Klingerit, Inc. v. United States

LawebNce, Judge: The two appeals for reappraisement covered, by this application for review, together with appeal for reappraisement No. 136443-A, in the name of the same parties, were tried together and disposed of by the trial judge in one decision and judgment (Reap. Dec. 5944). The Government filed an application for review as to reappraisement No. 136443-A, and the importer filed the application for review herein. Each application is being decided separately, but the decisions will be published concurrently. The merchandise consists of certain asbestos goods manufactured, in Austria and exported therefrom in May 1938, when that country was under the de jacto administrative control of Germany. It was appraised, according to the contention of the Government, in German reichsmarks. The appellant, however, contends, to quote from its brief— That the proper appraised value of the merchandise in question is that found by the appraiser in Austrian shillings, such value being presumptively correct and not challenged by appellant: that in view of such presumption and the absence — 437 — of any challenge by appellant they should be found by this court as the proper dutiable value. While both parties litigant rely upon the return of value by the appraiser, there is a sharp dispute between the parties as to precisely what constituted his return. This conflict will be explained in detail later in this opinion. A preliminary question is presented, due to the fact that during the progress of the trial appellant secured the issuance of subpoenas duces tecum directed to the Assistant Attorney General in Charge of Customs and the Director of the Customs Information Exchange, respectively, to produce “a certain special agent’s report or reports” which appear to have been relied upon by the examiner in making his advisory return of value to the appraiser. Motion was made on behalf of the United States to quash the subpoena directed to the Assistant Attorney General. After oral argument and submission of briefs the trial judge granted the motion to quash, and of his own motion also ordered that the subpoena duces tecum issued to the Director of the Customs Information Exchange likewise be quashed, and an order was entered accordingly. Appellant, by appropriate assignment of error, challenges the correctness of that action. It appears from the record that in a letter (exhibit 2) from the Assistant Secretary of the Treasury Herbert E. Gaston to the Director of the Customs Information Exchange, the opinion was expressed that the disclosure of the information contained in the documents sought to be produced pursuant to the subpoenas “would be inimical to the public interest.” In support of the Government’s motion to quash the subpoena directed to the Assistant Attorney General, that officer filed with the court, subsequent to the submission of the case on the motion to quash, an affidavit to which was attached a letter of similar import to exhibit 2, supra, addressed to him by Assistant Secretary of the Treasury Gaston. Appellant complains that said affidavit and letter were filed without notice to it, and contends that the court below improperly based its ruling quashing the subpoena addressed to the Assistant Attorney General upon the letter of the Assistant Secretary of the Treasury, and, moreover, that irrespective of whether the letter was or was not in the record, the question of whether the disclosure of the reports would be “inimical to the public interest” was for the court to decide upon a personal inspection of the reports. We find it unnecessary to decide whether or not it was error for the court to base its order quashing the subpoena directed to the Assistant Attorney General upon the letter of the Assistant Secretary of the Treasury which was attached to the affidavit filed without, notice to the appellant, in view of the fact that a letter of like import was properly admitted m evidence as exhibit 2. — 438 — The question whether it was for the court, rather than the Assistant Secretary of the Treasury, to decide if the disclosure of the contents of the reports would be inimical to the public interest, is no longer open to debate. That question is well settled in this jurisdiction. Knauth, Nachod & Kuhne et al. v. United States, 23 Treas. Dec. 342, T. D. 32925 (G. A. 7401). That case has stood for more than 30' years as a declaration of the law applicable in circumstances similar to those presented in this case, and rests upon no less eminent authority than United-States v. Burr, 25 Fed. Cases 30, and Marbury v. Madison, 1 Cranch (5 U. S.) 137, 2 Law Ed. 60. In the Knauth case, supra, it was said: * * * If the Secretary of the Treasury could be compelled to produce in court a communication which he asserts to be confidential, and which it would be against public policy to produce, then the Secretary of State could be SO' compelled, and important diplomatic matters depending for their success entirely upon the discretion and secrecy with which they are conducted might be given that publicity which properly surrounds all judicial procedure. The very statement of such a proposition carries its own answer. And the court concluded— • — that the letter of the Assistant Secretary of the Treasury is a complete answer to the subpoena, and the subpoena is discharged. Accordingly, we find no error in the order of the trial court quashing the subpoenas duces tecum directed to the Assistant Attorney General in Charge of Customs and to the Director of the Customs Information Exchange, respectively. Turning now to the merits of the controversy, we find on the invoice covered by reappraisement No. 134744-A the following red-ink notation of the examiner: Appraisal basis (F. M. V.) at 6.20 Austrian Schillings Plus 10% for thinness on y¡2" only Less 0.20 A. Sch per Kilo rebate Less quantity discount 2%, less bonus 10% Plus turnover tax 3.7% and crisis tax 3.7% Plus packing. Appraised in German Reichsmarks at the ratio of one Reichsmark equals 1.50 Austrian Schillings of the foregoing appraisal basis. Adv P. M. V. The invoice covered by reappraisement No. 134747-A bears the following notation made by the examiner in red ink: Appr. Basis: Items ® above at units checked in red, Less 15% discount, plus 7.4% taxes, plus packing. PMY Items @ above at units checked 4n red, Plus 7.4% taxes, plus packing. PMV Items ® and (§> appraised in German Reichsmarks at the ratio of one Reichsmark equals 1.50 Austrian Schillings of the foregoing appraisal basis. As pointed out, infra, the foregoing reports of the examiner were adopted by the appraiser. — 439 — It is the contention of the appellant that the above-quoted language down to and including the words “plus packing” in each instance constituted a complete and final appraisal, and that the language following the words “plus packing” was “purely gratuitous * * * and of no effect,” and that the— —attempted reappraisement [sic] on the basis.of Reichsmarks was illegal, null and void, the proper conversion of currency being solely within the function of the Collector of Customs * * *. In our opinion the language down to and including the words “plus packing” merely gives the calculating factors which formed the bases of the conclusions reached by the appraiser as expressed in the language following the words “plus packing,” reading, in one instance— Appraised in German Reichsmarks at the ratio of one Reichsmark equals 1.5Q Austrian Schillings of the foregoing appraisal basis. Adv F. M. V. and in the other— Items ® and ® appraised in German Reichsmarks at the ratio of one Reichs-mark equals 1.50 Austrian Schillings of the foregoing'appraisal basis. In other words, the first part of the red-ink notation on each of the invoices is precisely what it is designated to be, namely, an “appraisal basis,” and the remaining part of the notation is the appraiser’s, return of value of the merchandise in German reichsmarks predicated on the “foregoing appraisal basis.” The apparent reason for appraising the merchandise in German reichsmarks is disclosed by a reference to T. D. 50029, 75 Treas. Dec. 192, dated December 11, 1939, wherein it appears that the Secretary of the Treasury was advised by the Secretary of State, under date of December 1, 1939, with regard to the territories then under the de-facto administrative control of Germany, in part as follows: On Apcril 5, 1938 this Department notified you that for all practical purposes, the disappearance of the Republic of Austria as an independent state and its. incorporation in the territory of the German Government must be accepted as. a fact. Doubtless in view of this information the appraiser found it necessary to appraise the merchandise (which was exported in May 1938) in German reichsmarks which, it is fair to assume, became the prevailing currency with the “disappearance of the Republic of Austria”1 as above set forth. In such circumstances it would have been inappropriate for the appraiser to attempt to find a value for the merchandise in Austrian schillings, purporting to be the currency of the-country of exportation, when as a matter of fact Austria had, prior-to the date of exportation, disappeared “for all practical purposes.” We see no reason for disregarding the express statements on the-invoices that the merchandise was “appraised in German Reichs-marks.” The examiner’s red-inlc notations upon the invoices were440 apparently adopted in their entirety by the appraiser, as is indicated by him on the summary sheets attached to the invoices, and illustrate some of the “reasonable ways and means” employed by him in arriving at his appraised values (Sec. 500 (a) (1), Tariff Act of 1930). And while he did not specifically state the exact number of reichsmarks per unit of appraisement, nevertheless, he did give sufficient information upon which the collector in due course could proceed to convert the currency "For the purpose of the assessment and collection of duties,” pursuant to section 522 of the Tariff Act of 1930. Note Collin & Gissel v. United States, 71 Treas. Dec. 1227, Reap. Dec. 4004, affirmed in 72 Treas. Dec. 1210,. Reap. Dec. 4183, and United States v. Sontag’s Shoe Stores, 14 Cust. Ct. 314, Reap. Dec. 6091, decided February 1, 1945, reversing Reap. Dec. 5797. The action of the appraiser upon the summary sheets attached to the invoices is his seal of approval of the red-ink notations on the invoices. Consequently, there would seem to be no justification in fact or in law for dividing the red-ink notations into two separate parts, treating one part as the complete appraisement, and ignoring the other as a nullity and hence merely surplusage, as contended by the appellant. The notations should be accepted, or rejected, in their entirety. It may clarify the situation somewhat to point out that the invoices disclose the “purchase price” of the merchandise in United States currency and state th'e “Home Market Value” in Austrian schillings. However, 'as above indicated, it would scarcely be reasonable for the appraiser in the circumstances of this case to find a value in Austrian schillings when, prior to the date of exportation, Austria had ■ceased to exist as an independent state. In the brief filed on behalf of the appellant it is argued that “the ■appraiser having found the value in Austrian schillings, it was^ beyond his power and duty to convert such values into another currency.” While it is frequently stated that the conversion of currency is peculiarly the function of the collector of customs, nevertheless, it ’is not strictly accurate to confine the function solely to that officer. Obviously, article 776 of the Customs Regulations of 1937 contemplates that the conversion of currency “for the purpose of comparison,” .as indicated in subparagraph (e) thereof, is to be performed by the appraiser. It will be observed that section 500 of the Tariff Act of 1930, defining the duties of appraising officers, declares in subparagraph (a) thereof, ■that the appraiser shall perform his duties— * * * under such rules and regulations as the Secretary of the Treasury may prescribe— Subparagraph (e) of article 776, supra, is preceded by the general .admonition that the appraiser, among other things, “will observe the — 441 — following rules in making returns on invoices.” Said subparagraph (e) reads: . (e) When merchandise identical with or similar to that under appraisement is sold for domestic consumption and for exportation in different currencies in the country of exportation, the currencies involved should, for the purpose of comparison to determine whether the foreign or export value is the higher, he converted into United States currency at the rate certified by the Federal reserve hank for the date of exportation of the merchandise involved; but the currency expressed in, the appraiser’s return should be the currency in which identical or similar merchandise is usually bought and sold in the ordinary course of trade for domestic consumption in the country of exportation or for exportation to the United States,- depending upon whether the foreign or export value is adopted as the basis of appraisement. [Italics supplied.] The italicized language in the above quotation clearly discloses that under certain conditions it is incumbent upon the appraiser to convert different currencies “for the purpose of comparison” as above indicated, and his action in ascertaining, estimating, and appraising merchandise, to the extent that his processes involve the conversion of currency, is legal. This conclusion is confirmed by the language of subparagraph (f) of said article 776 which reads: CO The conversion of currency, being a function of the collector, is not related to the determination of the unit values of merchandise or of the costs, charges, etc., entering into the determination of dutiable values, and it is not the duty of appraising officers to find or state the value of currency. [Italics supplied.] The apparent purpose of subparagraph (f), supra, was to make it clear that the conversion of currency, being a function of the collector “For the purpose of the assessment and collection of duties” pursuant to section 522 of the Tariff Act of 1930, has no relation to the action of the appraiser in converting currency ‘ ‘ for the purpose of comparison ’ ’ in ascertaining “ the unit values of merchandise or of the costs, charges, etc.,'entering into the determination of dutiable values” of the merchandise, which latter action, pursuant to subparagraph (e), supra, is the function of the appraiser. The value found by the appraiser is presumptively correct, and the burden rested upon the party who challenged its correctness to prove otherwise (section 501, Tariff Act of 1930). The return of the appraiser carries with it the presumption that the German reichs-mark was the “currency of the country of exportation in which merchandise identical with or similar to that under appraisement” was at the time of exportation “bought and sold in the ordinary course of trade” (article 776 (b), Customs' Regulations of 1937). There is no competent proof to the contrary, nor is there any proof which would establish values for the merchandise other than those found by the appraiser. For the foregoing reasons we affirm the finding of the trial judge in substance that the proper basis of value of the merchandise covered — 442 — by- these appeals was the foreign value, as found by the appraiser, and that the values of the various items were, in each case, the values returned by the appraiser in reichsmarks. Judgment will be entered accordingly.