CBP's Policy Change on Bond Collection Can't Apply to 14-Year-Old Bond, Surety Argues

CBP's attempts to collect a 14-year-old bond for antidumping duties on Chinese garlic should be thrown out because the agency's collection policy change "fundamentally altered" the responsibilities of all parties to the bond, said surety Aegis Security Insurance in its June 26 brief at the Court of International Trade (U.S. v. Aegis Security Insurance, CIT # 20-03628).

Aegis is seeking the dismissal of the government's 2020 complaint, which sought to recover a $50,000 bond from Aegis after the principal, Linyi, failed to pay in 2014. CBP then demanded payment from Aegis in January 2015. That bill became delinquent after 30 days and CBP argued Aegis breached the terms of the bond.

CBP's bill to Aegis came long after what Aegis argued was the end of the six-year statute of limitations, which it says began upon liquidation of the entries in 2006. CBP argued that the six-year period runs from CBP’s demand for payment rather than from the date of liquidation. Aegis had argued that such an interpretation would effectively remove any finality as to when CBP can collect a customs bond (see 2211010037).

With the filing of this suit, Aegis said that CBP announced a policy change regarding when its cause of action accrued. That change, Aegis argued, "fundamentally altered the rights and responsibilities of all parties to the bond." The 1996 Restatement of Suretyship and Guaranty, a legal treatise, said that if CBP fundamentally alters the risks imposed on the surety by agreeing to modification of the duties that either amounts to a substituted contract or imposes risks on the surety fundamentally different from those imposed prior to modification, the surety is then discharged from any unperformed portion of the secondary obligation, Aegis said. CBP's policy change on payment altered Aegis' obligation because the company believed, based on years of CBP action, that the agency was well past its ability to collect on the bond, Aegis argued.

When CBP approved the subject bond, it did so "against a historical understanding that the six-year statute of limitations to collect duties against the surety commenced upon the liquidation of the entries." CBP's payment demand language has been incorporated into continuous importation bonds for 20-30 years, Aegis said. That language "has never been interpreted to mean that a demand by Customs is a necessary predicate to the accrual of the United States’ cause of action to collect duties."