In a case successfully argued by Sandler, Travis & Rosenberg, the Court of International Trade ruled June 11 that U.S. Customs and Border Protection waited too long to try to recover on an import bond.
In this case CBP sought to recover $100,700 in unpaid antidumping duties and interest under a bond underwritten by a surety company. The bond covered a single entry of imported goods subject to an AD duty order that was deemed liquidated due to CBP’s failure to timely liquidate it. More than seven years passed after the deemed liquidation before CBP first billed the importer, with a second bill issued almost two years after that.
The CIT agreed with the surety that CBP breached the bond contract by failing to make its recovery demand within a reasonable time. CBP acknowledged that 19 CFR 113.62(a)(1)(ii), which was incorporated in the bond at issue, does not have an express limitation on the time for demand but said that bonds are governed by the implied duty of good faith and fair dealing inherent in every contract. “While there is no bright-line rule for what constitutes a reasonable time to make a demand,” the CIT said, CBP’s years-long delay in doing so here solely because it lost or misfiled the relevant documents “is both unreasonable and violates the duty of good faith and fair dealing.”
The CIT also rejected CBP’s argument that its right of action to collect on a bond accrues when the bond is breached and that this occurs only when CBP issues the demand (however long that may take) and the surety fails to pay. Instead, the court said, the statute of limitations runs from the date the entry is liquidated, which is when duty liability due is legally fixed.
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