CIT Says 6-Year Statute of Limitations on Customs Bond Collections Runs From Liquidation

CIT Judge Richard Eaton ruled that the government's decade of inaction before attempting to collect nearly $400,000 in unpaid duties from the surety American Home Assurance Company meant that it was barred from alleging AHAC was in breach of the eight single transaction bonds.

CBP originally asked the court to award it unpaid duties in the amount of $379,009.00 plus interest for bonds from AHAC securing the payment of antidumping duties owed on entries of preserved mushrooms from China. U.S. Importers Panjee and Pan Pacific imported the mushrooms between 2001 and 2002 and obtained eight single transaction bonds instead of making cash deposits. The entries were liquidated by operation of law between 2003 and 2004. Over the next decade, CBP took no action to collect the debts owed, the opinion said. CBP sent no bill to, nor initiated any lawsuit against either importer. Neither did CBP take any steps to obtain payment by calling on AHAC’s bonds, CIT said.

Finally, in 2014, CBP sent eight bills to Panjee and Pan Pacific. The agency then, in 2015 and 2016, issued notices to AHAC for the outstanding bills with formal demands on surety for delinquent payments, which AHAC did not pay. CBP never offered any reason for its failure to take action to collect on those debts, Eaton said.

The statute of limitations on the bonds "began to run at liquidation when all of the events necessary to bring suit for the duties owed had occurred," not when CBP demanded payment, Eaton said. The suit is time-barred simply because it was commenced more than 10 years after the statute of limitations ran. AHAC’s contractual obligation was to be "jointly and severally liable for payment of the debt," Eaton said. CBP's cause of action against AHAC accrued at the same moment as its cause of action against Panjee and Pan Pacific.

Even if the court had agreed with CBP's claim that its action for breach of contract accrued 30 days after AHAC failed to pay, the claims would still be time-barred, Eaton said. The courts have long disliked rewarding a party for taking advantage of a delay regarding statute of limitations cases when the delay is caused by that party and when to issue a demand for payment was "solely within the control of CBP," Eaton said.

Eaton quoted the U.S. Supreme Court's decision in U.S. v. Commodities Exp. Co., when it said that "the Government may not indefinitely postpone the running of the statute merely by taking the steps any prudent litigant would take before bringing a lawsuit." Eaton reflected that sentiment in his opinion, saying that, "Like any prudent litigant, CBP ... must act reasonably in pursuing its claims under a bond."

AHAC argued that CBP's claims were also barred because the court had ruled in AHAC's favor in a similar 2016 case. Eaton disagreed, saying that while this case involves the same parties and the earlier case dismissed some of CBP’s claims, the claims raised in the current action are not based on the same set of “transactional facts” as those in the prior case.

"AHAC is pleased that the court has confirmed that CBP does not have an open-ended timeline when it comes to issuing and collecting its bills from a customs surety, said Taylor Pillsbury, lawyer for AHAC, in an email. "It is hoped that this decision will lead to a more streamlined approach regarding CBP bill issuance, and perhaps fewer delays related to the protest decision making process," Pillsbury said.

Neither DOJ nor CBP responded to requests for comment.

(U.S. v. American Home Assurance Co., Slip Op. 23-118, CIT # 20-00175, dated 08/18/23; Judge: Richard Eaton; Attorneys: Taylor Pillsbury of Meeks, Sheppard for defendant American Home Assurance Company; Peter Mancuso for plaintiff U.S. government)