GR L 11615; (April, 1918) (Digest)
G.R. No. L-11615; April 1, 1918
H. E. HEALDOCK CO., plaintiff-appellant, vs. THE INSULAR COLLECTOR OF CUSTOMS, defendant-appellee.
FACTS:
The plaintiff imported into the Philippine Islands 48 bracelet watches from the United States. The movements (the internal mechanisms) of all watches were manufactured in Switzerland and imported into the United States. Two of the watch cases were also made in Switzerland, while the remaining 46 cases and all 48 bracelets were manufactured in the United States. In the United States, the Swiss movements were placed into the cases, and the bracelets were attached. The Collector of Customs assessed and collected duty on the entire value of the imported watches. The plaintiff paid under protest and appealed, arguing the watches, as assembled, were a manufactured product of the United States and should be admitted free of duty under applicable tariff laws.
ISSUE:
1. Whether the watches, assembled in the United States from Swiss movements and predominantly American-made cases and bracelets, are considered a manufacture of the United States and thus exempt from customs duty upon importation into the Philippines.
2. Whether the Collector of Customs must pay interest on the amount of duty illegally collected and ordered to be refunded.
RULING:
1. On the dutiable status of the watches: No. The watches are not considered a manufacture of the United States entitled to duty-free entry. The Court held that the mere assembly of the Swiss watch movements into the cases and attachment of bracelets did not constitute “manufacture” as legally defined. There was no substantial transformation creating a new article with a distinctive name, character, and use. The essential and valuable componentthe Swiss movementremained a foreign product. Therefore, duty was properly assessed on the Swiss movements and the two Swiss-made cases. The American-made cases and bracelets were correctly admitted free of duty.
2. On the payment of interest: Yes. The Collector of Customs may be compelled to pay interest on the refund of illegally collected duties. While the sovereign state is generally not liable for interest absent a statute or contract, this immunity does not extend to subordinate governmental agencies like the Collector. In suits against a collector for illegal exaction paid under protest, interest is recoverable as damages for the wrongful withholding of money, even if the judgment is ultimately paid from public funds.
The decision of the lower court was affirmed.