Challenges of the ISF: Customs Brokers’ Perspective Challenges of the ISF: Customs Brokers’ Perspective Mary Jo Muoio, LCB, CCS Senior Vice President Barthco Trade Services, division Ozburn-Hessey Logistics President National Customs Brokers and Forwarders Association of America Alan Klestadt, BA, JD Partner GDLSK, LLP Customs Counsel to the National Customs Brokers and Forwarders Association of America NCBFAA - Clearing The Way For Trade

Learning Objectives Upon completion, participants will be able to:  Recognize the challenges of the ISF filing for customs brokers and importers.  Identify the additional liability inherent in ISF filings.  Discuss possible software and process solutions for automating the filing. NCBFAA - Clearing The Way For Trade

 Introductions  The Basics the Where, the What, the When, the Concerns  Additional Liabilities T&C, POA, Surety Questions  Technical Specifications What Brokers Need To Know  The NCBFAA Action Plan Outline NCBFAA - Clearing The Way For Trade

Who Is Required To File  Carrier – the 2 “Carrier” is Defined by 19 CFR The 2 Data Elements  Importer – the ISF ’10 or 5’ New Definition of Importer under 19 CFR 149  “the party causing goods to arrive within the limits of a port in the United States.” For FROB, IE, T&E, and FTZ –  party filing the FROB, IE, T&E, or FTZ documentation.” NCBFAA - Clearing The Way For Trade

How and When Will the ISF Be Filed?  How How To File  In the Entry Message  In the Manifest  As a Separate Filing NPRM Indicates via Current Methods  AMS  ABI  When 24 Hours Prior to cargo being laden on a vessel destined for the United States NCBFAA - Clearing The Way For Trade

Sources of Information DATA ELEMENTSIMPORT ER SUPPLIER / SHIPPEROVERSEAS FORWARDER ManufacturerYES ? SellerYES NO / ? BuyerYESNO /? Ship toYES Stuffing locationYES / ?YES ConsolidatorYES / ?YES ImporterYESNO ConsigneeYESNO Country of OriginYESYES / ?? / NO HTSYESNO NCBFAA - Clearing The Way For Trade

Importer  Exposure  Where will information come from?  Who will provide information to my filer?  Who will file the information for me?  When will the information be needed?  How will the information be given to my filer? NCBFAA - Clearing The Way For Trade Questions to Consider

Importer  Is my data secure?  What if there are changes that need to be made to the ISF filing?  What if a supplier ships cargo without our knowledge?  Can my Customs Broker do my filing for me?  Should I file ISF with the entry, or not? NCBFAA - Clearing The Way For Trade

The Licensed U.S. based Customs Broker  Confidentiality of importer’s information is required by law-- The Customs Broker is required by law to maintain the confidentiality of the transactions they handle for their clients. NCBFAA - Clearing The Way For Trade The Logical Filing Party

§ Records confidential The records referred to in this part and pertaining to the business of the clients serviced by the broker are to be considered confidential, and the broker must not disclose their contents or any information connected with the records to any persons other than those clients, their surety on a particular entry, and the Field Director, Office of International Trade, Regulatory Audit, the special agent in charge, the port director, or other duly accredited officers or agents of the United States, except on subpoena by a court of competent jurisdiction. NCBFAA - Clearing The Way For Trade

The Broker is the Logical Filing Party  Accountability to client The Customs Broker has a special accountability to their clients. The Customs Broker is charged with the duty to look after the best legal interests of their clients in their dealings with U.S. Customs. The Customs Broker is concerned with helping their clients meet the requirements of the law rather than simply filing any kind of data, good or bad just to get the cargo out the door. NCBFAA - Clearing The Way For Trade

 Proficient in ever changing U.S. Customs laws and requirements The licensed U.S. Customs Broker is faced with a multitude of laws administered by numerous government agencies through the Customs and Border Protection. The laws and regulations involved in importing are constantly changing. The Customs Broker is the party who is closest to all of this change and has to keep themselves abreast of the on-going changes. No other party in the supply chain has this type of exposure. NCBFAA - Clearing The Way For Trade The Broker is the Logical Filing Party

 Only party in the supply chain licensed by CBP The licensed U.S. Customs Broker is the only party in the supply chain licensed by Customs and Border Protection. The historical significance of this is that in the evolution of the industry the government recognized the significance of the transactions involved and the fiduciary responsibilities involved in representing someone in the intricacies of importing and decided that for the protection of the revenue and the importing public that Customs Brokers should be licensed. NCBFAA - Clearing The Way For Trade The Broker is the Logical Filing Party

 Familiarity with importer’s product and requirement There is virtually no other single party in the supply chain, outside of the importer themselves, who must have a greater familiarity with an importers product and the requirements of importing that product than the Customs Broker who is filing the entry on behalf of the importer. As such, the Customs Broker is in a unique position to ascertain the veracity of information being presented ISF filing. NCBFAA - Clearing The Way For Trade The Broker is the Logical Filing Party

 A part of the importer’s team The licensed Customs Broker is already a part of the importer’s team. They are for the most part familiar with the importer’s suppliers, and other parties to the supply chain. The licensed broker is like an extension of the importer’s own office. Other parties do not have this same relationship or accountability with the importer. No major carriers are planning to file the ISF 10 NCBFAA - Clearing The Way For Trade

Customs Brokers  Who will provide you the information The importer? The overseas shipper/seller? An overseas non-related forwarder? Your own overseas agent or office?  When will the information be provided? This is a very big question and needs to be addressed in standard operating procedure. NCBFAA - Clearing The Way For Trade Questions to Consider

In what format will it be provided? Transmitted into your system from importer. Transmitted into your system from overseas source. Given to you by hard documents. Who will you notify of CBP acceptance of ISF filing and how will you notify the respective parties? Questions to Consider NCBFAA - Clearing The Way For Trade

Will you be able to receive the info into your system, and link to the entry? Should I file the ISF with the entry, or independently? Filing as an independent ISF if monumental in itself. Filing the whole ISF as one filing with the entry will be an entirely different challenge. Questions to Consider NCBFAA - Clearing The Way For Trade

 How much re-keying will you have to do?  Will there be an additional cost for surety bonds?  What additional software will you need?  Will you have to go to 24/7 staffing? Questions to Consider NCBFAA - Clearing The Way For Trade

New Issues of Potential Liability  The ISF raises creates new issues of potential liability between the importer and the broker.  Who will be responsible for late transmissions or formatting errors? How will the parties assign responsibility for updating ISF filings while the merchandise is in transit?  Who’s bond will be obligated by the ISF?  What happens if cargo is not laden on board due to a failure to properly transmit the ISF?  What will be the broker’s ultimate liability for ISF errors? NCBFAA - Clearing The Way For Trade

ISF Bond Requirement  NPRM provides that the ISF filer must have a bond  NPRM amends the basic bond conditions to provide that the principal on the bond is liable for a default “with respect to any obligation” relating to the ISF.  NPRM does not specify the form nor amount of bond  Brokers are not currently required to obtain bonds to file entries and it is unclear at this time whether brokers will be required to obtain a bond (and if so, in what amount), to file the ISF on behalf of their clients. NCBFAA - Clearing The Way For Trade

Managing the New Risks Develop written procedures that clearly specify:  1. How and when the ISF information be provided.  2. Who is responsible to provide the broker with updated ISF information?  3. Who should be notified that the ISF filing has been accepted and how will those parties be notified?  4. Specify that the importer’s bond will be obligated for ISF purposes and that the importer has financial responsibility for any CBP fines or penalties.  5. Utilize updated Terms & Conditions which limit the ISF filer’s financial liability. The NCBFAA has recently updated its recommended Terms & Conditions to incorporate such language. NCBFAA - Clearing The Way For Trade

ISF Filer Issues  The language in the standard NCBFAA power of attorney is broad enough to authorize the broker to file the ISF.  Brokers who do not use the standard NCBFAA form should check the text of their power of attorney to verify their authority to file the ISF.  The NCBFAA will be formatting a new ISF power of attorney which limits the authority of a third party to ISF filings only. NCBFAA - Clearing The Way For Trade

Verification of Information  In addition to potential liquidated damages exposure for untimely, incomplete or inaccurate filings, the NPRM provides that the ISF filer must verify the ISF data in accordance with “ordinary commercial practices.”  This language could be interpreted as creating a reasonable care requirement for the ISF filer.  Where another party makes the ISF, the broker must consider whether they will assume responsibility for reconciling that data against the entry data and, if the broker decides to do so, how and to whom the broker will report discrepancies in the ISF data. NCBFAA - Clearing The Way For Trade

Off-Shore Processing Centers There are several unanswered questions relating to the use of off-shore processing centers:  If separately incorporated, will the prohibition on sharing of customer information with third parties in 19 CFR affect the operation?  Will the off-shore office require a separate POA?  Will the importer’s information be kept confidential?  What recordkeeping requirements will apply?  Since the current regulations do permit the off-shore office to prepare or transmit a combined ISF/entry, what safeguards will be established to demonstrate that the activities performed by the off-shore office do not rise to the level of “customs business?” NCBFAA - Clearing The Way For Trade

Draft Technical Specifications  Published as a result of multiple trade requests (including NCBFAA, COAC, TSN)  Published on June 2, 2008  Documentation can be found at: utomated_systems/sf_transaction_sets/ utomated_systems/sf_transaction_sets/  Link on NCBFAA website NCBFAA - Clearing The Way For Trade

Transmission Identifiers  CBP to assign a unique number to the ISF filing  SF Transaction Number  Filer Code + Year + Numeric Sequence # What Does This Tell Us?  There is a tracking number for future actions  It will be sent to the filer via a return message  Paves the way for a status or query message NCBFAA - Clearing The Way For Trade ISF 10 Loop - Entry

Updating ISF Filings  Add, Delete, Replace Action Codes  Reason Code Record Space Allocated What Does This Tell Us?  Updates will happen electronically  We will be able to delete records not needed  CBP will want a reason for changes NCBFAA - Clearing The Way For Trade ISF 10 Loop - Entry

 Master Bill of Lading – Optional  Entry Number - Optional  House or Regular Straight Bill –Required  Multiple Bills can be reported on one ISF What Does This Tell Us?  CBP will link the ISF with the AMS and Entry by the House or Straight Bill  Other Numbers used as reference  The ISF Filing is by “shipment” NCBFAA - Clearing The Way For Trade ISF 10 Loop - Entry

Parties to the Transaction What Does This Tell Us?  Product linking is done by manufacturer  Multiple Shippers, Manufacturers, Consignees, etc. are possible  Data is sent and reviewed on a shipment level  Similar in structure to the FDA BTA data NCBFAA - Clearing The Way For Trade ISF 10 Loop - Entry

ISF Output Records  Acceptance  Rejections with Reason Code  Acceptance with Warnings  Narrative to accompany rejections  Appearance of appendix indicates there will be an error code reference table NCBFAA - Clearing The Way For Trade ISF 10 Loop - Entry

What Else Do We Need To Know?  Comments indicate that there will not be a “NO LOAD” message to carriers for ISF10 failure to file  Further revisions to the DRAFT Technical Specifications are anticipated  Indication that CBP is listening and responding to concerns raised by the trade  ISF will affect everyone in the supply chain  Automation Changes will be required NCBFAA - Clearing The Way For Trade

Final Rule??  Commissioner Basham’s testimony before Congress  Phased in Approach is indicated  Ensure concerns, questions, issues are forwarded to the CBP address: NCBFAA - Clearing The Way For Trade

NCBFAA Action Plan  Terms and Conditions Revisions Completed and available in the next week  Power of Attorney Minor Revisions Customs Broker NVOCC and FF Combined CHB-NVOCC/FF ISF Filer  Surety Communications NCBFAA - Clearing The Way For Trade

NCBFAA Action Plan  How To Kits  Customs Broker CHB to Importer / Client CHB to Software Vendor CHB to NVOCC / FF  NVOCC / FF NVOCC / FF to Importer / Client NVOCC / FF to Software Vendor NVOCC / FF to Carrier NCBFAA - Clearing The Way For Trade

NCBFAA Action Plan  How To Kits  Importer Importer to Suppliers Importer to Carriers Importer to Vendors (CHB, NVOCC, FF)  Software Vendor Conference Calls  NVOCC and Freight Forwarder Webinar August 7 th, 1 PM EST NCBFAA - Clearing The Way For Trade

Wondering What to Do About ? Questions?? NCBFAA - Clearing The Way For Trade

Thank You! NCBFAA - Clearing The Way For Trade