articles of the Eepublic of Cuba shall receive, on their importation into the ports of the United States, treatment equal to that which similar articles of the United States shall receive on their importation into the ports of the Eepublic of Cuba. Any tax or charge that may be imposed by the national or local authorities of the United States upon the articles of merchandise of the Ee-public of Cuba, embraced in the provisions of said convention, subsequent to importation and prior to their entering into consumption into the United States, shall be imposed and collected without discrimination upon like articles whensoever imported.”

Section 10 of the tariff act of July 24,1897 (30 Stat. 206), mentioned in Article II of the foregoing treaty, provided in terms as follows:

“ That section thirty-three hundred and ninety-four of the Revised Statutes of the United States, as amended, be, *300and the same is hereby, further amended, so as to read as follows:

“ ' Upon cigars which shall be manufactured and sold, or removed for consumption or sale, there shall be assessed and collected the following taxes, to be paid by the manufacturer thereof: On cigars of all descriptions made of tobacco, or any substitute therefor, and weighing more than three pounds per thousand, three dollars per thousand; on cigars, made of tobacco, or any substitute therefor, and weighing not more than three pounds per thousand, one dollar per thousand; on cigarettes, made of tobacco, or any substitute therefor, and weighing more than three pounds per thousand, three dollars per thousand; on cigarettes, made of tobacco, or any substitute therefor, and weighing not more than three pounds per thousand, one dollar per thousand : Provided, That all rolls of tobacco, or any substitute therefor, wrapped with tobacco, shall be classed as cigars, and all rolls of tobacco, or any substitute therefor, wrapped in paper or any substance other than tobacco, shall be classed as cigarettes.

“ ' And the Commissioner of Internal Revenue, with the approval of the Secretary of the Treasury, shall provide dies and adhesive stamps for cigars weighing not more than three pounds per thousand: Provided, That such stamps shall be in denominations of ten, twenty, fifty, and one hundred, and and the laws and regulations governing the packing and removal for sale of cigarettes, and the affixing and cancelling of the stamps on the packages thereof, shall apply to cigars weighing not more than three pounds per thousand.’ ”

Paragraph 217 of the foregoing tariff act (30 Stat. 169) levied the following import duties:

“ 217. Cigars, cigarettes, cheroots of all kinds, four dollars and fifty cents per pound and twenty-five per centum ad valorem; * * *.”

Without quoting the provisions of the tariff acts subsequent to 1897, it is sufficient for present purposes to state the duties upon importations of the character here involved were continued therein and no point arises with respect thereto. It is to be observed, however, that Article II of the treaty between the United States and Cuba provides that Cuban products as therein limited “ shall be admitted at a reduction of twenty per centum of the rates of duty thereon as provided by the tariff act of the United States approved July *30124, 1897, or as may be provided by any tariff law of the United States subsequently enacted.”

The plaintiff alleges that inasmuch as section 10 of the act of July 24, 1897, supra, is a distinct provision of the tariff act of that date, and levies, in addition to the duties exacted by paragraph 217 of the act, the taxes therein prescribed, that it was entitled to a reduction of twenty per centum of the taxes levied by section 10 of the act, precisely as it was entitled to the same reduction accorded it under paragraph 217 of the act. In other words, that for the sums expended in the procurement of internal-revenue stamps exacted by the collector of customs under sections 3377 and 3402, Revised Statutes, in accord with Treasury and customs regulations with respect thereto, it is entitled to recover back from the full amount paid therefor twenty per centum thereof under Art. II of the treaty as aforesaid.

The first and, obviously important issue arising under the demurrer is one of jurisdiction. If the asserted claim is one “growing out of or dependent on any treaty stipulation entered into with foreign nations ” this court is without jurisdiction. Sec. 153 of the Judicial Code. Sec. 1066, R. S. Eastern Extension, Australasia & China Telegraph Co., Ltd., v. United States, 231 U. S. 326; Kinkead v. United States, 18 C. Cls. 504, 514. The plaintiff’s contention is that the asserted claim is one founded upon the act of December 17, 1903, and hence jurisdiction attaches in virtue of section 145 of the code, our general jurisdictional act. The act of December 17, 1903, supra, is entitled “An act to carry into effect a convention between the United States and the Republic of Cuba, signed on the eleventh day of December, in the year nineteen hundred and two.” The act itself was made necessary by the action of the Senate wherein ratification of the treaty with amendments was advised. Article XI provided: “ This convention shall not take effect until the same shall have been approved by the Congress.” The treaty with the amendments was duly ratified by the two countries involved, and proclaimed on December 17, 1903. United States v. American Sugar Refining Co., 202 U. S. 563. Since that date the instrument was treated and observed as a treaty obligation, and the act of Congress of *302December 17, 1903, regarded as an essential legislative step, the final one, to fix its effective date. This is in accord with the ruling of the Supreme Court in the American Sugar Refining case just cited. The plaintiff in opposition cites the case of United States v. Weld, 127 U. S. 51. In our opinion, it is decidedly inapposite, and if at all available as a precedent supports rather than discredits the demurrer. The case itself was the outgrowth of an award paid to the United States by Great Britain in settlement of the historical Alabama Claims in accord with an arbitration provided for in the treaty of Washington (17 Stat. 863). The sum awarded the United States—The Geneva Award—was $15,500,000, and following its liquidation the Congress created a tribunal known as the Court of Commissioners of Alabama Claims and conferred upon the same jurisdiction to hear and determine the claims of citizens to any portion of the award. Obviously the act of Congress created a right which under the treaty could not have been asserted in this court. Other cases of a like nature have been before this and the Supreme Court, and the Weld case, supra, followed in their adjudication. The Supreme Court in disposing of the issue involved in the Weld case said: December 17, 1903, regarded as an essential legislative step, the final one, to fix its effective date. This is in accord with the ruling of the Supreme Court in the American Sugar Refining case just cited. The plaintiff in opposition cites the case of United States v. Weld, 127 U. S. 51. In our opinion, it is decidedly inapposite, and if at all available as a precedent supports rather than discredits the demurrer. The case itself was the outgrowth of an award paid to the United States by Great Britain in settlement of the historical Alabama Claims in accord with an arbitration provided for in the treaty of Washington (17 Stat. 863). The sum awarded the United States—The Geneva Award—was $15,500,000, and following its liquidation the Congress created a tribunal known as the Court of Commissioners of Alabama Claims and conferred upon the same jurisdiction to hear and determine the claims of citizens to any portion of the award. Obviously the act of Congress created a right which under the treaty could not have been asserted in this court. Other cases of a like nature have been before this and the Supreme Court, and the Weld case, supra, followed in their adjudication. The Supreme Court in disposing of the issue involved in the Weld case said:

“ It may be said, in opposition to this view of the case, that, had there been no treaty of Washington, there would have been no fund of $15,500,000 to distribute, the act of June 5, 1882, would never have been passed, and, therefore, that the treaty is the basis of all the subsequent legislation, and consequently the basis of this claim; in other words, that, therefore, this claim is ‘ dependent upon and grows out of ’ the treaty of Washington. “ It may be said, in opposition to this view of the case, that, had there been no treaty of Washington, there would have been no fund of $15,500,000 to distribute, the act of June 5, 1882, would never have been passed, and, therefore, that the treaty is the basis of all the subsequent legislation, and consequently the basis of this claim; in other words, that, therefore, this claim is ‘ dependent upon and grows out of ’ the treaty of Washington.

“ We are of opinion, however, that such a dependency upon or growing out of, is too remote to come within the meaning of § 1066, Rev. Stat. In our view of the case, the statute contemplates a direct and proximate connection between the treaty and the claim, in order to bring such claim within the class excluded from the jurisdiction of the Court of Claims by § 1066, Bev. Stat. In order to make the claim one arising out of a treaty within the meaning of § 1066, Rev. Stat., the right itself, which the petition makes to be the foundation of the claim, must have its origin—derive its life and existence—from some treaty stipulation. This ruling is “ We are of opinion, however, that such a dependency upon or growing out of, is too remote to come within the meaning of § 1066, Bev. Stat. In our view of the case, the statute contemplates a direct and proximate connection between the treaty and the claim, in order to bring such claim within the class excluded from the jurisdiction of the Court of Claims by § 1066, Rev. Stat. In order to make the claim one arising out of a treaty within the meaning of § 1066, Rev. Stat., the right itself, which the petition makes to be the foundation of the claim, must have its origin—derive its life and existence—from some treaty stipulation. This ruling is *303analogous to that of the ancient and universal rule relating to damages in common-law actions; namely, that a wrongdoer shall be held responsible only for the proximate, and not for the remote, consequences of his action.”

Attention is directed by the plaintiff to what is said to be a specific prescription of rates of duty in the act of 1903 applicable to the merchandise imported, and from this an inference is drawn that Congress intended the subject matter of the act “ as one entirely for legislative regulation.” In support of this contention the provision in the act that “ Nothing contained in this section shall be held or construed as an admission on the part of the House of Representatives that customs duties can be changed otherwise than by an act of Congress, originating in said House,” is likewise cited. The language of the act of 1903 conforms to the terms of the treaty, the identical subject matter with which Congress was immediately concerned. It would be difficult, indeed, in view of the history of the transaction, to hold that Congress by the act was legislating reciprocal and preferential rights as between two countries with respect to tariff duties, when precisely the same subject matter was covered by treaty stipulations then before Congress for consideration, and in view of the fact that the treaty itself depended by its own provisions for effectiveness upon the enactment of such an act. True, Congress inserted a provision in the act expressly excluding it as a precedent in the event of a conflict as to the lawful and constitutional right to change customs duties otherwise than in an act originating in the House of Representatives; but this provision in no sense indicates that in the enactment of this act Congress was' legislating independently of the treaty. The title and language of the act itself exclude the possibility of such an intent. On the contrary, the facts conclusively show that Congress was acting in accord with the articles of the treaty, and legislating as therein provided to give it effect, whereas without such legislation it would have been ineffective. The case, we think, is governed by the decision of the Supreme Court in the following cases: Eastern Extension, Australasia & *304China Telegraph Co. (supra), Kinkead v. United States (supra), and Great Western Insurance Co. v. United States, 112 U. S. 193, and this court is without jurisdiction to consider it.

The demurrer will be sustained and the petition dismissed. It is so ordered.

concurring:

I concur in the foregoing opinion to the effect that plaintiff’s cause of action is based upon a treaty provision. Such being the case, it is clear that this court has no jurisdiction of the case. The plaintiff, however, insists that the claim is based upon a statutory provision passed by both Houses of Congress and not upon a treaty. Conceding for the sake of the argument only that this statement is correct, I am clearly of the opinion that a case is not stated in the petition.

The material portions of the commercial treaty between the United States and Cuba involved in the case are set out in the foregoing opinion, together with the statutory provisions pertaining thereto so far as material to the consideration of the case at bar.

The tax in controversy was levied by section 10 of what is commonly called the “Tariff act of July 24, 1897,” but I assume that the fact that the provision under which the tax was assessed was one of the sections of a tariff bill will not be considered as making the tax levied thereby an import duty. It is a very common practice on the part of Congress to intermingle in the same acts customs duties and internal-revenue provisions. Nor do I think that the fact that in some provisions of the internal-revenue law the tax on cigars is made to apply (as it was in section 3402, Revised Statutes, act of July 20, 1868) to cigars imported from foreign countries is at all material. Plaintiff’s principal contention is that the tax which is sought to be recovered back in this case is in substance and nature an import duty, *305but the argument presented on behalf of plaintiff is as I think based on a misconception of the true distinction between an import duty and an internal-revenue tax.

The basis of an import duty is the fact that the goods have been imported, but it is entirely immaterial in the assessment of an internal-revenue tax whether the articles have been imported or not. An import duty could be made either by law or regulation a condition precedent to foreign goods entering our boundaries, although as a matter of fact for convenience this is not done. An internal-revenue tax can not be levied or collected until the goods are located within our boundaries. The customs duty is levied on the privilege of bringing foreign goods into our country; the internal-revenue tax in this case .is levied on the privilege of removing the goods after they have come within our boundaries for consumption or sale. This will be observed from the language of the provision which imposes the tax in question, which is “ upon cigars * * * sold or removed for consumption or sale,” and like any other tax upon a privilege it may be collected before the privilege is. exercised (as it usually is) and before the cigars are actually removed for sale. The removal for sale does not refer to the removal from foreign countries. The privilege of removal which is taxed is one which is to be exercised within this country, otherwise the tax would not apply to domestic cigars, as it unquestionably does.

Counsel for plaintiff say in their brief—

“ Congress, of course, has no power to levy an excise tax on imported goods while they are still in customs custody, í¡! ^

It needs no argument to show that a State could not levy a tax affecting imported goods while they were still in the custody of the Government, but I know of nothing to prevent Congress from so doing if it is considered advisable. As Congress is given complete power to legislate with reference to importation of foreign goods, it may enact statutes which apply to imported goods while still in the custody of *306the customs officials. It is true that the statutes imposing the tax require the affixing of stamps in payment thereof while the cigars are still in the custody of the collector of customs; but, as before stated, this is not upon the privilege of importation but upon the privilege of removal for sale and applies wherever the cigars may be found — whether in the custody of the customs officials or elsewhere. No reason can be given why Congress may not require the stamps to be affixed while the cigars are still in the custody of the collector of customs. In so doing, it is merely providing for the collection of the tax in advance of the privilege taxed being exercised, and if the cigars were released without the stamps being so affixed it would probably result in much evasion of the law. Section 3402, Revised Statutes (act of July 20, 1868) accordingly provided that cigars imported from foreign countries should pay in addition to the import duties imposed thereon the tax prescribed by law for cigars manufactured in the United States, and should have the same stamps affixed and canceled by the owner or importer while they were in the custody of the proper customhouse officer. The language used in imposing the tax by section 3402 should specially be noted. The tax is in addition to the import duty, not an additional import duty. The requirement that the stamps should be affixed and canceled while in the custody of the customhouse officer is merely to prevent evasion, otherwise they could just as well be affixed after ¿he property had passed out of the hands of the customs authorities. In none of the acts which have been cited in connection with the tax in controversy is the importation made the basis of the tax. The Government simply refuses to release the goods until the internal-revenue tax is paid. The necessity of preventing the evasion would be abundant authority for Congress so requiring the collection of the tax, if anything else was needed beyond its general authority with reference to imported goods and imposing excise taxes.

In Jordan, Collector, v. Roche, 228 U. S. 436, it appeared that by proclamation of the President issued under authority *307of law “ all tariff duties on merchandise coming into the United States from Porto Rico ceased ” (italics in Supreme Court opinion), but “ articles of merchandise of Porto Rican manufacture coming into the United States shall pay ‘ a tax equal to the internal-revenue tax imposed in the United States upon the like articles of merchandise of domestic manufacture.’ ” It was held in that case that bay rum imported from Porto Rico was subject to the internal-revenue tax upon distilled spirits, notwithstanding all import duties had ceased. It is manifest that this holding is contrary to the logic of plaintiff’s argument, the basis of which is that any tax which is laid upon domestic and imported articles alike is an import tax when it applies to articles that have been imported.

Counsel for plaintiff cite several decisions by the United States Court of Customs Appeals which tend to sustain their position, but I can not follow the reasoning upon which these decisions were based. It is quite correct to say that calling an excise duty an internal-revenue tax does not make it such; but I think it is equally true that calling a tax a customs duty because it includes with others goods which have been imported does not make it in fact a customs duty. The Federal Government does not have to wait until goods pass out of the hands of the customs officials in order to impose an indirect tax which may be assessed upon them. It has, as I think, every right and authority to impose such a tax while the goods are in the custody of the customs officials and say, as it did in this case, that they shall not release the goods until the stamps required by the law are affixed. The cases of Brown v. State of Maryland, 12 Wheat. 419, and May v. New Orleans, 178 U. S. 496, appear to me to have no application. The opinions and judgments rendered therein were upon altogether different facts and upon altogether different questions.

On the grounds stated above, as well as upon those set forth in the majority opinion, I conclude that the demurrer should be sustained.