On January 26, 2010, U.S. Customs & Border Protection (CBP) began implementing their strategy of graduated Importer Security Filing (ISF) enforcement. While CBP's plan for ramped-up enforcement will not be made public, we can garner the following details and pertinent information about what lies ahead:
CBP will initially focus on those consignments arriving in the U.S. by maritime conveyance with no ISF filed against them. The importers of those shipments can expect a Warning Letter or e-mail from CBP. The first series of stern admonishments for importers who are not filing ISF's at all are due to begin hitting mailboxes soon. Importers with larger volume may also receive a telephone call from CBP Headquarters.
CBP does not plan to focus on timeliness or accuracy issues early on for importers who are filing and attempting to meet the spirit of the new requirement. However, while they are not closely monitoring timeliness at this juncture, they did indicate that an ISF one week late would be considered unacceptable. CBP has not yet spelled out the consequences in such cases, however.
Beginning in May, CBP will start issuing penalties and liquidated damage claims on shipments arriving without an ISF being filed. A "hold" will also be placed on such consignments effectively making good on CBP's promise to place such shipments in "ISF Jail." Extra scrutiny in the form of an intensive inspection or VACIS exam might also be conducted further adding to delays and expense.
By the third quarter of this year CBP plans to begin analyzing the ISF data of compliant filers for accuracy and timeliness issues. CBP will work closely with the trade to continually improve accuracy and timeliness rates.
Penalties or other claims for liquidated damages will be exclusively handled by CBP headquarters in Washington for the first year to ensure uniform application.
Should a penalty or liquidated damage claim be issued, normal CBP protocols will be used for processing them. Importers who have a history of filing ISF's in 2009 will have an advantage because their early adaptation of an ISF program will be considered as a mitigating factor.
Importers who are Tier II or Tier III C-TPAT members will receive an automatic 50% off the amount of an ISF penalty or liquidated damage claim.
CBP has steadfastly maintained that a one-year phase-in period has been generous and more than adequate for the import community to establish and implement the necessary data collection and reporting protocols to satisfy the ISF requirements. Some importers, however, have procrastinated or incorrectly wagered on ISF being repealed. For them the stakes are high, and they are currently in a last-minute scramble to get their programs in place and operating efficiently before CBP moves to the next stage of escalated enforcement.
After having presented at and participated in more than 10 ISF Public Outreach sessions since 2005 in and across the U.S. and Europe, I have compiled the following list of recommendations and best practices for ISF:
When designing your ISF program, automate data streams whenever feasible.
Consider placing your company's ISF data expectations in contractual language and purchase order terms and conditions. Many importers are also including culpability clauses that will require the vendor or service providers to share in the costs of a penalty should one be issued.
Importer controlled and direct-filed ISF's is clearly a best practice. Any importer can directly file their ISF's with CBP without the necessity of a license or other permit. Web-based applications like TRG Direct are available, cost effective and highly adaptable. Using all system features and functionality, you can literally file an ISF in a matter of seconds at a savings of up 90% off of standard market rates.
File the ISF as soon as you have the 10 data elements and the bill of lading number.
Always ask for and obtain the Automated Manifest System (AMS) bill of lading. Without it you will never get a "Bill on File" message from CBP.
Only use automated consolidators, freight forwarders or Non-Vessel Operating Common Carriers (NVOCC's). Non-automated providers do not have AMS capabilities and your risk and probability of a "Bill Not on File" message from CBP increases exponentially.
If you get a "Bill not on File" message from CBP, first double-check the bill of lading number to ensure it was entered properly. If accurately reported, then wait patiently for a match to occur. CBP will continually try to match the bill of lading every few hours and it is possible that it may take several days for it to match. Do not re-transmit the ISF as this will cause a "Duplicate ISF" rejection and clog the system. If several days pass and you know that the shipment has departed then it is very likely that you do not have the AMS bill of lading and you should immediately contact the overseas shipper, consolidator or NVOCC.
If you experience issues, problems or rejections from CBP, carefully document the steps and corrective action you took to assist with mitigation should a penalty be issued.
Many importers are considering joining C-TPAT to take advantage of the 50% discount given to members who get an ISF penalty.
When possible always use "Compliant Transaction" versus "Flexible Range" or "Flexible Timing" options under the ISF Transaction Type.
Frequently review your ISF Performance Report and make necessary corrections to your program. If you have not received your ISF Performance Report you should immediately ask the agent filing your ISF's for a copy. CBP has been very aggressive with customs brokers and forwarders who are not sharing this information with their clients and importers.
Lastly, the entire CBP executive management team, Rich DiNucci (Director of the Secure Freight Initiative) and all members of his team are to be commended not only for the public outreach they have accomplished over the last few years, but more importantly, for their sensible and measured approach to ISF enforcement. As a long-time member of the trade community it is refreshing to see CBP confront such substantive change with logic and an even hand.
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