Importing Updates to the Trade 2009 Joe Yingst, Import Manager Licensed Customs Broker Certified Customs Specialist

Importing Afternoon Agenda ISF Filing C-TPAT Update Importer Compliance

Importer Security Filing and Additional Carrier Requirements “10+2” Program

” Today’s Presentation on “10+2” Introduction and Overview Implementation Strategy Specific Importer and Filer Requirements Proposed Penalty for non-compliance Kuehne + Nagel Process and Assistance

What is the Security Filing? The Security Filing, commonly known as the “10+2” initiative, is a Customs and Border Protection (CBP) regulation that requires importers and vessel operating carriers to provide additional advance trade data to CBP pursuant to Section 203 of the SAFE Port Act of 2006 and section 343(a) of the Trade Act of 2002, as amended by the Maritime Transportation Security Act of 2002, for non-bulk cargo shipments arriving into the United States by vessel. What is the Security Filing? Importer Requirements: U.S. Bound Cargo (Includes FTZ and IT) : requires the electronic filing of an Importer Security Filing (ISF) comprised of 10 data elements. Carrier Requirements: Vessel Stow Plans required for arriving vessels with containers. Container Status Messages required for containers arriving via vessel.

Filing Requirements All ISF filings are to be done electronically via vessel Automated Manifest System (AMS) or the Automated Broker Interface (ABI). There will be no paper forms (e.g., CBP Form 3461 equivalent) Note: CBP is not creating an internet-based web portal to accept the ISF filings. However, some service providers allow self-filers indirect access to CBP systems.

Effective Date vs. Compliance Date Effective Date: The Interim Final Rule took effect on January 26, 2009 (60 days after the publication date). Compliance Date: 12 month delayed compliance period from the effective date to allow industry to comply with the new requirements. January 26, 2010. The 12 month delayed compliance period may be extended if circumstances warrant. Structured Review Period Flexible Enforcement Robust Outreach Program Public Participation

“10+2” Importer Filing Requirements

Importer Security Filing (ISF) Importer The party required to submit the Importer Security Filing (ISF) is the party causing the goods to enter the limits of a port in the United States. This party is known as the “ISF Importer”. Could be the owner, purchaser, consignee, or agent (e.g. customs broker). For foreign cargo remaining on board (FROB), this party is the carrier (vessel operating carrier). The party filing the immediate exportation (IE), transportation and exportation (T&E), or foreign trade zone (FTZ) documentation is the ISF Importer for those types of shipments. The ISF Importer is ultimately responsible for the timely, accurate and complete submission of the ISF filing.

Additional ISF Responsibilities Pursuant to the Trade Act of 2002, where the presenting party is not able to reasonably verify the information required for the ISF filing, that party may submit the information on the basis of what it reasonably believes to be true. The party who filed the Importer Security Filing must update the Importer Security Filing as additional or more accurate information becomes available.

ISF-10 Filing Parameters of an ISF-10 filing: One ISF Importer per filing One Importer of Record Number per filing Must be part of the same “shipment” Must be arriving on the same vessel/voyage ISFs are to be done at the “lowest” bill of lading level that has been (or will be) recorded in the vessel AMS system. CBP will accept an ISF at either the house bill of lading level or regular (i.e., simple, straight) bill of lading level. A single ISF may cover multiple bills of lading While ISF filings may naturally match up with CBP Form 3461 Entries, there is no actual requirement that they do so.

Bill of Lading Number Identifier commonly known as the “11th Element”. Required as part of the ISF Filing. The ISF Importer, or their agent, must obtain this information and provide it to CBP as part of the ISF filing 24 hours prior to cargo lading*. Absolutely necessary to properly link the Importer Security Filing (ISF) to the customs manifest data.

Unified Entry Filing Option Four of the Importer Security Filing elements are identical to elements submitted for entry (CBP Form 3461) and/or entry summary (CBP Form 7501) purposes. These elements: importer of record number consignee number country of origin, and commodity HTSUS number when provided at the 10-digit level. An importer may submit these elements once to be used for both Importer Security Filing and entry/entry summary purposes. If an importer chooses to have these elements used for entry/entry summary purposes, the Importer Security Filing and entry/entry summary must be self-filed by the importer or filed by a licensed customs broker in a single transmission to CBP no later than 24 hours prior to lading. In addition, the HTSUS number must be provided at the 10-digit level.

Exemptions from the Security Filing Bulk Cargo is exempt from all ISF requirements. “Exempt” Break Bulk is cargo that has already received a temporary exemption from CBP for the purposes of the 24 Hour Manifest Rule requirements. An ISF for “Exempt” Break Bulk cargo needs to be filed no later than 24 Hours prior to U.S. arrival. Ship’s Equipment (From ISF filings) Instruments of International Trade (From ISF filings) Cargo arrivals into the U.S. by modes other than vessel. Department of Defense shipments that are exempt from manifest requirements.

10+2 Summary 10+2 Summary

Importer of Record Number Internal Revenue Service (IRS) number, Employer Identification Number (EIN), Social Security Number (SSN), or CBP assigned number of the entity liable for payment of all duties and responsible for meeting all statutory and regulatory requirements incurred as a result of importation. The importer of record number for Importer Security Filing purposes is the same as “importer number” on CBP Form 3461. The importer of record number can be a foreign entity. However, a U.S. entity must be provided for the consignee number element. For goods intended to be delivered to an FTZ, the IRS number, EIN, SSN, or CBP assigned number of the party filing the FTZ documentation with CBP must be provided. Back

Consignee Number Internal Revenue Service (IRS) number, Employer Identification Number (EIN), Social Security Number (SSN), or CBP assigned number of the individual(s) or firm(s) in the United States on whose account the merchandise is shipped. This element is the same as the “consignee number” on CBP Form 3461. ..\US Customs Reference\Customs Compliance Publications and proceedures\ID_of_consignee_or_sold_to_party.doc ..\US Customs Reference\Customs Compliance Publications and proceedures\UltimateConsignee.doc Back

Seller (Owner) Name and address of the last known entity by whom the goods are sold or agreed to be sold. If the goods are to be imported otherwise than in pursuance of a purchase, the name and address of the owner of the goods must be provided. The party required for this element is consistent with the information required on the invoice of imported merchandise. See 19 CFR 141.86(a)(2). A widely recognized commercially accepted identification number for this party may be provided in lieu of the name and address. CBP will accept a DUNS number in lieu of the name and address. Back

Buyer (Owner) Name and address of the last known entity to whom the goods are sold or agreed to be sold. If the goods are to be imported otherwise than in pursuance of a purchase, the name and address of the owner of the goods must be provided. The party required for this element is consistent with the information required on the invoice of imported merchandise. See 19 CFR 141.86(a)(2). A widely recognized commercially accepted identification number for this party may be provided in lieu of the name and address. CBP will accept a DUNS number in lieu of the name and address. Back

Ship To Party Name and address of the first deliver-to party scheduled to physically receive the goods after the goods have been released from customs custody. CBP is looking for the actual deliver to name/address; not the corporate address If unknown, provide the name of the facility where the goods will be unladen. May provide a FIRMS code of a warehouse or terminal if the specific ship to name/address is unknown at the time of the filing. For example, a container freight station is acceptable. May provide the name and address of an in-land distribution center if the specific ship to name/address is unknown at the time of the ISF filing. A widely recognized commercially accepted identification number for this party may be provided in lieu of the name and address. CBP will accept a DUNS number in lieu of the name and address. Back

Manufacturer or Supplier 1. Name and address of the entity that last manufactures, assembles, produces, or grows the commodity 2. Or, name and address of the supplier of the finished goods in the country from which the goods are leaving. In the alternative, the name and address of the manufacturer (or supplier) that is currently required by the import laws, rules and regulations of the United States (i.e., entry procedures) may be provided (this is the information that is used to create the existing manufacturer identification (MID) number for entry purposes). A widely recognized commercially accepted identification number for this party may be provided in lieu of the name and address. CBP will accept a DUNS number in lieu of the name and address. Back

Country of Origin Country of manufacture, production, or growth of the article, based upon the import laws, rules and regulations of the United States. This element is the same as the “country of origin” on CBP Form 3461. Back

Commodity HTS-6 Number Duty/statistical reporting number under which the article is classified in the Harmonized Tariff Schedule of the United States (HTSUS). The HTSUS number must be provided to the six-digit level. In the alternative, the filer may choose to provide the HTSUS number to the 10-digit level. Back

Container Stuffing Location Name and address(es) of the physical location(s) where the goods were stuffed into the container. For break bulk shipments, the name and address(es) of the physical location(s) where the goods were made “ship ready” must be provided. The “scheduled” stuffing location may be provided. This may be the same name/address as the manufacturer (supplier) If a “factory load”, simply provide the name and address of the factory A widely recognized commercially accepted identification number for this party may be provided in lieu of the name and address. CBP will accept a DUNS number in lieu of the name and address. Back

Consolidator (Stuffer) Name/Address Name and address of the party who stuffed the container or arranged for the stuffing of the container. For break bulk shipments, the name and address of the party who made the goods “ship ready” or the party who arranged for the goods to be made “ship ready” must be provided. If no consolidator is used, e.g., “factory load” shipments, provide the name/address of the manufacturer (supplier). A widely recognized commercially accepted identification number for this party may be provided in lieu of the name and address. CBP will accept a DUNS number in lieu of the name and address. Back

What about the “2”? In addition to the 10 data elements, 2 other data elements are required to be filed by the carrier (VOC): for containerized cargo, the Vessel Stow Plan and the Container Status Message (CSM) Data

10 + 2 Proposed Penalty Schedule If the principal fails to comply with the proposed Importer Security Filing requirements, liquidated damages are equal to the value of the merchandise. If the principal fails to comply with the proposed vessel stow plan requirements, liquidated damages of $50,000 for each vessel arrival. If the principal fails to timely provide CSMs for all events that occur relating to a container, for which the carrier creates or collects CSMs in its equipment tracking system, the principal and surety (jointly and severally) would pay liquidated damages of $5,000 for each violation, to a maximum of $100,000 per vessel arrival.

What importers need to do now! Begin the classification process sooner for preparation of the customs entry so that the information is available in time for ISF. Decide who will transmit the ISF and how Know all your supply chain partners Require suppliers to provide “10+2” data sooner than before Add data fields to existing forms such as the commercial invoice, purchase order and advance ship notice to capture as much of the required information through normal business processes.

Our Solution We can accommodate both NVOCC handled and direct Carrier handled shipments Process Flow For shipments which we serve only as the customs broker, documents will be forwarded directly to ISF desk. ..\US Customs Reference\10 plus 2_AMS\ISF Form.xls

Comments to CBP on Rule Making Interested persons are invited to submit written comments on those data elements for which CBP is providing some type of flexibility and the requirements related to those elements discussed in section 149.2(b) and (f). CBP also invites comments on the revised Regulatory Assessment and Final Regulatory Flexibility Analysis. Federal eRulemaking Portal: http://www.regulations.gov. Follow the instructions for submitting comments via docket number USCBP-2007-0077. Mail: Border Security Regulations Branch, Office of International Trade, U.S Customs and Border Protection, 799 9th Street, NW, Washington, DC 20001. Comments are due by June 1, 2009.

15 minute Break

Customs-Trade Partnership Against Terrorism Updates and Review 2008

A Brief Summary of C-TPAT C-TPAT is a voluntary government-business initiative to build cooperative relationships that strengthen and improve overall international supply chain and U.S. border security. C-TPAT requires the trade company participant to document their supply chain security procedures in relation to CBP C-TPAT criteria. C-TPAT Supply Chain Security Specialists (SCSS) and the C-TPAT participant will jointly conduct a validation of the company’s supply chain security procedures. Based on the participant’s C-TPAT security profile and the recommendations of the validation team, Headquarters will also oversee the specific security elements to be validated. Kuehne + Nagel offers professional services to implement C-TPAT application and validation.

Eligibility Requirements for C-TPAT Certification Be an active U.S. Importer or Non-Resident Canadian Importer into the United States. Have a business office staffed in the United States or Canada. Have an active U.S. importer of record ID in either of the following formats: U.S. Social Security Number U.S. Internal Revenue Service assigned ID(s) CBP assigned Importer ID Possess a valid continuous import bond registered with CBP. Have a designated company officer that will be the primary cargo security officer responsible for C-TPAT. Commit to maintaining the C-TPAT supply chain security criteria as outlined in the C-TPAT Importer agreement. Create and provide CBP with a C-TPAT supply chain security profile, which identifies how the Importer will meet, maintain, and enhance internal policy to meet the C-TPAT Importer security criteria.

C-TPAT 2008 Year in Review Certified 1,448 new members and validated 3,469 supply chains. Since inception C-TPAT has performed 8,149 initial validations and 2,218 revalidations. Issued “A Guide to Partner Benefits” illustrating how C-TPat companies realize lower examinations rates compared to non-members. Conducted 391 actions to ensure adhearence to the program’s requirements including suspension of 121 members of which 49 were suspended as a result of an incident such as a seizure at port. 72 members were suspended as a result of a C-TPAT validation.

Impact as a result of C-TPAT participation (Importers) Potential Factors for Importers Increase Same Decreased Unknown N/A Number (%) n # of Inspections 6.6 44.1 35.4 12.9 1.0 814 Lead time 8.1 60.0 18.6 11.0 2.3 812 Ability to predict Leadtime 24.3 56.8 4.2 11.9 2.8 810 Ability to track orders 22.2 60.9 2.2 8.6 6.1 805 Supply chain visability 29.4 56.4 .7 8.9 4.6 809 Disruption in supply chain 4.5 51.8 28.9 10.0 4.9 803

Import FAQs Why is Customs Holding my Freight? Classification Continuous Bonds Document Consistency Consequences of non-compliance and what you can do to prevent penalties

Perils in the Post 9/11 environment MET- Manifest Enforcement Team CET- Contraband Enforcement Team Stratified- Random Manual Override – At will by Officer AQI – Agriculture Quarantine Inspection -USDA Importer Alert – By country, manufacturer, commodity or importer VACIS – Vehicle and Cargo Inspection System

Method of Classification Congressional Intent By Name – Easy! Parts of – If specified. If all the parts are present you classify as a whole. Articles of – what is it made of? Plastic, Steel, Rubber, ect. Use Classification Similitude – very rare Official Harmonized Tariff Schedule

Customs Bonds Bonds do not protect the importer from penalties! Three entities are involved: The Principal – the importer The Beneficiary- US Customs and Border Protection Surties – Insurance Companies designated by CBP All formal entries require a bond

Conditions of the Bond A Basic Importation Bond make an agreement with CBP Pay Duty Make Entry Produce Documents Redeliver Merchandise if requested Comply with CBP Agree to Examination Any time Customs “cashes” a bond that is Liquidated Damages

Why has Customs Increased by Bond Liability? All continuous bonds are minimum of $50.000 Continuous Bonds only need to protect Duty Customs will review bonds for sufficiency using this formula: Duties, Taxes & Fees x 10% = minimum bond amount or $50,000 (rounded up by increments of $10,000 previous 12 months up to $100,000 and then by increments of $100,000) Based on current CBP Directive (amended)

Document Consistency The POA must be consistent with all documents related to the transaction, including: The Customs Bond Commercial Invoices Entry Documents (3461 7501) Consignee on the B/L A lack of consistency is suggestive. At a minimum is deemed a clerical error but could be construed as a deliberate attempt to misrepresent information about the import ..\Forms\Customs_OGA Forms\POA\Who_Can_Sign.doc

Customs Compliance is the responsibility of the importer Penalties can be severe Fraud: Revenue Loss Fraud- Min- 5X loss of Revenue Max- 8x loss of Revenue Non-revenue Loss Fraud = 50-80% of value Gross Negligence Revenue Loss Gross Negligence Min- 2X loss of Revenue Max- 4X loss of Revenue Non Revenue loss G. Negligence = 20-40% Negligence Min- 1x Loss of Revenue Max- 2x Loss of Revenue Non Revenue Loss Negligence = 5-20% of value

How to Protect yourself The Reasonable Care Checklist Review your entries Maintain your records and have access to them Document meetings and discussions with your broker

Responsibilities ISF applications will be handled by CVGFZ ISF account updates are as follows: Contact List for Freight & Brokerage.xls CVG XZ must begin to move to 100% partex entry for ALL accounts. File notes should now be limited to contact information and handling instructions. The person who opened the file is the one responsible for ensuring ISF is filed. That person answers to the customer in regard to any question involving the ISF filing. E-mail confirmations should be send to the customer and copied to e-file Status codes to follow? Unless otherwise instructed, ISF filing fee is flat $35.00 per bill of lading.

Goals Implementation of about two accounts with an active POA per week determined by CVGFZ. An “active” POA is one entry per quarter XZ- convert two accounts per week to Partex. 100% ISF filing by Thanksgiving?

The End! Thank you!