Slip Op. 07-5

UNITED STATES COURT OF INTERNATIONAL TRADE 

____________________________________

:

UNITED STATES OF AMERICA, :

:

Plaintiff, : Before: Judith M. Barzilay, Judge

: Court No. 03-00005

v. :

:

GOLDEN GATE PETROLEUM CO., :

:

Defendant. :

____________________________________:

MEMORANDUM ORDER

[Plaintiff’s prayer for prejudgment interest is granted.] 

Dated: Jan. 17, 2007. 

Peter D. Keisler, Assistant Attorney General; (Barbara S. Williams), Attorney in Charge,

International Trade Field Office; (Marcella Powell), Commercial Litigation Branch, Civil

Division, U.S. Department of Justice, for the plaintiff.

Kellye Drye Collier Shannon (Michael D. Sherman), for the defendant.

Barzilay, Judge: This opinion elaborates upon events last set out in United States v.

Golden Gate Petroleum Co., 30 CIT __, Slip Op. 06-22 (Feb. 21, 2006) (not reported in F.

Supp.) (“Golden Gate I”). In that opinion, the court rejected the arguments of Defendant, Golden

Gate Petroleum Company (“Golden Gate”), that it should not be liable for increased duties on an

entry of leaded fuel entered at the port of San Francisco, California, on October 8, 1985, and
Court No. 03-00005 Page 2

1

 Customs reclassified Golden Gate’s entry under 432.10 (a mixture in whole or in part of

hydrocarbons derived in whole or in part from petroleum), HTSUS, rather than 475.25 (motor

fuel), HTSUS, which resulted in increased duties.

2

 Prejudgment interest started to accrue on June 14, 1986, fifteen days 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. In the same

case, Plaintiff, the United States (“Government”), had also 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 agree on

the amount of prejudgment interest” owed to the Government. Id. at 14. Because the parties

proved unable to reach an agreement, the issue returned to this court for resolution. 

Since interest has accrued on Golden Gate’s unpaid duties for twenty years, and Plaintiff

claims much of the delay was due to government inaction, the court requested additional briefing

from the parties on whether § 1505(c) mandated prejudgment interest or whether the court had

discretion in awarding such interest. Although the Government is responsible for some delay in

bringing this suit, legal authority prohibits the court from exercising its equitable powers when a

statute, such as § 1505(c), mandates that prejudgment interest be paid on delinquent duties. 

I. Discussion

In 1985, 19 U.S.C. § 1505(c) read as follows:

Duties determined to be due upon liquidation or reliquidation shall be due 15 days

after the date of that liquidation or reliquidation, and unless payment of the duties

is received by the appropriate customs officer within 30 days after that date, shall

be considered delinquent and bear interest from the 15th day after the date of

liquidation or reliquidation at a rate determined by the Secretary of the Treasury.

19 U.S.C. § 1505(c). Section 1505(c) requires that interest be paid on overdue duties to
Court 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 not awarded to the Government, nonpayment of estimated duties would amount to

an interest-free loan of the money owing the Government from the due dates for payment until

recovery.”); 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 underpayment that

Customs is required to recover, and Congress was undoubtedly aware that nonpenal interest on

underpayments is specifically provided for in section 1505.” United States v. Nat’l

Semiconductor Corp., 30 CIT __, __, Slip Op. 06-138 at 6 (Sept. 8, 2006) (not reported in F.

Supp.).

The general rule concerning the award of prejudgment interest provides that when “no

statute specifically authorizes an award of prejudgment interest, such an 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. 189, 194 (1995); United States v.

Goodman, 6 CIT 132, 139-40, 572 F. Supp. 1284, 1289 (1983). However, cases involving the

tax code often have held that when a statute authorizes prejudgment interest, the court cannot

exercise its equitable powers. See Purcell v. United States, 1 F.3d 932, 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 faced with a

binding statutory directive to allow interest to the government . . . . The court was not required –

indeed, was not permitted – to exercise its discretion regarding the award of interest.”); Johnson
Court No. 03-00005 Page 4

3

 The court notes that recent cases illustrating this trend have not included any cases

arising in the duty payment context. 

v. United States, 602 F.2d 734, 739 (6thCir. 1979) (“[T]he district court’s invocation of equity to

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

beyond the court’s equitable powers despite the even handed result sought by the court.”). 

Although non-binding authority, these cases are persuasive and provide guidance on the limits of

the court’s equitable discretion when a statute provides for prejudgment interest. 

Moreover, an alternative body of case law similarly prohibits equitable estoppel against

the Government when acting in its sovereign 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 cases involving the collection or refund of duties on

imports.”). But see Fed. Ins. Co., 805 F.2d at 1016 (suggesting that equitable estoppel possibly

appropriate in extraordinary circumstances),1020 (Newman, J. dissenting); cf. Office of Pers.

Mgmt. v. Richmond, 496 U.S. 414, 421 (1990) (“[S]ome type of ‘affirmative misconduct’ might

give rise to estoppel against the Government.”).3

While there may exist an exception to the prohibition on using equitable estoppel against

the Government when acting in its sovereign 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 nonpayment. See Ex. A, Letter from William K. Martin, Chief
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Financial Officer, Golden Gate Petroleum Co., to John Eastman, U.S. Customs Service (Mar. 1,

1991); see also Ex. B, Letter from James M. Moster, Assistant Chief 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 Gate’s debt, but Golden

Gate did not follow the proper procedures during the negotiations, thus contributing to their

failure. See Attach. 3, Letter from Harvey B. Fox, U.S. Customs Service, to Michael D.

Sherman, Collier, Shannon & Scott (Mar. 22, 1991). 

Consequently, because the language of § 1505(c) requires that a party pay interest on its

unpaid duties, the decision to award such interest does not lie within the court’s equitable

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

prejudgment interest on all unpaid duties calculated from June 14, 1986 to the date of this

judgment. Plaintiff’s motion is granted.

 January 17, 2007 /s/ Judith M. Barzilay

Dated:________________________ ___________________________

New York, NY Judith M. Barzilay, Judge