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Update: National Semiconductor

Remember National Semiconductor? This is the penalty the Court of International Trade awarded interest on unpaid Merchandise Processing Fees under 19 U.S.C. 1505(c). This provision is the law that gives Customs and Border Protection the right to collect interest on unpaid duties and fees. The Court also assessed a $10,000 additional penalty under 19 USC 1592(c)(4)(B)(i.e., the prior disclosure statute).

The Federal Circuit reversed that decision and remanded for a new determination. According to the Court of Appeals, 1505(c) does not provide authority for the Court to award interest as part of a penalty case. The second time around, the Court of International Trade awarded the maximum penalty allowed in the prior disclosure (i.e., the interest owed) plus pre-judgment interest. Today, the Federal Circuit affirmed the maximum penalty and reversed the pre-judgment interest. Here is the opinion.

In analyzing the maximum penalty, the Federal Circuit noted that how the Court of International Trade weighs the factors in coming to a penalty amount is within the discretion of the lower court. The Federal Circuit found no abuse of discretion and upheld the penalty.

The more interesting part relates to pre-judgment interest. First, the Court held that pre-judgment interest is not available for awards of punitive damages. Since, section 1592 sets up a penalties scheme, it is clearly punitive. Further, where the amount of the claim is uncertain, pre-judgment interest is not permitted. This is interesting. The Court held that the interest penalty in a prior disclosure is not necessary fixed at the full amount due. Further, if there is litigation, the amount of the penalty is up to the trial judge. Consequently, at the time of the penalty notice, the ultimate penalty is not fixed. Based on these two factors, the Federal Circuit reversed the award of prejudgment interest.

Full post as published by Customs Law on November 13, 2008 (boomark / email).