CIT Says Surety Liable for Unpaid AD Duties Despite Errors on Bonds Submitted to CBP
A surety is on the hook for $2.2 million in uncollected duties even though the underlying bonds had missing information and errors, the Court of International Trade said in a decision issued Aug. 10. Hartford Fire Insurance argued the bonds violated customs regulations and were not enforceable contracts, but the court found those errors didn’t invalidate them, especially given that Hartford accepted premiums and submitted the bonds to CBP.
Sign up for a free preview to unlock the rest of this article
If your job depends on informed compliance, you need International Trade Today. Delivered every business day and available any time online, only International Trade Today helps you stay current on the increasingly complex international trade regulatory environment.
The test case involved 65 single entry bonds covering entries subject to antidumping duties that went unpaid by the relevant importers. Hartford’s general agent discovered patterns of specific errors by the customs brokers completing the bonds, and on occasion notified Hartford’s account representative, who told the agent that “it was not his responsibility to inform Customs of errors on bonds that the agency had accepted,” according to CIT. Hartford “billed premium on such bonds even if a pattern of error common to bonds issued by a given customs broker were noticed,” CIT said.
After paying the $2.2 million owed on the bonds and filing protests that CBP denied, Hartford filed a series of court cases challenging the bonds’ validity and CBP’s ability to collect. It said the bonds were invalid because Part 113 of the customs regulations requires that bonds submitted to CBP via CBP Form 301 “shall” include certain information, including dates and signatures, that was missing on the bonds issued by Hartford. It also said that those omissions also meant that the bonds were not enforceable contracts, and CBP’s acceptance of the purportedly invalid bonds harmed Hartford because the surety would not be able to collect from the bonded importers.
CIT found the bonds’ failure to adhere to regulatory requirements did not render them invalid. Those regulations in Part 113 are directions to sureties on how bonds should be filed, not mandates to CBP. Importantly, the regulations don’t include “consequential language” explaining the repercussions if CBP accepts a bond that doesn’t include the required information.
The court also held that the bonds were enforceable contracts, because the information missing on the contracts could be gleaned from supporting documentation. Hartford’s intent to enter into the contracts was clear, given that it “indisputably accepted premium on each bond, the billing for which required review of copies of the bonds” by its general agent. Even though some bonds lacked Hartford’s signature, “a surety that bills premium signals that it is the surety on the instrument in question,” CIT said. And even if CBP’s acceptance of those bonds caused it harm, “the court finds that Hartford consented to that act and thus waived its suretyship impairment claim in the case of each [bond],” it said.
(Hartford Fire Ins. Co. v. U.S., Slip Op. 17-103, CIT # 09-00122, dated 08/10/17, Judge Katzmann)
(Attorneys: Frederic Van Arnam, Jr., of Barnes Richardson for plaintiff Hartford Fire Insurance Company; Edward Kenny for defendant U.S. government)