Thursday, June 25, 2015

Prejudgment Interest: Statutory and Equitable

You may recall that in United States v. American Home Assurance Company, the U.S. Court of International Trade held that a surety could not be held liable for statutory prejudgment interest owed by the importer because the statute reaches only "ordinary" duties and not antidumping duties. However, in the same case, the CIT held that the government is entitled to prejudgment interest under equity. The Court of Appeals for the Federal Circuit has now reversed the CIT on the first point and vacated the decision with respect to the second point.

The facts you need to know are few. American Home was the surety for an importer of crawfish tail meat from China, which is subject to an antidumping duty order. At the time of entry, the deposit rate applicable to the specific exporter was zero, which is convenient. But, following a review, liquidation occurred with a 223.01% assessment rate, which was inconvenient. The importer defaulted and Customs and Border Protection sought payment from the surety. There are some interesting procedural issues involving the various liquidations, protests, and the lack of protests; but, know that there is $1,157,898.22 in unpaid duties at issue.

In the collection action, the United States sought prejudment interest under 19 U.S.C. § 580, which provides that "[u]pon all bonds, on which suits are brought for the recovery of duties, interest shall be allowed . . . from the time when said bonds became due." The CIT held that this did not apply to antidumping duties because, at the time the statute was originally enacted in 1799, it was not intended to apply to antidumping duties. The Federal Circuit disagreed.

On this point, the Federal Circuit said:

The language—“all bonds” on which the government sues for “the recovery of duties”—is clear and unqualified. As written, the term “duties” does not modify the type of “bonds” on which interest shall be allowed. Instead, the statute calls for interest on “all bonds.” The term “duties” reflects only the requisite res litigiosae—i.e., the general nature of the disputed property in the government’s legal action against the surety. Thus, by the statute’s plain terms, it covers, among other things, bonds securing the payment of antidumping duties when the government sues for payment under those bonds.

[Note: I feel that I have a good grasp of law Latin. Nevertheless, "res litigiosae" is new to me. Black's defines it as "In Roman law, things which are in litigation; property or rights which constitute the subject-matter of a pending action." It sounds more like a Harry Potter spell for turning someone into a convict.]

What about the fact that from 1799 to 1921 there was no such thing as antidumping duties? Not a problem. According to the Federal Circuit (and the Supreme Court), laws encompass those things and people that fall within the scope of the language, even if those things and people arise subsequently. That's why wire fraud statutes apply to the Internet (maybe, that is just a guess on my part). Furthermore, Congress knew about this law and did nothing to change it when it enacted and subsequently modified the antidumping laws. That indicates that Congress understood it to apply to "all bonds" securing duties.

Having permitted the U.S. to recover prejudgment interest under the statute, the remaining question was whether the U.S. was entitled to the same interest on an equity theory. Equity is all about doing the right thing given all of the facts and circumstances. Given the decision that the U.S. is entitled to statutory prejudgment interest, the facts and circumstances have changes. Consequently, rather than decide the equity issue, the Federal Circuit vacated the CIT decision on this point and remanded the case to the CIT for further review.

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