Surety Co. Says It Can't Prove Prejudice Over Delayed Action Seeking Late Collected AD Duties
The U.S.'s "unreasonable delay" in asserting claims seeking to collect antiduming duties on entries of canned mushrooms brought in between 2000 and 2001 warrants dismissal of its case at the Court of International Trade seeking the duties, surety company American Home Assurance Co. (AHAC) argued in an Aug. 1 reply brief. Responding to the court's request for more briefing over AHAC's affirmative defense and claims of prejudice, the surety company said that it has not been able to actually provide significant evidence of actual harm "despite best efforts," but that the case should be decided on statute of limitations grounds (United States v. American Home Assurance Company, CIT #20-00175).
In AHAC's case, two importers brought in canned mushrooms from China at the turn of the century. DOJ is seeking to recover a customs bond for unpaid AD duties on the mushrooms, arguing that sureties have a unique liability to pay the unpaid duties. To establish that the statute of limitations hasn't run out on collecting payments on a decade-plus-old bill, the government has argued that its issuance of a bill to the surety constitutes a reliquidation of the entries, allowing it to collect duties from the sureties at a much later date than the date of liquidation (see 2105170036).
The government is making a nearly identical argument in the case United States v. Aegis Security Insurance Company, as it's seeking to untether the six-year statute of limitations for customs bonds from the date an entry is liquidated. Aegis has argued that doing so would undermine the entire business model of sureties (see 2109210086). In the case, AHAC claims that the Aegis case will resolve the questions of whether the government's claim for the AD duties is time barred by the six-year statute of limitations and whether "prejudice required for the laches defense may be presumed as a matter of law where there is unreasonable delay in issuing a demand against a customs bond" (see 2111290045).
On the second question of the case, CIT has ordered the parties to conduct discovery to find if Aegis suffered actual harm as a result of the government's "extensive delay" in issuing the bills for the AD duties after the entries were liquidated. Following discovery, AHAC said it cannot prove actual harm was incurred for two reasons: AHAC shut down its customs bond program where the bonds in question were issued "almost immediately after it began," and the company's ability to gather records relating to the claim had been compromised due to the unreasonable delay in asserting the claims.
The customs recordkeeping statute says importers and brokers are only required to keep records for five years after the date of entry. Also, sureties have record retention policies which limit the amount of time records are kept, making discovery impossible in this instance. "Customs’ unexcused delay of over ten years in issuing its demand on AHAC was both unreasonable and prejudicial," the brief said. "If this demand is not dismissed by the Court on the grounds that it is time-barred under the Statute of Limitations or the principals of res judicata, it should be dismissed as a matter of law under the doctrine of laches."
AHAC wrapped up the brief by arguing that "the Government is attempting to manipulate a statute of limitations for its own benefit." The deemed liquidation rule was passed to "achieve finality" so that importers and sureties would not be saddled with unexpected claims down the road. "Congress plainly intended to limit Customs’ ability to collect unpaid duties from sureties when it enacted the six-year statute of limitations in 28 U.S.C. § 2415(a)," the brief said. "If the Court were to adopt the Government’s position that it can get around both statutory provisions by unilaterally delaying making a demand in perpetuity and allow this new position to be applied retroactively to bonds issued decades ago, AHAC and other sureties would suffer significant harm."