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Seminar ISF Enforcement October Meeting, Thursday, 10/24/13.

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Presentation on theme: "Seminar ISF Enforcement October Meeting, Thursday, 10/24/13."— Presentation transcript:

1 Seminar ISF Enforcement October Meeting, Thursday, 10/24/13

2 Introductions Lisa Gelsomino, President/CEO – Avalon Risk Management NCBFAA Preferred Provider, NCBFAA ISF subcommittee, ITSA Board, TSN eBond Avalon ISF outreach to over 1,000 trade participants since 7/9/13 Avalon ISF Archives Page at 847-700-8192 or ISF Hotline: 847-700-TISF(8473) Anthony Maresca, Deputy Chief Officer – Customs & Border Protection Officer Maresca is assigned to the New York/Newark Sea Port He is responsible for Anti-Terrorism sea cargo targeting For ISF, contact problem resolution unit at M. Craig Clark, ISF Program Manager – CBP Headquarters Office of Cargo and Conveyance Security As ISF Program Manager, he is national point of contact for all ISF matters Mr. Clark can be reached directly at 202-344-3052 or Or send questions to Refer to CBP ISF website for current informationCBP ISF website

3 ISF Timeline ISF Action Date ISF Proposed Rule (NPRM) 01/02/08 ISF Interim Rule 01/26/09 Flexible Enforcement 01/26/09 Informed Compliance 01/26/10 ISF Enforcement 07/09/13 ISF Final Rule OR&R Review CBP FAQ After Final Rule ISF Document 1 st notice of ISF bonds CBP 19CFR149(b)CBP 19CFR149(b) CBP ISF Interim RuleISF Interim Rule CBP FAQCBP FAQ dated 07/09/10 CBP ISF Mitigation GuidelinesISF Mitigation Guidelines CBP CSMS Enforcement MessageCSMS Enforcement Message CBP ISF Web PageISF Web Page Port Date

4 ISF by the Numbers © Avalon Risk Management January 26 – November 23, 2009 3.4 million ISF-10s 1,900 ISF Filers (90% customs brokers) 99,700 ISF importers on file 95% importers filing ISF 6,000 vessel stow plans 101 million container status messages January 26 – September 21, 2010 6.2 million ISF-10s 2,350 Filers 194,000 ISF importers on file 97% importers filing ISF nationally 82% compliance in NY/NJ January 26, 2012 – October 21, 2013 18,200,000 million ISF-10s 2,500+ Filers 354,000 + ISF importers on file 90%+ importers filing ISF nationally 37,000+ vessel stow plans 603+ million container status messages

5 ISF Enforcement effective 7/9/13 Vessel Stow Plan Container Status Message (CSM) Data 1. Booking Party name/address 2. Ship to Party 3. Commodity HTS-6 4. Foreign Port of Unlading 5. Place of Delivery (FROB*, IE, TE) ISF-10 U.S. Bound Cargo 24 Hrs Prior to Lading* (3461 Entries, IT, FTZ) 1. Importer of Record or FTZ Number 2. Consignee Number(s) 3. Seller (Owner) name/address 4. Buyer (Owner) name/address 5. Ship to Party name/address 6. Manufacturer (Supplier) name/address 7. Country of Origin 8. Commodity HTS-6 digit level 9. Container Stuffing Location 10. Consolidator (Stuffer) name/address ASAP, But NLT 24 Hrs Prior to Arrival ISF-5 Transit Cargo 24 Hrs Prior to Lading* *FROB ISF-5 is required anytime prior to lading Carrier Requirements NLT 48 Hrs After Departure* w/in 24 Hrs of Creation or Receipt *Anytime prior to arrival for voyages less than 48 Hrs For all vessels carrying containers ISFs must contain the lowest bill of lading number (i.e., regular or house) as referenced in the Automated Commercial Environment (ACE). * Must be linked together as a line- item at the ISF shipment level *ISFs for exempt break bulk shipments are required NLT 24 hrs prior to arrival

6 ISF Enforcement on Local Level Each port will implement based on local needs/resource Port Date LA/Long Beach 07/12/13 NY/NJ 07/19/13 Seattle 07/22/13 San Francisco/Oakland 07/25/13 Baltimore 08/05/13 Notices are all similar, attend local port meetings for details Port Notice Link LA 13-026 Public Bulletin Pipeline 13-027-NWK CBP Trade Information Notice 13-17 WA Notice 782-13-09 BWI Port Information Notice 2013-16 Port Date LA/Long Beach is Unique Not enough resource to issue 400 LD claims/day to address all ISF violations. Did not start out holding consolidated shipments, but is doing so effective 10/7/13 only on cargo that arrives without an ISF 48 hours prior to arrival. Each port handling enforcement differently.

7 ISF Compliance – Cargo Holds CBP expects 100% compliance since 7/9/13 Non-compliant ISFs subject to cargo holds in ACE When is CBP using the new ISF cargo holds? – When ocean cargo arrives without an ISF – When an ISF is not timely or completely filed – Entry cant be made w/out ISF

8 ISF Compliance – Cargo Holds 2Q is the code for Carrier Holds Overseas – Only used when there is a threat to national security – You should not expect the ocean carrier to hold cargo for non-compliant ocean shipments. – Any instances of CBP holding cargo or containers overseas without a 2Q code should be reported to CBP. Once ISF data received, security assessment made – Other enforcement could include: NIIs or intrusive exams; – Liquidated Damages could be assessed in addition to holds – Enforcement will vary by port depending on local needs – Estimated costs = $$$$$

9 ISF Compliance – LD Claims When/Why Will a Claim Get Issued? – ISF must be filed timely, accurately and completely. – If not, CBP may assess liquidated damages of $5,000 per violation subject to $10,000 maximum per ISF transaction. – Since 7/9/13, any ISF not filed timely, accurately and completely is in violation of ISF laws and at risk for claims. – CBPs initial focus is measured approach focusing on egregious offenders (non-files, repeat late files, etc.). – HQ reviews circumstances before port issues the 5955A. – Past ISF performance may not matter when the port issues a claim, but will always matter when CBP considers providing any mitigation.

10 Calculate Exposure from Financial Perspective – Inventory carrying costs based on 2-5 day shipment delays (cargo holds) – Extra costs for holding freight at origin or destination if ISF missing/late – Extra costs for non-intrusive inspection (NII) and/or full examination – Liquidated Damage (LD) Exposure (now or future potential) – One day, ISF violations will receive LD claims routinely like Entry Process. ISF Exposure for Importers 100/Year%#WorstC-TPATBestAverageC1 Bond Violation%3%3 $ 15,000 $ 3,000 $ 6,000 $ 8,500N/A Violation%5%5 $ 25,000 $ 5,500 $ 11,000 $ 16,000N/A Violation%10%10 $ 50,000 $ 11,750 $ 23,500 $ 61,000 $ 50,000 Violation%20%20 $ 100,000 $ 24,250 $ 48,500 $ 73,500 $ 50,000 Worst assumes $5,000 liquidated damage per violation, no mitigation Best assumes $1,000 for 1 st time violation, $2,500 for all subsequent violations C-TPAT assumes 50% reduction of claims Average, mix of each

11 ISF Exposure for Importers Entry Process IssueOutcome Late-FileLD = $100 Non-FileLD = # days late Incomplete/InaccurateCorrected Entry MitigationOIC or Petition LiquidationOne Year Statute of Limitations6 Years ISF Process IssueOutcome Late-FileLD = $5,000 Non-FileLD = $5,000 Incomplete/InaccurateLD = $5,000 MitigationOnly Petition/ No OIC LiquidationISFs dont liquidate Statute of Limitations6 Years Entries: Bonds written guarantee future obligation to pay duty and comply with laws ISF: Right of action occurs 24 hours prior to vessel departure (timely/accurate/complete) If ISF is late, this results in need for an ISF Bond with known violations and claims – Insurers dont insure after a loss occurs (i.e. provide flood insurance while flooded). – Sureties dont want to write bonds for known claims either, but will do so with: – Collateral to cover the potential or known claim amount. Bonds are not Insurance

12 CBP requires ISF bonding per CBP 19CFR149(b) & 19CFR113-GCBP 19CFR149(b)19CFR113-G – Bond guarantees ISF importers compliance with all laws and regulations – Liquidated Damages result from breach of the surety contract – Late File/Incomplete/Inaccurate ISF subject to $5,000/$10,000 max. Parties to a Customs Bond Contract – Sureties obligate ISF importers performance to comply with laws; can subrogate against importer and expect to be made whole. Customs Bond Contract

13 Liquidated Damage Claims Volume (per CBP as of 10/21/13) – # Received By CBP-HQ: Over 200 – # Approved By CBP-HQ: 24, 20 have been issued Types of Violations – Non Files – Late Files – Inaccurate/Incomplete – B/L Mismatch (will make ISF late, also inaccurate)

14 LD Claim Examples (Avalon data) Departure Date ISF Filed Date/ Violation Date # of Days Late Date of Cargo Arrival in USAISF Report Card Info 7/12/20137/17/201367/31/2013Not Available 7/12/20137/24/2013137/29/2013Not Available 7/12/20137/29/2013187/31/2013 Not Available, claim has since been cancelled by local port 7/12/20137/30/2013197/29/2013Not Available 7/12/20137/18/201347/31/2013 40% Late from 5/1/13-7/31/13 7/22/20137/24/201337/28/2013Not Available

15 Mitigation Guidelines Violation TypeCauseMaximum1 st ViolationAll OtherC-TPAT ISF-10 FilingLate File$5,000$1,000-$2,000$2,50050% ISF-10 FilingInaccurate$5,000$1,000-$2,000$2,50050% ISF-10 FilingUpdates$5,000$1,000-$2,000$2,50050% ISF-10 FilingWithdrawals$5,000$1,000-$2,000$2,50050% Mitigating Factors ISF-5 for FROB cargo is not subject to liquidated damages at this time, but would be subject to same violation types and mitigating factors. 6 Mitigating Factors: 1) ISF implementation progress since 1/26/09; 2) Small # of violations/shipments; 3) C-TPAT Importer Tier 2 or 3; 4) Demonstrated action to reduce future violations; 5) ISF filed late, or 6) inaccurate, if due to factors outside importers control. 4 Aggravating Factors: 1) Non-cooperative; 2) Multiple errors on the ISF; 3) Rising/Deteriorating Error Rate; 4) Smuggling/Fraud.

16 Top 10 List of ISF Questions 10)After the 12 month review by CBP-HQ, can ports go back retroactively to assess claims on or after 7/9/13? What about claims prior to ISF Enforcement on 7/9/13? –Y–Yes and Yes because ISFs do not liquidate; subject to 6 year statute of limitations per 28 USC § 2415(a). –F–For claims prior to 7/9/13, No unless in cases of fraud. 8)Which ports are actively issuing LD Claims? –A–All CBP ports with vessel operations have been given the authority to begin issuing LD claims for ISF violations. 9)What does CBP consider egregious to issue an LD claim? –T–This will vary by port depending on the compliance problems they are having with non-filers or repeat late-filers.

17 Question 7–ISF impact on C1 Bonds? No, C1 Bonds will not increase as a result of ISF at this time ISF claims may impact bond sufficiency per Analytical FormulaAnalytical Formula Duties, Taxes & Fees x 10% (previous 12 months) + 10% - unpaid bills not protested and less than 210 days or protested + $ for $ - delinquent bills not protested and over 210 days or denied protest + $ for $ debit vouchers unpaid + $ paid by surety = minimum bond amount or $50,000 (rounded up by increments of $10,000, up to $100,000 and then by increments of $100,000) + Exact Amount + Exact Amount + Exact Amount + Exact Amount B A C D E BACDE Total Amount = + + + +

18 © Avalon Risk Management Question 6 – Use of ISF Type 5? Yes, CBP still allows use of ISF Submission Type 5 (ISF Late-No Bond) CBP FAQ pp 51-52, CSMS Message #11-000149, Quest 7/19/13 CBP FAQCSMS Message #11-000149Quest 7/19/13 ISF-D Single ISF Submission Type 5 ISF 10 Late – No Bond Potential issuance of LD for $5,000; mitigate 1 st time violation $1,000-$2,000 Admission of guilt or non-compliance, only use for the one-time importer. Cost of Bond Premium + Collateral/Fees ($1,100 to $5,500 range depending on mitigating factors) Cost of NIIs or full examinations plus storage and delay of cargo for inspections ($3,000 to $5,000 range) CBP prefers an importer file an ISF for security purposes and be properly bonded to meet ISF requirements during full enforcement period. CBP-HQ has advised that abuse can result in penalties against the ISF Importer under 19 U.S.C. 1595a(b) reserved for serious and repetitive violations.19 U.S.C. 1595a(b)

19 Question 5 5)How does CBP consider if an ISF is timely filed? What is CBP measuring on the ACE Report Cards? –V–Vessel Departure Date of the Mother Vessel destined for the U.S. less 24 hours (based on local time) –T–The ACE Report Cards will measure performance based on the Vessel Departure Messages (VDMs) received by CBP. –ISFs not measured for timeliness occur when no VDM was sent. These are not late ISFs, and do not negatively affect an importers compliance rate, but also why the compliance record is just a best estimate of compliance.

20 Question 4 4)When will importers be subject to LD claims? – CBP expects 100% compliance and ISF importers that dont fully comply expose themselves to liquidated damages. All violations are eligible for liquidated damages because ISF is in full enforcement effective July 9, 2013. CBP has advised that negligent importers will be the highest enforcement priority. – Past ISF performance will be taken into consideration during the mitigation process. HQ will review all claims issued by the ports for 12 months, and possibly longer if necessary. After the initial review by HQ over the next 12 months, ports would issue liquidated damages within their regulatory authority. Even when the ports are handling all liquidated damage claims without review by HQ, past ISF performance will be a mitigating factor.

21 Question 3 3)Is CBP placing holds on consolidated cargo? –Y–Yes, but each port has a different practice. –C–CBP indicates less than 1% of all cargo is being held. –C–CBP should not be comparing ISF to entry data, however this may be reviewed during a cargo hold or inspection. –O–Only major discrepancies that impact national security, such as commodity or origin, should be of concern to CBP. –S–Some cargo holds may result in abandoned cargo and G.O. Open Discussion

22 Question 2 – What about C-TPAT Cargo? When importers are C-TPAT certified…. – Consider consolidating with other C-TPAT cargo as best practice – Load cargo that has ISF acceptances in same container – These best practices can help avoid cargo holds for C-TPAT How can the Trade better identify C-TPAT importers? –Y–You must participate in C-TPAT to have access to the C-TPAT Status Verification Interface to search participants. –A–Also visit:

23 Number 1 Bill of Lading Match in ACE Top 10 List of ISF Questions

24 B/L commonly known as the 11th data element. B/L required as part of the ISF transmission – ISF Importer must provide B/L to lowest common denominator – ISF Filer must continue to query ACE to secure a match – This will link ISF to Customs manifest data in ACE to be visible to CBP CBP cannot target ISF or verify ISF timeliness without match – CBP needs match at least 24 hours prior to cargo arrival to conduct targeting. – Failure to match 24 hours prior to arrival may result in cargo hold. – Liquidated Damage claim also possible. – A B/L mismatch is an inaccurate ISF. an i – Potential for 2 LD claims, late ISF and the other for an inaccurate ISF. – Cap is $10,000 any one ISF transaction. Bill of Lading Match in ACE

25 Final Wrap-Up 25

26 ISF Compliance Best Practices Per CBP, always better to file ISF timely and update later – CBP prefers that ISFs be amended or updated vs. deleted if changes to the ISF are required to make it accurate and complete. – Update a timely ISF, dont delete and redo an untimely ISF. ISFs can be updated until the cargo arrives in the U.S. – 19 CFR 149.2(d) states the ISF must be updated if, after the filing is submitted and before the goods enter the limits of a port in the United States, any of the information submitted changes or more accurate information becomes available. 19 CFR 149.2(d) – CBP requires updated information and ACE match at least 24 hours prior to cargo arrival for targeting purposes. – Thus, amendments made after 24 hours prior to arrival may be considered inaccurate.

27 ISF Compliance Best Practices Cannot transfer ISF liability once an ISF Bond is transmitted – An ISF-D Single is obligated at the time the ISF transaction is filed; can only be voided when there is a duplicate or cancelled ISF. – Cannot transfer bond liability from ISF-D Single to C1 Bond. – If ISF Filer uses own bond, they assume liability of ISF importer. – Note: CBP will always make a claim against the bond that was originally filed with the timely ISF submission, regardless of any updates made to the bond prior to the cargos arrival. – Why? Because right of action accrues when the ISF is first transmitted to be considered timely, accurate and complete. That liability will always remain and cannot be modified unless the ISF can be legitimately deleted.

28 ISF Compliance Best Practices Exposures for ISF Importer of Record – ISF importer responsible for timely, complete, accurate filing. – ISF importer responsible for cargo holds and/or liquidated damages. – ISF is not considered Customs Business but ISF importer is also subject to penalties under 19 U.S.C. 1595a(b) = value of cargo.19 U.S.C. 1595a(b) Exposure for ISF Filers (CHB or OTi) – Per CBP regulations, the ISF importer is responsible for all ISF activity and enforcement as referenced above. – National Customs Brokers & Forwarders Association of America (NCBFAA) Terms & Conditions of Service limit liability to $50 per entry and/or ISF transaction. – E&O insurance

29 Contact and Links to Information Avalon Risk Management Underwriting QuestionsGroup email:, phone line: 847-700-8473 Gabriela Craver:, Surety Underwriting Claims QuestionsZuleika Medina:, Surety Claims Web Merlin IT Additional ISF Information CBP CBP ISF Page CBP ISF FAQs 7/9/2010 _filing/10_2faq.ctt/10_2faq.doc ISF Liquidated Damage Mitigation Guidelines Continuous Bond Formulas and Sufficiency Information ogram/bond_form.ctt/bond_form.pdf

30 Questions? 30

31 Premier Provider of Innovative Insurance and Surety Solutions Celebrating 15 years in 2013, thanks for your participation!

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