Bond Irregularities, Late Liquidation Don't Absolve Surety From Payment Obligation, CIT Says

Irregularities on a single transaction bond issued to cover antidumping duties on Chinese garlic don’t mean the surety doesn’t have to pay out to CBP, the Court of International Trade said in an Oct. 5 decision. Handwritten changes to the bond after it was signed, in apparent violation of CBP’s regulations, don’t invalidate the bond, CIT said. And despite lengthy delays before the underlying entry was liquidated, the government’s lawsuit to collect was not filed too late, it said.

China Leader imported the garlic in 2002, obtaining a single transaction bond from Fidelity worth $231,000 to cover the 376.67% AD duty in effect at the time. After the bond was signed, China Leader’s customs broker sent new information to Fidelity’s agent. Sometime after it received that information, handwritten changes were made to the bond, including crossing out an entry number and putting in a new one and hand-checking a box indicating the entry is subject to AD duties.

A lawsuit challenging the AD duty rate applicable to the entry followed, resulting in the suspension of liquidation, and CIT sustained the rate in November 2004. CBP published a copy of the decision in a Customs Bulletin the following month. The 60-day period for appeal expired in January 2005. But the Commerce Department waited until January 2007 to send a message instructing CBP to liquidate the entry, which CBP did that September. CBP would eventually file suit to collect on the bond in July 2013.

Fidelity argued CIT should throw out the collection suit because it was filed too late. The government has six years from the date of liquidation to bring a collection action. The entry should have been deemed liquidated six months after the court case was finalized, or at most six months after publication of the decision in the Customs Bulletin, Fidelity said.

CIT disagreed, finding Commerce’s instructions to CBP in 2007 served as notice that the entry should be liquidated. The Customs Bulletin was not a formal notice to CBP to remove suspension of liquidation, the trade court said. “Customs employees who are charged with liquidation are not: (1) responsible to read the Bulletin, (2) do not receive the Bulletin on a regular basis, and (3) receive notice only through [a particular] message board where the Bulletin is never posted,” CIT said, citing a previous case. Though the six-month clock for deemed liquidation means the entry should have been deemed liquidated in July 2013, six months after Commerce’s instructions, that was still one day prior to expiration of the six-year deadline, CIT said.

Nor do the bond’s irregularities mean it should be canceled, CIT said. Fidelity argued CBP made the changes, and bonds become invalid if changes are made after CBP accepts them. But Fidelity provided no evidence to back up its allegation and overcome the presumption that public officers “perform their duties correctly, fairly, in good faith, and in accordance with law and governing regulations,” CIT said.

And though the changes were not made in accordance with CBP’s bond regulations -- they didn’t include a statement from the surety consenting to the changes -- those same regulations do not say bonds are invalid if they don’t comply, CIT said. “The burden is on the parties submitting the bond for Customs’ approval to exercise reasonable care in submitting the required entry paperwork, including a bond,” it said. “The subject bond and entry documents submitted with the entry support the conclusion that the subject bond was intended to secure the entry.”

(U.S. v. Int’l Fidelity Ins. Co., Slip Op. 17-136, CIT # 13-00256, dated 10/15/17, Judge Gordon)

(Attorneys: Monica Triana for plaintiff U.S. government; Ralph Sheppard of Meeks Sheppard for defendant International Fidelity Insurance Company)