Surety Associations Can't Comment on Customs Bond Limitations Period Due to History, Brief Says

A group of surety associations should not be able to argue against when the six-year limitations period begins for a customs bond due to their role in "abetting the new shipper bond disaster," a group of domestic agricultural goods producers said in a July 8 amicus brief in the Court of International Trade. The brief was filed to oppose the surety associations' motion to intervene in the lawsuit (United States v. American Home Assurance Company, CIT #20-00175).

The Department of Justice, now backed by the domestic producers, argues that the surety associations' filing was untimely and that its public policy arguments raised in its proposed brief do not address the facts of the case. The producers' brief was filed on behalf of Adee Honey Farms, American Honey Producers Association, Bayou Land Seafood, Catahoula Crawfish Inc., Christopher Ranch, L.K. Bowman Company, Sioux Honey Association and The Garlic Company.

The lawsuit was brought by the government to collect antidumping duties on imports of canned mushrooms from China brought in between 2001 and 2002 from the surety for the duties, American Home Assurance Company. The government argues that sureties have a unique liability to pay the unpaid duties and that the statute of limitations for the duties runs from when CBP makes a demand for payment and not when the entries are liquidated. AHAC contends that "it defies logic that bills issued ten years later for the same set of entries should be more recoverable than the bills issued in a far shorter time frame" (see 2105170036).

AHAC wants the court to find that the government filed its complaint after the six-year statute of limitations. The surety's amicus backs this argument, also contending that there exist serious public policy concerns if the court is to rule in the government's favor. Changing the statue of limitations poses a serious risk to the business model of sureties, their amicus brief said.

"The applicable law is clear that Customs’ cause of action against a surety on a customs bond does not accrue -- and the six-year limitations period does not begin to run -- until Customs makes a demand for payment," the producers said. "Further, the Surety Amici’s appeal to public policy as a basis for keying accrual to the date of liquidation is undermined by the surety industry’s role in the new shipper bond disaster, which contributed significantly to Customs’ difficulties in stopping the flow of unfairly dumped Chinese merchandise and collecting AD duties."

"The Surety Amici’s public policy arguments ring hollow considering that the surety industry’s irresponsible conduct caused a colossal disruption in Customs’ enforcement of the AD orders on the agricultural imports from China covered by the Four Orders, by allowing huge volumes of those goods to flood the U.S. market from 1998 through 2006," the brief said.

"In sum, over this period, eight major bond sureties issued about 8,000 [single entry bonds] (referred to as 'new shipper' bonds) on 8,000 entries of imports covered by the Four Orders, with a total face value of $627 million (and an average face value of $78,000), to secure the ultimate payment of the same amount AD duties assessed on those entries. The sureties issued those bonds on behalf of 'shell' companies that posed as legitimate U.S. importers, without performing the standard underwriting required to confirm that those companies were creditworthy, or obtaining full collateral against each bond’s value as was then, and still is generally, required for SEBs, which have long been considered high-risk credit instruments," the domestic producers said. The shell companies proceeded to dump large quantities of goods into the U.S., then disappear when assessed AD duties, the brief said. The sureties would go on to contest CBP's attempts to demand payment on the bonds.

The surety associations' "public policy arguments do not square with the surety industry’s conduct in undermining Customs’ collection of AD/CV duties and enforcement of the AD/CV laws through its unrestrained issuance of new shipper bonds to high-risk importers and refusal to honor its payment obligations on those bonds," the brief said.