Right to Collect on a Customs Bond Runs From When CBP Demands Payment, US Tells Trade Court

The government's right to collect on a bond against a surety doesn't accrue until the surety breaches the bond, the Department of Justice said in a Feb. 28 motion for judgment in a case seeking to collect on a bond that covers imports entered during 2002-2006. Since the terms of the bond say that the surety must pay "as demanded by CBP," the statute of limitations on which to file suit to collect payment runs from when CBP demands payment, the brief said (United States v. Aegis Security Insurance Co., CIT #20-03628).

DOJ filed the case at the Court of International Trade to collect on 10 entries subject to antidumping duties on garlic from China that liquidated in 2006. However, CBP did not bill the surety, Aegis Security Insurance Company, until 2014, despite what Aegis argues is 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 (see 2109210086).

The U.S., filing its motion for judgment in the case, argued that it timely commenced the action seeking the duties. As established by the U.S. Court of Appeals for the Federal Circuit, the date of accrual runs from when a bond is breached. This leaves the question: When was the bond breached? In this case, a condition of the bond said that the principal and surety agree to pay "as demanded by CBP," DOJ said. "Thus, the terms of the bond at issue were not breached by Aegis until CBP made a demand for payment against Aegis and Aegis failed to pay the duties within the time required by law," the brief said.

"This legal framework demonstrates the timeliness of this action. CBP first billed the principal, Linyi, on October 3, 2014. When Linyi failed to pay, CBP then made its first demand for payment against Aegis on January 7, 2015. When the bill against Aegis became delinquent on February 7, 2015 (i.e., 30 days after the demand), Aegis breached the terms of the bond. We commenced this action on October 2, 2020, which was within six years of February 7, 2015. Therefore, this action is timely because it was commenced within six years of the breach," the brief said.