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Exporter Not Entitled to Bonding Arrangement It Has Previously Violated, US Tells CIT

CBP need not allow exporter Oman Fasteners to continue to post bond instead of paying Section 232 steel and aluminum duties given the exporter's "longstanding history" of failing to honor the bonding arrangement, the U.S. said in a Sept. 28 brief at the Court of International Trade. Replying to Oman Fasteners' motion to compel the U.S. to honor a CIT order, the government argued that the plaintiff's claims are based on an "incomplete telling of the facts," and that Oman Fasteners is not entitled to the privilege of bonding, especially when it has violated the bonding arrangement via under-bonding (Oman Fasteners v. United States, CIT #20-00037).

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In its emergency motion to compel, Oman Fasteners said it has complied with the order but that the U.S. has not (see 2209210071). CBP allegedly has refused to agree to future bonding and honor the plaintiff's current customs bond after causing the exporter to increase that bond. In its reply, the U.S. said that bonding is a "unique privilege," and that the arrangement struck between the U.S. and Oman Fasteners "has not worked." The exporter has routinely exceeded its bonding limits and failed to replenish its bonds, in light of commitments made to the government to do so. "The consequence of that neglect has been enormous," the brief said.

As a result, the government said that it is under no obligation to allow Oman Fasteners to continue to post bond. After the U.S. found that the exporter underestimated the amount of bonding needed to secure the relevant entries, CBP had Oman Fasteners promise it would monitor its imports and forgone duty deposits and regularly terminate and replace the bonds once the secured amounts under the bonds faced exhaustion. Two and a half years later, the U.S. said it has receipts and that the data shows the arrangement "will not work." The U.S. said the company will not correct the lack of duties that it owes the government.

"At minimum, these circumstances justify CBP’s refusal to continue a bonding arrangement with Oman Fasteners that has failed," the brief said. "That Oman Fasteners would bring a motion, accusing CBP of malfeasance given its present posture, is inexplicable. The motion itself is meritless. Oman Fasteners has no right to claim that it should be entitled to revive a bonding arrangement when it has persistently under-bonded relative to its obligation." As for the court's order, the U.S. said Oman Fasteners cannot "trivialize" the section of the order that says Oman Fasteners can resume bonding "after reaching agreement with defenders on the resumption of bonding to secure the protection of the revenue for potential Section 232 duty liability."

Despite its issues with Oman Fasteners' bonding compliance, CBP agreed to partially allow limited bonding up to a certain amount, given a mistake made by the agency. However, the government should not be obligated to accept bonding for a mistake borne by Oman Fasteners, the brief said. In August, CBP "mistakenly" agreed to let Oman Fasteners post a bond to resume bonding in lieu of paying Section 232 deposits. Acknowledging the mistake, CBP asked the plaintiff if the bond was reversible. Based on a "misunderstanding," Oman Fasteners' surety retracted the prior bond and remitted new paperwork for a new bond without confirming the arrangement with CBP.

Given this, CBP said it is willing to bear responsibility for its mistake, though it will not for Oman Fastener's. "Oman Fasteners cannot have it both ways," the brief said. "It cannot acknowledge that its surety did something it should not have done, and then attempt to foist responsibility for that mistake elsewhere. ... CBP should not be forced to agree to a bond amount that it (undisputably) never agreed upon.

"The situation is unfortunate, but it is not complicated. Oman Fasteners has not honored its bonding arrangement with CBP, and it cannot demand a continuation of that arrangement in light of its past, and still uncorrected, conduct."