Aegis Says CBP's Late Collection on Bond Upends Sureties' Finances, 40 Years of Practice

Untethering the six-year statute of limitations for customs bonds from the date an entry is liquidated would impair the ability of customs sureties to function, and CBP’s attempt to collect on a bond issued by Aegis Security Insurance eight years after liquidation is an unreasonable delay that would cause real harm to the surety, Aegis said in a brief filed Sept. 16 at the Court of International Trade.

Aegis contests CBP’s attempt to collect on 10 entries subject to AD duties on garlic from China that liquidated in 2006. CBP did not bill Aegis until 2014, despite the six-year statute of limitations set by 28 USC 2415(a). CBP argues the six-year period runs from CBP’s demand for payment from a surety, but Aegis says this upends the surety industry’s understanding that it runs from the date of liquidation, and effectively removes any finality as to when CBP can collect on a customs bond.

Aegis has “relied upon the six-year statute of limitations that started running at liquidation -- or a reasonable period of time after liquidation -- as the outside limit in the management of its risk,” it said. “The standard Customs surety industry practice was to manage risk by reliance on the applicable Customs statutes, in this case the appraisement statute (19 U.S.C. § 1504) and the collection statute (19 U.S.C. § 1505) in conjunction with the six-year statute of limitations (28 U.S.C. § 2415(a)).”

Even if the trade court finds CBP’s interpretation correct, Aegis asserts two affirmative defenses -- impairment of suretyship and laches -- in its motion for summary judgment.

“Customs’ delay jeopardized Defendant’s rights under its contractual relationships with the bond principal and importer of record, Linyi, and with Defendant’s reinsurer; impeded Defendant’s ability to establish cash reserves and set premiums, and impaired Defendant’s reporting and recordkeeping obligations with state and Federal agencies,” Aegis said. Both the importer and Aegis’ reinsurer are now insolvent, meaning it cannot recover any of the bond amount because of CBP’s delay, it said.

CBP’s “approach wreaks havoc on the policies and procedures that the industry has had in place for more than four decades,” the surety said.

CBP’s bond collection attempt was also unreasonably late, and was entirely the fault of the agency, Aegis said. And Aegis was directly harmed by the late collection bid, not only because of its now inability to get reimbursed, but also because additional interest has accrued solely because CBP waited to collect on the bond, Aegis said.

“Customs’ interpretation of the statute in this case would be absurd. Congress plainly intended to limit Customs’ ability to collect unpaid duties from sureties when it enacted the six-year statute of limitations … ,” APHIS said. “If the Court were to adopt Customs’ position that it can get around both statutory provisions by delaying making a demand in perpetuity, effectively vitiating any and all limits on its ability to demand payment from sureties -- indeed to treat the surety just like the importer of record for which no statute of limitations applies -- would upend the statutory scheme, Congress’s intent as expressed in such scheme, and lead to profoundly absurd results. The Court should avoid interpreting the statute when it leads to an absurd result.”