Surety Says Statute of Limitations to Collect on Customs Bond Runs From Liquidation
Surety company Aegis Security Insurance moved the Court of International Trade on June 30 to dismiss the government's case looking to collect duties that have gone unpaid on entries of garlic imported in 2002. Aegis said the six-year statute of limitations to file such a claim runs from the date of liquidation of the underlying entries, arguing that two CIT judges have held as much and that the collections statute, 19 U.S.C. Section 1505, compels such a finding (United States v. Aegis Security Insurance, CIT # 25-00051).
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At issue are unpaid antidumping duties, totaling $1,936,800, on 28 garlic entries from China, which were brought into the U.S. by importer DMT International in 2002. DMT didn't pay cash deposits for the entries, but instead secured its AD liability through Aegis under the Commerce Department's "then-applicable new shipper bond program." At the time, Congress let CBP accept bonds in lieu of cash deposits to secure AD liability for new shippers of goods covered by an antidumping duty or countervailing duty order.
Liquidation of the duties was suspended, though the suspension was lifted in December 2004. As a result, the entries were deemed liquidated in June 2005. The U.S. then made its first demand for payment for the unpaid duties to Aegis in October 2019, over 14 years after the entries were deemed liquidated.
Aegis moved to dismiss the case on the grounds that the U.S. brought the case too late, since the six-year statute of limitations set in 28 U.S.C. Section 2415(a) lapsed. This statute says that every action brought by the U.S. for money damages which is "founded upon any contract express or implied in law or fact, shall be barred unless the complaint is filed within six years after the right of action accrues."
And as two CIT judges have already held, the right of action accrues from the date of liquidation, not the date the U.S. demands payment, the surety argued. "So unremarkable was the proposition that the statute of limitations began to run at liquidation, the government itself until recently agreed," Aegis said.
The surety added that Section 1505 confirms that the statute of limitations against a customs surety to collect on a customs bond "commences upon deemed liquidation." Section 1505(b), which concerns the collection of duties, fees and interest due upon liquidation, says duty liability is "determined on a liquidation or reliquidation" and that duties are "determined to be due upon liquidation." The statute also says refunds shall be paid within 30 days of liquidation.
"In all instances, the event of liquidation or reliquidation, not a demand by Customs, establishes the importer’s and surety’s liability for duties (and Customs’ liability for refunds)," the brief said. "Nothing in the language of Section 1505(b) changes the time of accrual for purposes of the statute of limitations." The words "breach" and "demand," which are the events the U.S. identifies as the start of the statute of limitations, don't even appear in this statue, the brief said.
Aegis added that Congress used the term "shall" in Section 1505(b) "solely in connection with Customs' duty to collect interest and its duty to refund excess moneys deposited 'as determined on a liquidation or reliquidation.'" The use of "shall" isn't used in connection with CBP's issuance of a bill and "nothing in Section 1505(b) even requires Customs to send a bill," the brief said. While billing may be a "self-imposed prerequisite to collecting interest on any duties determined to be due on liquidation, no statute or regulation holds that billing is a prerequisite to filing a suit for collection of the actual duties determined to be due on liquidation," Aegis argued.
Amendments to the statute, passed in 1984 and 1993, were passed for "no purpose other than to set the moment in time when duties became delinquent for the purpose of calculating the amount of remedial interest due under Section 1505(c)," Aegis added.