CBP Says Lack of Suspension Notice to Surety Doesn’t Cause Deemed Liquidation

Failure by CBP to provide notice of suspension of liquidation to a surety does not automatically result in deemed liquidation, CBP said in a July 14 ruling, HQ H097501. CBP shot down a number of arguments submitted by the surety, American Home Assurance Co. (AHAC), as part of a headquarters further review of a protest. AHAC objected to a bill it received from CBP that included antidumping duties some eight years after the original entries, saying "that the subject entries were deemed liquidated, that the statute of limitations for collecting under AHAC’s bond expired, that CBP improperly assessed interest, and that CBP improperly calculated the amount of antidumping duties owed."

The transaction in question involves a shipment of freshwater crawfish pellets imported by American Coast Processing entered at the Port of Houston in February of 2001. The shipment was secured by a continuous bond not from AHAC, though AHAC later executed a single transaction bond for the importer because the crawfish were subject to antidumping duties on crawfish tail meat from China, the ruling said. In March 2001, the importer withdrew the meat from warehouse, with a Form 7501 identifying both sureties, the continuous bond surety and AHAC, said CBP. The agency notes that while there are two entry numbers for the merchandise in question, the second entry number "was generated in accordance with CBP procedures in order to identify the warehouse withdrawal transaction." Following the conclusion of litigation on the crawfish meat administrative review, the Commerce Department published final results in 2008, saying the suspension of liquidation of subject merchandise would be lifted. As a result, CBP in Feb. 20, 2009 informed the importer it would liquidate the entry with the antidumping duties, while AHAC learned it would be on the hook for duties owed in September that year.

CBP had not given notice to AHAC of the suspended liquidation, which would mean the entries are deemed liquidated, or "liquidated by operation of law," AHAC argued. While CBP's regulations in 19 CFR 159.58 require that the port director give notice of suspended liquidation, it's a "statutory procedural requirement, which does not include any expressed consequences for violations of the requirement." Consistent with a Court of Appeals for the Federal Circuit decision last year against Great American Insurance (see 13123101), a surety must "demonstrate that it suffered substantial prejudice as a result of CBP’s procedural error before the suspension attached to the entries can be invalidated," said CBP. While the company claimed it would have acted differently had it gotten the notice -- participating in the administrative review process and/or seeking assurances or other means of subrogation from the importer -- those assertions are too broad to prove there was sufficient prejudice created, said CBP.

AHAC also said that because the continuous bond surety is identified in the original entry, which is the entry discussed in CBP's demand for payment, the continuous bond surety should be responsible. Despite AHAC not being identified in the original entry, because the STB was executed "before the merchandise was withdrawn from the warehouse under an entry for consumption, the STB was effective at the time American Coast filed the warehouse withdrawal," the agency ruled. Even though the entries have different entry numbers, because the importer of record associated the STB in the withdrawal entry with the original entry, AHAC "intended to secure the duties, taxes, and fees owed" for the original entry, it said. CBP records show that the original entry identifies AHAC by surety code and indicates "that the payment of duties for that entry was insured by a bond executed by AHAC in an amount consistent with the amount of AHAC’s STB," it said. "Although the amount of the bond exceeds the amount of supplemental duties owed, we note that the STB posted at the time of entry is intended to cover 'estimated' duties rather than the exact amount of duties that are assessed at the time of liquidation. To this end, the bond amount matches exactly the estimated duties."

The company's claim that the six-year statute of limitations for collection against the STB had expired is also mistaken, said CBP. "Such a right of action accrues 31 days after the demand for payment was made against the importer of record," it said. Because liquidation and the first demand for payment against the importer of record "did not occur until February 20, 2009, the breach of the bond that started the running of the statute of limitations did not occur until 31 days later, and the six-year statute of limitations has not yet expired.

CBP was unconvinced by the surety's argument that the payment under the Byrd Amendment to domestic parties is a breach of the surety contract, which did not include language for duties paid to third parties. The agency previously ruled that the Byrd Amendment "did not change the importer’s obligation to pay the duties it owes, nor did it change the surety’s liability for those duties," and "because AHAC presents no new arguments of fact or law, we determine that this part of the protest may be denied," it said. The agency also found that the antidumping duty amount was properly calculated.

Although it denied the rest of the protests, CBP did agree with AHAC that the interest for money owed should be less, though not eliminated. The entry at issue was filed during a new shipper review of the crawfish meat's exporter, so the importer was allowed to post a bond instead of a cash deposit. Interest isn't collected on bonds used in lieu of cash deposits, said CBP. Without a cash deposit, the interest should not have been assessed based on the 2001 entry date, but be assessed based on liquidation in 2009, the agency said. -- Tim Warren