Jun 12th, 2024

Trade Update for Week of June 12, 2024


Slip Op. 24-63

Before the Court in United States of America v. Aegis Security Insurance Company, Court No. 1:20-cv-03628 (SAV), Slip Op. 24-63 (May 28, 2024) was a motion for reconsideration filed by the Government seeking to (1) reimagine the proceedings and its own actions before this Court and (2) raise arguments the Government did not previously make. The motion relates to an action where the United States sued Aegis to recover under a customs bond issued by Aegis to secure garlic entries by a Chinese company in January and February 2004, same which liquidated in November 2006. United States v. Aegis Security Insurance Co. (Aegis I), No. 1:20-cv-03628 (SAV) 2024 Ct. Intl. Trade LEXIS 33 (March 18, 2024).

The issue in case, as in the prior related decision, turns on deciding the limits on the Government’s time to make demand on a customs bond. The Court previously held that the Government breached an implied contractual duty in the bond to make demand within reasonable time and granted summary judgment to Aegis because the Government had not made a demand to Aegis for the outstanding duties until January 2015, more than eight years after the deemed liquidation.

An influential fact used by the Court in deciding the instant case was the development in a similar case, United States v. American Home Assurance Co., 653 F. Supp. 3d 1277 (2023), where the Court of International Trade granted summary judgment to a surety in similar circumstances as the defendant in this case. The Court in American Home Assurance found that the Government’s “suit was untimely based on its failure to act in a reasonable time.” Id. at 1295. Here, the parties disagreed over whether the eight-year delay between liquidation and demand was reasonable. The Government has argued that it did not unreasonably delay making demand.  Aegis  argued the delay was unreasonable, whereas the Government defended its position that that “the Court should look only at the portion of the delay attributable to Customs, not the portion attributable to the U.S. Department of Commerce (Commerce).” Slip Op. 24-63 at 5.

In Aegis I, Court held the Government’s delay in making demand was “unreasonable and … a breach of contract.” Id. In this case, the Government asked the Court to reconsider Aegis I arguing that (1) the implied reasonable time requirement is not “consistent with the statutory and regulatory scheme” and (2) that, even if it breached an implied term of the bond contract, the breach was not material and “does not warrant discharging Aegis’s obligation[s]” under the contract. Id. at 6 (capitalization altered).

In this case, Judge Vaden, writing for the Court of International Trade, denied the Government’s motion because it found it to be inappropriate under USCIT Rule 59 since these new arguments rest on an assumption that the Court disagreed with: that the Government “could not have anticipated raising” these arguments during the underlying proceedings. Id. at 4, 6. USCIT Rule 59 does not allow the losing party to relitigate its case by raising arguments it previously waived or forfeited.

To support its finding, the Court pointed to the fact that the Government was had notice of the final judgment entered in American Home Assurance, showing that the Government had awareness of the way the law operates in similar cases. Despite having had notice, the Court pointed to the fact that the Government failed to raise its two arguments in its previous action.  Furthermore, the Court noted that during oral argument, the Government conceded that the implied reasonable time requirement exists and applies in  this case. Moreover, during the third oral argument in the instant case, Counsel for the Government did not object to this characterization. Lastly, the Government did not dispute that the implied reasonableness contractual term applied to it. The Court concluded that the Government, being aware that the Court might decide this case by finding a breach of an implied contractual term requiring demand to be made within a reasonable time, strategically decided not to contest the existence of the implied contractual term or to argue for a materiality requirement. Thus, it denied the motion for reconsideration.