ISF Enforcement Recap A Surety Perspective Presented by: Jason Palumbo Account Executive September 18, 2013

Liquidated Damages LD enforcement phase officially began July 9 – Limited LD activity to date – Major concern to importers, brokers, & sureties is poor compliance rate CBP policy is to withhold release until ISF filing – I.e., to get out of “ISF Jail” an ISF must be filed (late)

Some Disturbing Numbers As of September 6, “compliance rate” was just over 90% – Eight weeks earlier, it was said to be around 80% These CBP numbers measure only filing/non-filing of ISFs on shipments requiring them: – Late file percentage unknown “Timely” = vessel departure minus 24 hours – Faulty data percentage unknown

Temporary Enforcement Phase Until mid-2014 or later, HQ is to approve all LD claims prior to mailing to importer & surety – CSMS giving 30 days notice to be transmitted prior to end of HQ review requirement Exact form of next phase unclear Eventually, issuance of LD for late ISFs to become “automatic” (similar to current process on late filing of 7501s)

What to Expect if No ISF Filed In general, ISF holds – No release until an ISF filed + – NII or intensive exam + – Possible LD (since ISF filing will be late) Expectations similar if ISF is filed just before arrival

What Not to Expect Uniform port-to-port handling – Due to variable volumes/resources, CBP HQ will not dictate “operations policy” to ports – This will affect: LD issuance Frequency of holds Frequency of NIIs, intensive exams Release of consolidated containers – partial compliance

Don’t Expect… No-load messages – CBP is clearly viewing this as a rare step to be taken only when “national security threat” is foreseen General increase to Activity Code 1 continuous bond amounts – But selective increases for specific non-compliant importers is a possibility consistent with current Revenue Division practice

Also Deemed Rare… Long case issuance delays/large LD backlogs – The “six year distraction” All bond originated liabilities are subject to 28 U.S.C. § 2415 –ISF: Statute essentially starts at due date –Other LD: Essentially starts at 5955A date –Supplemental duties: Statute essentially runs from liquidation – HQ wants LD assessed timely (within 30 – 60 days)

Ready to File but Late – What to Do? Sureties will probably require collateral to do an ISF STB, but there are other possibilities Activity Code 1 (also 2, 3, or 4) continuous bond on file as of ISF due date ISF Submission Type 5 (late ISF-10 with no bond)/Type 6 (late ISF-5 with no bond) Worst thing to do – not file the ISF

Lingering Concerns 5955A inconsistencies – Delays of up to two weeks in mailing – Inadequate information To date, notices have not shown ISF numbers or filer IDs Data inadequacies (ASI) – No ISF number – No B/L number – No Filer ID

Mitigation…The Big Question Mark July 2009 Mitigation Guidelines specify: – Minimum assessment (after mitigation) for first violation - $1,000 – Minimum for any subsequent violation - $2,500 – Additional relief available if importer C-TPAT certified Interim final rule (November 2008): “…mitigation will be the exception and not the rule….”

Questions??