Statute of Limitations on Sureties Begins When Payment Isn't Forthcoming, DOJ Says

CBP's attempts to collect a 14-year-old bond for antidumping duties on Chinese garlic shouldn't be thrown out because a change in tactic by the government didn't fundamentally alter the responsibilities of the bond issuer, DOJ argued in an Aug. 10 reply at the Court of International Trade (U.S. v. Aegis Security Insurance, CIT # 20-03628).

The bond, issued by Aegis Security, covered $50,000 in antidumping duties on Chinese garlic. The government has continued to seek recovery since the principal, Linyi, failed to pay it in 2014. CBP demanded payment from Aegis in January 2015, and it became delinquent after 30 days. CBP has argued that Aegis breached the terms of the bond and that the six-year statute of limitations began when CBP issued the bill, rather than when the goods were liquidated, making the lawsuit timely filed (see 2210270054).

Aegis had argued in June that when CBP announced a policy change regarding when its cause of action occurred, that change "fundamentally altered the rights and responsibilities of all parties to the bond" (see 2306270032). DOJ said that it's merely "seeking to enforce its legal rights based on a legal theory different than those made in the past," and that the terms of the bond are unchanged since it was executed in 2002.

Aegis countered that the 2006 liquidation of the goods should have started the clock on the six-year statute of limitation, but DOJ argued that "CBP is still required both by the terms of the bond and by statute to make a demand for payment," although liquidation signals the final duty computation. The government pointed to U.S. Court of Appeals for the Federal Circuit precedent that says that sureties are generally “obligated to pay” only after receiving a demand for payment because “only from then can the United States lay claim to a loan to the surety.” Other appellate courts have held that demand for payment is a prerequisite to liability and the running of the statute of limitations.

Aegis' argument that all elements of the government’s cause of action were present at liquidation is incorrect because Congress "expressly stated" that duties aren't due until 30 days after issuance of a bill, DOJ said. "CBP can only begin the billing process" once liquidation has occurred but it must "issue a bill to the surety before the duties become due from the surety and this bill must go unpaid before all elements of the Government’s cause of action" are present, the agency said.

The government also noted that the terms of the bond itself state that payment is made "as demanded by CBP." Therefore, there was no breach of the bond terms until Aegis failed to pay within 30 days of CBP's demand in February 2015, DOJ said.