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US Asks for Rehearing of CIT Decision Finding US Waited Too Long to Demand Payment From Surety

The U.S. on April 17 filed for partial reconsideration of a Court of International Trade judgment that held the government waited too long to make a demand for payment under a customs bond, violating an "implied contractual term." The government said that it couldn't have "anticipated raising or discussing the issue" of an "implied contractual term of a reasonable time for demand," so it seeks to "do so here" (United States v. Aegis Security Insurance Co., CIT # 20-03628).

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The U.S. said that the court should instead find that the demand for the bond came from 19 U.S.C. 1505(b), which doesn't include a "deadline or a reasonableness standard for issuing a demand for payment." This provision of the law says that the U.S. "shall collect any increased or additional duties and fees due" and that the duties and fees found to be due on liquidation or reliquidation are due "30 days after issuance of the bill for such payment."

The government argued that the use of the word "demand" in surety company Aegis Security Insurance Co.'s bond made the language of this statute and the accompanying federal regulation terms of the bond since "they created an obligation of the Government to the surety to make a demand for payment. A demand affects Aegis’s rights because it triggers the clock for a surety to file a protest." As terms of the bond, the statute and regulation don't require that the demand "be made within a certain time or reasonable time."

As a result, it was "error to read an implied reasonable time requirement into the surety bond when the statutory and regulatory scheme did not create such an obligation," the brief said.

The case centers on a bond issued by Aegis for exporter Linyi Sanshan Import & Export Co. in 2002, under which Linyi Sanshan entered garlic from China, then disappeared before paying the bill. The entries liquidated in 2006 and sat untouched until CBP made a demand for payment from the importer in 2014, then Aegis in 2015.

Judge Stephen Vaden said that while the six-year statute of limitations on customs bonds runs from the date CBP issues a bill and not the date of liquidation, CBP violated the "implied contractual term" of reasonableness in waiting so long to issue the bill (see 2403180059).

In vying for the court to reconsider its decision, the U.S. said that even if there was a breach of this term, it was "not material and does not warrant discharging Aegis's obligation to pay under its bond." The government said this was the case since the "essence of the bond contract is to secure the collection of duties for the public fisc" and Aegis failed "to articulate any harm arising from the timing of the demand." This doesn't "warrant discharging Aegis from its obligation to pay under its bond."

The government said the delay in making the demand wasn't "so substantial that it defeated the purpose of the bond; nor did it prevent Aegis from being able to protest that demand." It also didn't interfere with the surety's "receipt of premium for issuing the bond," nor did it "impair Aegis's suretyship," as the court itself found.