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HQ 115777




August 26, 2002

BON-2-RR:IT:EC 115777 GEV

CATEGORY: BONDS

Jeff Kranig
Counsel – Customs Bonds & Commercial Surety XL Specialty Insurance Company
20 N. Martingale Road
Suite 200
Schaumburg, Illinois 60173-2415

RE: Bonds; Change in State of Incorporation; 19 U.S.C. § 1623; 19 CFR § 113.37

Dear Mr. Kranig:

This is in response to your letter dated August 19, 2002, requesting Customs opinion regarding the acceptance of your company’s customs bonds under the circumstances described below.

FACTS:

XL Specialty Insurance Company (“XL”) is in the process of changing its state of incorporation from Illinois to Delaware. After the change occurs, XL will eventually print new bond forms that identify Delaware as its state of incorporation. Until then, the company’s attorneys-in-fact will continue to file bonds that identify Illinois as the state of incorporation. There is no other corporate change involved at this time (e.g., merger, dissolution, or asset sale) other than the changing of the state of incorporation.

ISSUE:

Whether, after a change in XL’s state of incorporation from Illinois to Delaware, it may continue to file Customs bonds identifying Illinois as its state of incorporation until such time as it begins to file Customs bonds that identify Delaware as its state of incorporation.

LAW AND ANALYSIS:

Title 19, United States Code, § 1623 sets forth the legal authority for Customs to promulgate regulations pertaining to the issuance and administration of bonds. Those regulations are set forth in Part 113, Customs Regulations (19 CFR Part 113). With respect to corporate sureties, we note that § 113.37 provides, in pertinent part, as follows:

(b) Name of corporation on the bond. The name of a corporation executing a Customs bond, as a surety, may be printed or placed thereon by means of a rubber stamp or otherwise, followed by the written signature of that authorized officer or attorney.

(e) Signatures and seal of the corporation on the bond.

A bond executed by a corporate surety shall be signed
by an authorized officer or attorney of the corporation and the corporate seal shall be affixed immediately adjoining the signature of the person executing the bond, as provided for in § 113.25.

Section 113.25, cited within § 113.37(e), provides in part that, “the corporate seal shall be affixed close to the signatures of persons signing on behalf of the corporation.”

With respect to the proposal under consideration, it is readily apparent that XL’s filing of Customs bonds, with the requisite corporate seal affixed thereto reflecting XL’s incorrect state of incorporation, contra-venes the proper execution of such instruments which “includes performance of all acts necessary to render [the] instrument complete and of every act required to give [the] instrument validity or to carry it into effect.” (Emphasis added) Northwest Steel Rolling Mills v. Com-missioner of Internal Revenue, 110 F.2d 286, 290 (1940). Further in regard the execution of such bonds, it must be noted that, “A seal is a symbol of the genuiness of the bond and imports that the instrument was executed with deliberation.” (Emphasis added) Stearns Law of Suretyship, 5th Ed. at p. 250. XL bonds filed with a corporate seal showing Illinois rather than Delaware as the company’s state of incorporation, after the latter has effectively replaced the former, evidence execution lacking validity, genuiness and deliberation.

Accordingly, we disagree with your opinion that XL’s proposal as described above affects neither the liability of the bond nor the legal liability of the surety. It is our position that the filing of bonds with XL’s incorrect state of incorporation reflected thereon contravenes the above-referenced legal authority.

HOLDING:

After a change in XL’s state of incorporation from Illinois to Delaware, it may not continue to file Customs bonds identifying Illinois as its state of incorporation until such time as it begins to file Customs bonds that identify Delaware as its state of incorporation.

Sincerely,

Acting Chief

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