Importer Security Filing Mitigation Guidelines
Cause & Effect
Introduction
Welcome, to the second issue of TradeMerit e-Newsletter. This educational series is being offered on the most talked about topic this year, the Importer Security Filing (ISF) "10+2" rule. Over the next few weeks we will thoroughly explain ISF as it relates to the interpretation of U.S. Customs and Border Protection (CBP) requirements, mitigation guidelines, trade impact and best practices. If you have any questions, please feel free to send them to us and we will respond and include the question in the next e-Newsletter.
This series of e-newsletters will be followed by a Webinar where the critical issues raised by your questions will also be addressed by industry experts.
We hope you enjoy the article(s).
Pending Mitigation Guidelines
What has led us up to this point was the issuance of the ISF "10+2" requirements as published as an interim final rule in the Federal Register, November 25, 2008. If you have not read last week’s newsletter whereby a full explanation of what ISF is, please do so and then return reading TradeMerit Vol.1, No.2.
What caught the eye of most were the absorbent importer penalty amounts for liquidated damages of $5,000 for each ISF Violation. These included for ISF's that are untimely, incomplete and/or inaccurate. The trade anxiously awaited for the importer mitigation guidelines to be published and on July 17, 2009 the guidelines were published in the CBP Bulletin (CBP Dec 09 26, pages 29-41).
The guideline addresses both vessel carrier and importer liabilities; in this issue we will only be discussing the importer’s portion.
Mitigation Guidelines Effective Date July 17, 2009
It is evident importers moving goods to the U.S. via vessel have a lot to do between now and January 26, 2010 when full enforcement of ISF regulation is scheduled to begin. It can be a bit overwhelming when companies begin the process to determine what they need to do as they prepare for ISF. But it’s also obvious that the high penalty costs associated with potential ISF non compliance can be so great as to hinder the company’s entire operation. It's during this time of flexible enforcement (January 26, 2009 thru January 26, 2010) companies need to be proactive in finding out everything they can, put in place the processes, procedures and measurements so they are prepared when enforced compliance begins.
Since January 26th of 2009 the CBP has been keeping importer performance reports on your shipments that have not complied with the ISF rules. Therefore, they know those importers that are and those that are not submitting ISF, as required.
Ultimate Responsible Party
The importer is the party causing the goods to enter the limits of a port in the US. The party who filed the ISF must update the ISF as additional or more accurate information becomes available. The importer may not be the "importer of record" but rather the goods owner, purchaser, consignee, or agent such as a licensed customs broker. The importer is not responsible for foreign cargo remaining on board (FROB) but rather the vessel carrier is. In-Bonds are a bit different in that it is the responsibility of the party that is filing the immediate exportation (IE), transportation and exportation (T&E), or foreign trade zone (FTZ) documentation to file the ISF. This may be the carrier, licensed customs broker, importer, etc.
Do Not Wait to Comply
Importers should not wait until enforced compliance begins after January 26, 2010. Now, is the time for Importers to use their time wisely preparing for ISF. CBP has given the trade community an opportunity to transition providing time to adapt to the new requirement. The consequences can be severe for importers that choose to wait. After the enforcement period begins the penalty amounts are at average $5K per ISF violation. Waiting may result in having no "mitigating factors" with CBP, resulting having to pay the liquidated damage claim full amount.
The ISF Violation Table shown below is a brief view of the different types of violations, penalty amount and reasons associated with the violation.
There are mitigating, aggravating and extraordinary mitigating factors related to liquidated damages claims:
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ISF Importers - Mitigating Factors
Must show proof of ISF implementation during the period of flexible enforcement (January 26, 2009 through January 26, 2010). Volume of shipments requiring ISF is compared to the small number of violations. C-TPAT Tier 2 or Tier 3 certified members may receive up to 50% of the normal mitigation amount. This is dependent on Tier level. Show what remedial action is in place to prevent future violations from occurring. Late filing - was caused by vessel diversion, weather etc. any factor outside the importers control. Inaccurate filing -"extraordinary mitigation factor"- if the importer can demonstrate information received by another party is reasonably believed to be true, in accordance with ordinary commercial practices and not able to verify the information. This may constitute cancellation of a claim without payment.
ISF Importers - Aggravating Factors
When there is lack of cooperation with CBP or if it impedes CBP activity in the case. Attempt to introduce merchandise contrary to law and/or any evidence of smuggling activities. * Extraordinary aggravating factor. Multiple ISF errors. Increased error ratio is indicative of deteriorating ISF transmission performance.
It’s a Collaborative Process
Those of you that are Customs-Trade Partnership Against Terrorism (C-TPAT) members recall best practices were to establish an internal C-TPAT team prior to submitting your application for membership. The same is recommended, for those companies being required to submit ISF to CBP. You will find that many departments within your own company will now have to work together towards meeting the ISF requirements and deadlines. Operations, Systems, Inbound Logistics, Compliance and Financial are just a few areas to be represented. In addition, these departments will most likely reach out to their external trading partners the foreign supplier/manufacturer, vessel carrier, freight forwarder, customs broker just to name a few throughout your supply chain. The ISF importer cannot do their job effectively without including everyone in the supply chain.
In Summary
What we do know is that failure to comply with the new rule could ultimately result in monetary penalties, increased inspections and delay of cargo. CBP will treat all ISF importers the same, it doesn’t matter if there small, medium or large. It’s reasonable to assume the smaller the importer the less complex their supply chain will be. When it’s all said and done, at the end of the day, CBP is holding the ISF Importer completely responsible and liable.
This brings us towards the end of what we know at this point in regards to the ISF mitigation guidelines as published. We understand that "bonds" will not be required until January 26, 2010 therefore, we can expect at a later date to know more about ISF "bond" requirements. When more information is made available by CBP TradeMerit will address the subject in another newsletter.
Next Week’s e-Newsletter Series 3
September 21, 2009
The Impact to Trade for ISF Non-Compliance
The TM e-Newsletter will cover what are the consequences and costs for ISF non-compliance. It's more than just dollars and cents? Some questions you may be asking yourself?
Will CBP understand if Importers aren’t ready to submit their ISF by January, 2010? What if a company can't afford to participate in ISF? How is CBP able to produce ISF performance reports? Can the importers request a copy? How will CBP know whether or not the importer has written procedures for ISF?
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