Slip Op. 07-5 UNITED STATES COURT OF I NTERNATIONAL

TRADE

____________________________________ : UNITED STATES OF AMERICA, : : Plaintiff, : Before: Judi th M. Barzi lay, Jud ge : Court No. 03-00005 v. : : GOLDEN GATE PETROL EUM CO., :

: Defend ant. : ____________________________________:

MEMORANDUM ORDER [Plain tiff ’s pr ay er for pre judg ment i nter est is gra nted .] Dated: Jan. 17, 2007. Peter D. Keisler , Assistan t Attorne y G eneral ; (

Barbara S. Williams ), Attorney in Charge, Inte rnationa l Trade F ield Off

ice; ( Marcella Powell ), Commer

cial L itigation Branc

h, Civil Division, U.S. Department of Justice, for the plaintiff. Kellye Drye Collier Shannon ( Michael D. Sherman ), for th e defen dant. Barzilay, Judge : This opinion elaborates upon events last set out in United States v. Golden Gate Petroleum Co. , 30 CIT __, Sli p Op. 06-22 ( Feb. 21, 2006 ) (not report ed in F. Supp.) (“ Golden Gate I

”). In that opinion, the court reje cted the arguments of Defenda nt, Golden Gate Petroleum Company (“ Golden Gate”), that it should not be liable for increased duties on an entry of lea

ded fuel entered at the port of San Fra ncisco, California, on October 8, 1985, andCourt No. 03-00005 Page 2

1 Customs reclassified Golden Gate’s entry under 432.10 (a mixture in whole or in part of hydrocar bons derived in whole or in part from petroleum), HTSUS, rather than 475.25 ( motor fuel), H TSUS, which resulte d in incre ased duti es.

2 Prejudgment interest started to accrue on June 14, 1986, fifteen da ys after liquidation occurred on May

30, 1986. ordered Golden Gate to pay those duties in the amount of $1,359,172.50. 1 Id . at 13. I n the same case, Plaintiff, the United States (“Government”), had a lso claimed prejudgment interest from Golden Gate pursuant to 19 U.S.C. § 1505(c) (1984). 2 Id . The court did not decide whether § 1505(c) interest was mandatory, but instructed the parties to “consult, negotiate, and ag ree on the amount of prejudgment interest” owed to the Gover nment. Id

. at 14. Because the parties proved unable to reach an ag reement, the issue returned to this court for resolution. Since interest has accrued on Golden Gate’ s unpaid duties for twenty y ears, and Plaintiff claims much of the delay

was due to government inaction, the court reque sted additional briefing from the parties on whether § 1505(c) mandated pr ejudgment interest or whether the court had discreti on in awa

rding su ch inter est. Altho

ugh the Government is res

ponsible f

or some de lay

in bringing this suit, legal authority prohibits the court from exercising its equitable powers when a statute, such as § 1505(c), mandates that prejudgment inter est be paid on delinquent duties. I. Discussion In 19 85, 19 U.S. C. § 1505(c ) read a s follows: Du ti es de te rm in ed to be du e u po n l iq ui da ti on or re li qu id at io n s ha ll be du e 1 5 d ays after the date of that liquidation or reliquidation, and unless pay ment of the duties is rece ived by

the appr opriate customs of

ficer w ithin 30 da

ys a fter tha t date, shall be considered delinquent and bear interest fr om the 15 th day after

the date of li qu id at io n o r r el iq ui da ti on at a r at e d et er mi ne d b y th e S ec re ta ry o f t he Tr ea su ry. 19 U.S.C. § 1 505(c). Section 15 05(c) r equires that inter est be pa id on over

due dutie s toCourt No. 03-00005 Page 3

compensate the Government for the opportunity cost associated with the lost revenue. See United States v. Imperial Food Imps ., 834 F.2d 1013, 1016 (Fed. Cir. 1987) (“[I ]f prejudgment interest were no t awarde d to the Go vernmen t, nonpay ment of e stimated d

uties woul d amount to an inter est-fre e loan of

the money

owing the Gover

nment from the due d

ates for pay ment until

recove ry .”); see also GM Corp. v. Devex Corp. , 461 U.S. 648, 655-56 & n.10 (1983). Thus, § 1505(c) interest “is merely the natural, logical, and economic result of the unde rpayment that Customs is required to recover, and Congress was undoubtedly aware that nonpenal interest on underpayme

nts is specifically provided f or in section 1505.” United States v. Nat’l Semiconductor Corp. , 30 CIT __, __, S lip Op. 06 -138 at 6 (Se pt. 8, 200 6) (not report ed in F. Supp.). The general rule conce rning the award of prejudg ment interest provides that when “no statute specifically a

uthorizes an award of prejudgment interest, such a n award lies within the discretion of the court as part of its equitable powers.” Imperial Food Imps

. , 834 F.2d at 1016; see Milwaukee v. Cement Div., Nat’l Gypsum Co. , 515 U.S. 1 89, 194 (1 995); United States v. Goodman , 6 CIT 132, 139-40, 572 F. Supp. 1284, 1289 (1983). Howeve r, cases involving the tax code often have held that when a statute authorizes prejudgme nt interest, the court cannot exercise its equitable powers. See Purcell v. United States , 1 F.3d 93 2, 943 (9th Cir. 1993) (“[T]he trial court was plainly divested of discretion with respect to the government’s entitlement to interest by section 6601(e )(2)(a) of the Tax Code. . . . The district court thus was face d with a binding statutory direc

tive to allow interest to the government . . . . The court was not requir ed – indeed, was not per

mitted – to e

xercise it s discretion reg arding the awa rd of inte rest.”) ; JohnsonCourt No. 03-00005 Page 4

3 The court notes that recent cases illustrating this trend ha ve not included any c ases arising in the duty pa

yment context. v. United States , 602 F.2d 734, 739 ( 6th Cir. 1979)(“[T]he district cou rt’s invoc ation of e quity

to alter and reduce the statutorily defined period for the accruing of prejudgment interest was beyond the cour

t’s equitable powers despite the even handed re sult sought by the court.” ). Although non-binding authority , these cases are persuasive and pr ovide guidance on the limits of the court’s equitable discretion when a statute provides for pr ejudgment interest. Moreove r, an alt ernativ e body

of case law simila

rly prohibits e quitable

estoppel against the Government when acting in its sovereig n capacity , which includes the collection of taxes and import duties. See N.Z. Lamb Co. v. United States , 149 F.3d 1366, 1368 (Fed. Cir. 1998); see also United States v. Fed. Ins. Co. , 805 F.2d 1012, 1016 (Fed Cir. 1986); Air-Sea Brokers, Inc. v. United States , 596 F.2d 1008, 1011 (CCPA 1979) (“[W]e hold that equitable estoppel . . . is not available against the Government in case s involving the collection or refund of duties on imports.”). But see Fed. Ins. Co. , 805 F.2d at 1016 (s

ugge sting tha

t equitab le estopp el possibly appropr iate in extr

aordina ry circumst ances) ,1020 (Ne

wman, J. diss enting) ; cf

. Office of Pers. Mgmt. v. Richmond, 496 U.S. 414, 421 (1990) (“[S]ome type of ‘aff irmative misconduct’ might give rise to estoppel against the Governme nt.”). 3 While ther

e may exist an exce

ption to the

prohibition on using

equitabl e estoppe l again st the Government when acting in its sovereig n capacity , Plaintiff’s actions do not approach the level of misconduct that would compel this court to contradict settled law. See Fed. Ins. Co. , 805 F.2d at 1016. The Government provided Golden Gate with ample notice of its accumulating debt and the consequences of nonpay ment. See Ex. A, Letter from William K. Martin, ChiefCourt No. 03-00005 Page 5

Financial Officer, Golden Gate Petr oleum Co., to John Eastman, U.S. Customs Service (Mar. 1, 1991); see also Ex. B, L etter fr om James M. Mo ster, Ass istant Chie f Counsel, U.S. Customs Service, to Golden Gate Petroleum Co. (Dec. 23, 1992); Attach. 2, Letter from David M. Cohen, Director, U.S. Dep’t of Justice, to Golden Gate Petroleum Co. (May 6, 1999). Furthermore, the Government participated in settlement negotiations to resolve Golden Ga te’s debt, but Golden Gate did n

ot follow t

he prope r proce dures dur

ing the negotia

tions, thus

contribu ting to th eir failure. See Attach. 3, Letter from Ha rvey B . Fox, U.S. Customs Service, to Michael D. Sherman, Collier, Shannon & Scott (Mar. 22, 1991). Conseque ntly , becau se the la

nguag e of § 150 5(c) re quires th at a par ty p ay interest on its unpaid du ties, the d ecision to award s uch inter est does n ot lie withi

n the cour t’s equita ble discretion. Although the Government could have initiated this suit more expeditiously , the language of § 1505(c)

creates a “binding statutory directive” that “divest[s] [the court of] discretion,” and any

deviation from that legislative command in favor of equity would be

erroneous. Purcell, 1 F.3d at 943 . Accordingly , the court orders Golden Gate to pay prejudg ment inter

est on all u

npaid duti es calc

ulated f rom June 14, 1986 to the

date of t his judgment. Plaintiff’s motion is granted.

January 17, 2007 /s/ Judith M. Barzilay Dated:________________________ ___________________________ New York, NY Judi th M. Barzi lay, Jud ge