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 Sandler, Travis and Rosenberg

Customs and Border Protection to Begin Full Enforcement of the Importer Security Filing Requirements on July 9th
Melissa Miller Proctor, Esq., Sandler, Travis and Rosenberg, P.A.

After several years of a so-called "measured and common sense" approach to the enforcement of the Importer Security Filing requirements (i.e., otherwise known as "10+2" or "ISF"), U.S. Customs and Border Protection (CBP) will begin enforcing the rule on July 9, 2013. This means that, beginning on July 9th, CBP may begin assessing liquidated damages for failures to file ISFs, late filings, and inaccurate filings and updates. CBP may also withhold the release or transfer of cargo, issue no load instructions and, in some cases, impose penalties for serious or repetitive violations.

The ISF requirements were implemented to help CBP prevent terrorist weapons from being transported to the United States. Under the rule, U.S. importers and carriers bringing cargo to the United States on-board ocean vessels are required to transmit certain information to CBP about the cargo they are transporting prior to lading that cargo at foreign ports of entry. The required information is viewed as being necessary to improve CBP's ability to identify high risk shipments so as to prevent smuggling and ensure cargo safety and security. Importers1 are required to submit an ISF to CBP containing ten (10) data elements. Carriers are required to submit Vessel Stow Plans and Container Status Messages relating to their U.S. bound containers.

The 10 required data elements that must be reported to CBP for regular or FTZ shipments are as follows:

  • Manufacturer name and address
  • Seller name and address
  • Buyer name and address
  • Ship-to name and address
  • Container stuffing location
  • Consolidate name/address
  • Importer number of FTZ application identification number
  • Consignee number
  • Country of origin
  • Harmonized Tariff Schedule (HTSUS) number provided to the six-digit level

For In-Transit Cargo, the ISF Importer must file 5 data elements, which are as follows:

  • Booking party name and address
  • Foreign port of unloading at final destination
  • Place of delivery (city code)
  • Ship-to name and address
  • HTSUS number provided to the six-digit level

The ISF Importer may either self-file or designate an agent to submit the ISF. The ISF filing is not considered customs business; therefore, there is no requirement that the ISF filing agent be a licensed customs broker. In order to become a valid ISF filing agent, the agent must have a power of attorney issued by the importer, obtain a customs bond, and have access to approved data systems (i.e., ABI) for the filing. Regardless of whether an importer engages a third party to file ISFs on its behalf, CBP will hold the importer responsible for non-compliance with the rule.

Although there is some flexibility with regard to two of the data elements (i.e., container stuffing location and consolidator name/address), the ISF Importer or its agent must file the required data elements 24 hours before the cargo is laden. Violations of these requirements my lead to the assessment of liquidated damages against the filer's bond as well as CBP's issuance of no-load messages. However, since the inception of these requirements, CBP has delayed enforcement of these requirements - until now.

In 2009, CBP published a general notice setting forth its guidelines for assessing or cancelling liquidated damages claims for non-compliance with the ISF requirements. The guidelines distinguished the enforcement actions that will be considered for an importer's failure to file the ISF altogether from situations in which late or inaccurate ISFs are filed. For example, for failures to file ISFs, CBP will generally detain shipments (or withhold transfers of the cargo) until the required ISF information has been submitted and CBP has reviewed the information. CBP also has the authority to prevent cargo from being unladen in the absence of an ISF filing – if such cargo is unladen, CBP may seize the merchandise. With respect to late or inaccurate ISFs, CBP may assess liquidated damages in the amount of $5,000 per ISF as well as impose penalties for serious or repetitive violations. CBP's guidelines also provide for the cancellation of liquidated damages claims if law enforcement objectives were not placed at risk as a result of the late or inaccurate ISFs and the importer agrees pay: (1) an amount between $1,000 and $2,000 for the first ISF violation or (2) an amount of at least $2,500 for subsequent violations. CBP will also consider the presence of mitigating and aggravating factors in the assessment of liquidated damages and penalties. Mitigating factors which may warrant substantial reduction of liquidated damages or cancellation of the claim in its entirety include the following:

  • Company's demonstrated efforts toward implementing the ISF requirement during the flexible enforcement period
  • Relatively small number of violations as compared to the number of shipments for which ISFs were required
  • Company's certification as a Tier 2 or Tier 3 C-TPAT participant
  • Company's demonstrated remedial action taken to prevent future ISF violations
  • Vessel diversion due to factors outside of the ISF importer's control
  • Reasonable reliance by the ISF importer on information acquired from another party (per ordinary commercial practices)

Aggravating factors may include lack of cooperation with CBP on the part of the ISF importer, evidence of actual or attempted smuggling, multiple errors on the ISF showing a systemic pattern of non-compliance, and an increase in the importer's ISF error rate over a period of time.

Although the ISF requirements have been effect since January 26, 2009, delayed enforcement of these rules may have led some importers to become lax in their tenacity to ensure compliance. Given that CBP intends to begin full enforcement of the ISF requirements on July 9th, importers are urged to take stock of their current filing practices and ensure that their designated filing agents and supply chain partners are well-positioned to withstand any potential CBP scrutiny in this area so as to avoid any unnecessary delays in the loading and release of cargo and the potential for liquidated damages claims and penalties.

[1] Importers and carriers are covered by this new rule. CBP defines the "ISF Importer" as the party causing the goods to enter the limits of U.S. ports, such as the owner, purchaser, consignee, or agent such as a licensed customs broker. For FROB (Freight Remaining on Board) shipments, the carrier is considered to be the ISF Importer. For in-transit shipments (i.e., Immediate Export, Transportation & Export) and FTZ cargo, the document filer is considered to be the ISF Importer.

Melissa Miller Proctor is a Member of Sandler, Travis and Rosenberg, P.A. and the firm's Export Practice Leader, resident in the Scottsdale, Arizona office. With significant experience in export controls, customs laws and regulations, and international trade, Melissa works closely with clients to expand their markets while ensuring their regulatory compliance. She may be reached at (480) 305-2110 or via e-mail at mproctor@strtrade.com.