Barr v. United States

1945-02-05

Headline: Court requires customs valuation to use the exchange rate actually used to buy currency for a specific import, blocking the Treasury’s use of Britain’s higher official sterling rate and lowering some duties.

Holding: The Court held that when multiple exchange rates exist, customs valuation must use the buying rate actually applicable to the specific import certified by the Federal Reserve Bank, not the Treasury’s published official rate.

Real World Impact:

Makes customs duties reflect the exchange rate actually used to buy currency for that import.
Limits the Treasury’s ability to force use of a single official exchange rate.
Benefits importers who paid with lower market "free" exchange rates.

Topics: customs duties, currency exchange, import valuation, trade administration

Summary

Background

A U.S. importer bought woolen fabrics shipped from England in May 1940 and paid in pounds sterling purchased in New York by cable transfer. The customs collector converted the invoice pounds into dollars using Britain’s government "official" sterling rate of $4.035. The importer said customs should have used the New York "free" buying rate of $3.475138 that he actually used, paid the higher duty, and protested. Lower courts split: the Customs Court agreed with the importer, the Court of Customs and Patent Appeals reversed, and the Supreme Court took the case because the issue was important.

Reasoning

The Court examined § 522(c) of the Tariff Act, which says the Federal Reserve Bank of New York determines the buying rate in the New York cable-transfer market and the Secretary of the Treasury publishes it. During wartime Britain had created two sterling rates: an "official" rate fixed by the British Treasury and a separate "free" market rate. The Court concluded that § 522(c) requires using the buying rate that actually applies to the particular transaction. The Federal Reserve Bank may certify multiple rates, and the Secretary’s publishing only the official rate could not force an inflated valuation. The Court held the collector exceeded authority by using the official rate and ordered reversal.

Real world impact

The decision makes customs duties reflect the exchange rate actually used to purchase currency for a given import, rather than automatically using a single government-imposed foreign rate. It affects importers who paid with lower market rates and constrains Treasury direction of collectors in these valuation questions. Congress could change the rule, and the opinion arose from wartime currency controls creating dual rates.

Dissents or concurrances

The dissent argued the Secretary needed authority to pick a single rate to protect national fiscal and trade interests, warning that multiple rates have broad effects on trade policy and international relations, and would have affirmed the Treasury’s action.