Surety Opposes Collection of Duties on Years-Old Bond, Says US 'Must Be Stopped'

Surety firm Aegis Security Insurance Co. argued on Oct. 21 that the government's action seeking to collect unpaid duties on a Chinese honey entry imported in 2002 is barred by the statute of limitations or CBP's failure to issue the bill for the duties within a reasonable amount of time. Should either of these theories fall short, Aegis said it's entitled to judgment due to CBP's "inordinate and inexcusable delay in billing Aegis" and the fact that its reinsurer went insolvent, among other confounding factors, the company said (United States v. Aegis Security Insurance Co., CIT # 22-00327).

Aegis centered its motion for judgment at the Court of International Trade on two previous CIT decisions rejecting U.S. attempts to collect duties on years-old entries (see 2308220054) and 2403180059). In one case, U.S. v. American Home Assurance Co., the trade court said the statute of limitations for CBP to collect on customs bonds runs six years from the date of the underlying entry's liquidation. In another, which also involved Aegis, referred to by the company as Aegis I, CIT said that while the statute of limitations runs from the date CBP issues a bill, the agency violated the "implied contractual term" of reasonableness by waiting eight years to issue the bill.

AHAC was decided by Judge Richard Eaton, while Aegis' first suit was resolved by Judge Stephen Vaden. The present action is before Judge Jane Restani.

Presstek Wood Technologies imported the honey entry in 2002. The entry was deemed liquidated at a 183.8% AD rate, though CBP reliquidated the entry at a 101.48% AD rate in 2016. Presstek was sent a bill for $57,489.60, which it didn't pay. The bill became delinquent in November 2016, leading the agency to make its first payment demand to Aegis in February 2017.

The U.S. took to CIT to collect the duties from the surety, though Aegis is claiming that the statute of limitations has run on the single transaction bond. "Having struck out twice already, the United States steps to the plate for a third time on its discredited theories," the brief said. But as shown in AHAC and Aegis I, the U.S. case must falter since CBP "again failed to timely liquidate an entry, waited ten years after a deemed liquidation to send the surety a bill, and waited even longer to commence an action," Aegis said.

The surety faulted the U.S. for refusing to appeal either of the two prior cases to get a "definitive, binding ruling that its collection practices are illegal." Aegis said that, instead, the U.S. continues "to pursue meritless cases against sureties in this Court," forcing them to endure "unnecessary litigation expenses."

"The Government must be stopped," the surety pleaded. "Customs plainly has no internal procedure for restraining its own unreasonable conduct," but instead "blindly follows the mechanical rules of liquidation and collection without regard to whether those rules are reasonable." Aegis argued that it's "time for the Third Branch to act, establish the date of deemed liquidation as the date the statute of limitations begins to run against sureties" or find that CBP's demand here was unreasonable or impaired the company's suretyship status.

Aegis argued that the statute and "overwhelming weight of authority" clearly establishes the liquidation date as the date the statute of limitations starts. Judge Vaden in Aegis I based his decision on 19 U.S.C. Section 1505(b), which says the duties are due 30 days after the issuance of the bill. Believing Aegis I "to be incorrect," the surety said nothing in the language of Section 1505(b) "changes the time of accrual for purposes of the statute of limitations." The statue's plain language doesn't require a demand for payment before the cause of action accrues, adding that the term "shall" only refers to CBP's duty to collect interest and refund excess deposits "as determined on a liquidation or reliquidation."

The surety added that the court must read the assessment, liquidation and collection statutes within the structure of the statute as a whole. The only way to adequately read the statutory scheme is to have CBP's cause of action "accrue upon the event of liquidation," the brief said. Amendments to Section 504 of the Trade Act created a scheme to "protect importers and their sureties from undue delay in the liquidation of their entries by placing strict limits on the amount of time that Customs could take to liquidate an entry and subject importers and sureties to liability," the brief said.

Aegis also advanced the theory, spelled out in Aegis I, that CBP unreasonably waited too long to issue its payment demand. The surety said it didn't get a bill until nearly eight years after liquidation, which is a much longer interval than found in CBP's own policies and "almost twice as long as the six-year statute of limitations period some courts have found to define the outer bounds of reasonableness." The delay is "all the more egregious because there is no excuse for it," the brief said.

The surety lastly advanced claims that the payment demand impairs its status as a surety, arguing that CBP issued the bond under the "well settled understanding" the statute of limitations runs from liquidation. The agency also deprived the surety of recourse since its reinsurer went insolvent.