Surety Company Pushes Back Again Against US Defense of 'Indefinite' CBP Authority to Collect Duties
In a sur-reply supporting its motion for judgment (see 2410220026), surety company Aegis Security Insurance said it was responding to several new arguments the U.S. raised in a reply defending CBP’s 2016 attempt to collect unpaid duties that had been outstanding since 2002 (see 2503210069) (United States v. Aegis Security Insurance, CIT # 22-00327).
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The government’s reply argued that CBP’s civil penalty statute, 19 U.S.C. 1592, creates an analogous ability to the agency’s authority to collect unpaid duties. That law, which allows CBP to begin a collection action after discovering a violation resulting in unpaid duties, means CBP could conceivably make such a discovery at any point in the future, the U.S. argued.
But that “discovery rule” only applies when duties have gone unpaid due to fraud, not negligence or gross negligence, Aegis argued.
“[T]ying the commencement of a claim for fraud to the date of discovery of the fraud makes sense because the defendant is in sole possession of the facts needed for the United States to commence its action, but fraudulently concealed them from Customs,” it said. “Only upon discovery of the fraud does the United States have what it needs to state a claim.”
The U.S. also claimed that CBP had acted reasonably by sending Aegis a collection notice as soon as it realized in 2016 that it had removed the suspension of liquidation of the relevant entry, but never actually liquidated it because it had been misfiled.
But this was “flatly” contradicted by the government’s own witness testimony, Aegis claimed. That witness said the port of entry in 2009 had run “a list of all entries that needed to be liquidated as a result of the lifting of suspension.” The report included the relevant entry, Aegis said. That meant the agency had known about the unpaid duties since 2009, it argued.
And the U.S. finally said that the parties had reasonable notice of duty collection despite the delay because collection “could theoretically occur 100 years after liquidation without any statute-of-limitations impediment.” It argued that the delay had actually benefited Aegis in the meantime because Aegis didn’t face accruing interest.
Aegis might still have to pay interest, however, the surety company argued.
“On the law, interest may be capped at the bond amount under interest under 28 U.S.C. 1505, but it is not capped at the bond amount under 19 U.S.C. 580 or 28 U.S.C. 1961,” it said. “As made clear throughout this proceeding, the United States’ theory, if adopted, would allow Customs to neglect issuing bills and still put sureties on the hook for millions of dollars in interest without recourse.”
And it disagreed that surety companies and importers are on notice that CBP could, in theory, initiate duty collection “100 years after liquidation.” It said that “unrebutted record evidence” demonstrates that the industry expects liability to be tied to liquidation “as it had been for years.”
It said the U.S. was elevating protection of revenue “above all other purposes” of Aegis’ surety bond -- even though the bond also serves to foster “international commerce” and allow for the “immediate delivery” of imports into the country.