CIT Decision Finding Statute of Limitations on Customs Bond Collections Was Faulty, DOJ Says

The Court of International Trade should decline to follow another recent opinion regarding the statute of limitations on bond collection, due to "significant flaws" in its reasoning, DOJ said in a Sept. 25 reply at the Court of International Trade. That opinion in U.S. v. American Home Assurance Co. found that the six-year statute of limitations on customs bond collections ran from liquidation rather than the issuance of a bill (see 2308220054) (U.S. v. Aegis Security Insurance, CIT # 20-03628).

The AHAC opinion "parse[d] section 1505(b) in such a fashion as to misapprehend its plain meaning," DOJ said. The decision doesn't support the argument that no statute requires a bill to be a pre-condition to the government’s right to file a collection action, DOJ said. Instead, the statute, 19 U.S.C. § 1505(b), by its plain language, provides that payment of outstanding duties is not "due" until after a bill has been issued.

The August AHAC opinion contained faulty logic by assuming that debts are created at the time of liquidation, DOJ said. At that time, the amount owed does not "remain unpaid," as the CIT found, because no bill has been issued. The statute sets the due date for payment explicitly "30 days after issuance of the bill for such payment," DOJ said.

The AHAC decision incorrectly eliminated the demand requirement contained in the statute and described the term “bill” as providing notice to the importer, DOJ said. While a bill may serve that function, its "fundamental purpose" under section 1505(b) is to demand payment so that CBP can legally collect the outstanding amount, DOJ said.

The decision also improperly removed the demand requirement contained within the bond, DOJ said. The bond terms required that "a demand for payment ... be made, and should not be ignored," it said. Both the importer as principal and the surety agreed to all charges imposed on entries secured by the bond, DOJ argued. The terms of the contract, agreed to by both the importer and the surety was to pay "as demanded by CBP" and "CBP was required by contract to make a demand on each of these parties."

The AHAC opinion’s position that joint and several parallel liability could have relieved CBP of making a demand for payment on the surety "is not supported by section 1505(b), the general statutory scheme, or the terms of the bond contract," DOJ said. The opinion conflated the concepts of liability with that of a cause of action. The government's cause of action came from the breach of the bond agreement by the surety, which couldn't have occurred until CBP made a demand for payment, DOJ said.