Importer Security Filing Costs
Introduction
Welcome, to the third 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).
Overview
The ISF regulations specifically state what is required, who is responsible and what the penalties are for non-compliance. If you have not read the two prior e-Newsletters, please do so at TradeMerit Vol.1, No.2.
It's a challenge to put it all together to determine what to do first. How are you going to approach senior management in your organization with a cohesive plan and related cost? CBP has allowed time for industry to adjust to the new requirements, however there are approximately four (4) months left before enforcement is scheduled to begin on January 26, 2010. Companies may need to change their processes to achieve full compliance. With the ISF clock ticking, are importers making satisfactory progress toward compliance? If the answer to this question is no, your company could be in for some rough and costly times ahead.
CBP will only show restraint in enforcing the rule, when importers are making a good faith effort to comply with the rule. When ISF enforcement begins in January, infractions will come at a costly price.
Incremental Costs
What you do now could lower ISF costs for your company in the future. Major decisions need to be made as to what approach will be taken to be ISF compliant. Whether you decide to be a "self-filer" or have an "agent" file on your behalf, there are costs associated to collect, coordinate and electronically transmit the required data to CBP.
Last year, The Departmental Advisory Committee on the Commercial Operations of CBP and Related Homeland Security Functions (COAC) subcommittee estimated a cost of $25,000 per importer to complete some level of internal programming and modify their information systems.
Importers will incur security filing transaction costs on a continual and recurrent basis. These costs per ISF transaction have dropped considerably in the marketplace and it is worth the exercise to reach out and analyze the benefits, features and cost of being a "self-filer". There are many ISF service providers to choose from and self-filing may save companies time and money.
Cost, Benefit, and Feasibility Study
Industrial Economics Incorporated a Cambridge, MA consulting firm issued the "Importer Security Filing and Additional Carrier Requirements cost, benefit, and feasibility study" as required by Section 203(c) of the SAFE Port Act on November 6, 2008. The document was prepared for CBP and U.S. Department of Homeland Security. This Regulatory Assessment was for the Interim Final Rule Importer Security Filing and additional Carrier Requirements.
Within the Federal Register Vol.73, No.228 - Tuesday, November 25, 2008 CBP published the regulatory analysis on page(s) 71765 -71778.
As outlined, there are between 200,000 to 750,000 importers in the U.S. that will be impacted by ISF. The costs can range from 0.13% to 1.03% of the median shipment value ($38,000 per shipment). CBP estimated a per shipment cost from $58 to $390.
It should be noted that many importers and other groups disagrees with the government's assessment of the cost impact.
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In addition, the "regulatory assessment" can be found in the docket for this rulemaking: http://www.regulations.gov; see also http://www.cbp.gov
Supply Chain Delay's
Many importers claim ISF will result in supply chain delays and substantial costs. Shipment delays can be attributed to ISF failure, errors, etc. by either the ISF Importer or Carrier. Supply chain ISF delays can sometimes add as much as 2 additional days to the importing process. Even though the delays being experienced should decrease over time as the trade becomes familiar with the new requirement. It's been estimated that for every day added to the supply chain may equate to a 1% tariff on the goods subject to delay.
Non-Compliance Penalty Costs
Importers that fail to adhere to the rules are subject to some hefty fines. Some ISF violations are:
Failure to File Inaccurate Filing Failing to Withdraw Late Filing
The importer is fortunate that CBP is not issuing liquidated damages claims ($5K per violation) now. If you haven't already determined what your fiscal exposure is year to date for ISF infractions, it's time to complete this task. The result is your ISF indicator for importers to adjust their business processes and systems accordingly.
In the future, when importers receive CBP liquidated damages claims for ISF violations, in some cases they may be able to mitigate the penalty. Refer to TradeMerit Vol.1.No.2.
It cannot be overstated enough that importers need to begin ISF today. If and when you receive your first $5K penalty from CBP, you may not be able to mitigate the amount. CBP has stated, "CBP will show restraint in enforcing the rule, taking into account difficulties that importers may face in complying with the rule so long as importers are making satisfactory progress toward compliance and are making a good faith effort to comply with the rule to the extent of their current ability." During this period of "flexible enforcement" importers should be meeting the ISF rule in its entirety. CBP has further stated, "evidence of progress in implementing ISF during the flexible enforcement period" can be a mitigating factor.
CBP Watches & Waits
CBP is keeping performance reports on Importers that are making an attempt to comply with the regulation within this 12 month "flexible enforcement" period. These importers will be given deference and can benefit greatly from reduced penalties or fines beginning January 26, 2010. Importers can receive CBP performance reports by; sending an e-mail to progress_report@cbp.dhs.gov the information required is: Filers corporate name, ISF filer code, Contact name, Phone number and Corporate email address to which to send the Performance Report. CBP will call the Point of Contact to verify the provided information.
Next Week's e-Newsletter Series 4
September 29, 2009, ISF Best Practices
Next week's e-Newsletter will identify some of the industries "best practices" for ISF. Some questions you may be asking yourself?
Do all of the 10 data elements have to be submitted at once? What can the importer do when the carrier/freight forwarder/NVOCC are not providing bill of lading (BOL) numbers timely. 24 hours prior to lading? Should the importer request DUNS numbers from their trading partners before starting ISF? My company's IT department will not be able to finish the ISF programming by January 2010. Will CBP understand and accept our participation later in 2010 for this reason?
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