United States v. Twenty-Five Packages of Panama Hats

Background

A New York firm, Castillo & Co., received shipments of Panama hats from merchants in foreign ports. The foreign sellers sent false invoices that undervalued the hats. When the goods arrived in New York they were not claimed and were unloaded and placed in a General Order warehouse, where unclaimed goods are stored for up to a year before sale or reexport. The Collector began forfeiture proceedings under the Tariff Act after discovering the fraudulent invoices. The District Court and the Circuit Court of Appeals held the goods could not be forfeited because no formal entry had been made; Castillo & Co. prevailed below and the case reached the Court on review.

Reasoning

The Court addressed whether goods sent on fraudulent invoices become “introduced into the commerce of the United States” when unloaded and stored in General Order, even if no entry paperwork was made. The Court pointed to the 1909 amendment that expanded liability to consignors and broadened the covered conduct beyond merely making an entry. The opinion explains that a foreign consignor must be taken to know goods will be stored, sold, or re-shipped from U.S. territory, so unloading and placing items in General Order brings them into U.S. commerce and subjects them to forfeiture. The Court rejected the idea that inability to criminally prosecute the foreign consignor prevents forfeiture of the goods themselves.

Real world impact

The decision allows Customs to pursue forfeiture of unclaimed imports that arrived with fraudulent invoices once they are unloaded and stored. It closes a loophole that previously let undervaluing consignors escape civil liability, and returns the case for further proceedings consistent with this ruling.