Surety Group Decries Likely 'Absurd Result' of Late CBP Duty Collection

The Customs Surety Coalition called foul on a CBP attempt to collect unpaid antidumping duties eight years after the relevant entries liquidated, saying the “devastating impact on the surety program is obvious,” in a May 20 amicus brief filed in the Court of International Trade. Stepping in to help defend Aegis Security Insurance Co., the coalition argued that if the court were to accept CBP's position, the statute of limitations on duty payments would be eliminated, allowing the agency to use the law to "absurd ends." CSC was joined by its four coalition members -- the International Trade Surety Association, the National Association of Surety Bond Producers, Inc., the Surety & Fidelity Association of American and the Customs Surety Association -- in its brief (United States v. Aegis Security Insurance Co., CIT #20-03628).

The case involves 10 entries of fresh garlic from China -- under a continuous bond posted by Aegis -- that were deemed liquidated in 2006 (see 2104260076). Aegis was then hit with a bill for $50,000 in unpaid duties in 2014 -- eight years after liquidation and beyond the six-year statute of limitations for the duty's collection, Aegis and the coalition argue. CBP said a customs bond is a contract, so the agency can sue to enforce the terms of the contract when the terms of the bond are breached, which happened when CBP made a demand for payment from Aegis and the company did not pay within the time required by law.

This line of argument would lead to sureties being on the hook for an indefinite period of time -- seemingly until CBP decides to issue the bill, the coalition argues. "If we accept CBP’s current position that the Government can take no action for unlimited years after liquidation (when its right of action FIRST accrued), and then issue a bill for duties, and use that bill to assert its rights under a bond, then the statute of limitations provision of Section § 2415(a) would be meaningless," the coalition said. Further, CBP's argument goes against the original intent of the law, the amicus brief said.

Beyond the legal implications of CBP's action, the move would bring disastrous consequences on the surety industry, the coalition argued. Since Customs and the surety industry rely on each other for "predictable behavior" to ensure a functioning bond payment program, giving CBP the power to write bills whenever it would like would upend that, the brief said. "During those eight years, without knowing of its exposure, the surety will make decisions with regard to the bond principal, as whether to write new bonds each year, to release or require additional security or collateral from the principal, to exercise its subrogation rights, to project sufficient cash reserves to cover its exposure and comply with insurance laws, and to further insure itself against potential underwriting losses," the coalition said. The amicus brief mirrors a similar one the coalition is attempting to file in another case challenging unpaid antidumping duties, in that case 11 years post-liquidation (see 2105190051).