ISF Enforcement. Lisa Gelsomino. M. Craig Clark. President/CEO Avalon Risk Management

Transcription

1 ISF Enforcement Lisa Gelsomino President/CEO Avalon Risk Management M. Craig Clark Program Manager CBP Headquarters Office of Cargo and Conveyance Security

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 or Hotline: TISF(8473) 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 or Or send questions to Refer to CBP ISF website for current information 2

3 ISF Timeline ISF Action Date ISF Proposed Rule (NPRM) 01/02/08 ISFInterim Rule 01/26/09 Flexible Enforcement 01/26/09 Informed Compliance 01/26/10 ISF Enforcement 07/09/13 NPRM (ISF-5) ETA of 2/14 ISF Final Rule ETA of 8/14 CBP FAQ Update OR&R Review ISF Document 1 st notice of ISF bonds CBP 19CFR149(b) CBP ISF Interim Rule CBP ISF Web Page CBP ISF Mitigation Guidelines CBP CSMS Enforcement Message Questions or comments to: security_filing_general@cbp.dhs.gov CBP FAQ dated 07/09/10 3

4 ISF by the Numbers January 26 November 23,2009 January 26 September 21, million ISF-10s 6.2 million ISF-10s 1,900 ISF Filers (90% customs brokers) 2,350 Filers 99,700 ISF importers on file 194,000 ISF importers on file 95% importers filing ISF 97% importers filing ISF nationally January 01, 2013 December 31, ,000 vessel stow plans 10,508,000 ISF-10s 101 million container status messages 2,500+ Filers 264,000 + ISF importers on file 90%+ importers filing ISF nationally 22,000+ vessel stow plans 369+ million container status messages 82% compliance in NY/NJ 4

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

6 ISF Enforcement 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? (1% of cargo) When ocean cargo arrives without an ISF When an ISF is not timely filed 24 hours prior to departure When an ISF is not complete and/or missing a B/L match Entry cannot be made at ocean port without an ISF 6 Sent to G.O. if entry is not made (manual cargo holds)

7 ISF Enforcement Cargo Holds 2Q is the code for Carrier Holds Overseas Should only be used when there is a threat to national security. Any instances of CBP holding cargo or containers overseas without a 2Q code should be reported to CBP-HQ: craig.clark@cbp.dhs.gov You should not expect the ocean carrier to hold cargo for non- compliant ocean shipments. Once ISF data received, security assessment made Each port has its own process for handling manual cargo holds. Some ports don t have facilities to strip consolidated cargo when cargo is held so a single late ISF can delay entire container. Some cargo holds may result in abandoned cargo and G.O. CBP should not be comparing ISF to entry data, however this may be reviewed during a cargo hold or inspection. Only major discrepancies that impact national security are a concern. Liquidated Damages could be assessed in addition to cargo holds. 7

8 ISF Enforcement - Port 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, contact local port for details Port Notice Link LA Public Bulletin Pipeline NWK CBP Trade Information Notice WA Notice BWI Port Information Notice LA/Long Beach has been most unique Not enough resource to issue 400 claims/day to address all violations. Effective 10/7/13 holding all cargo that arrives without an ISF 48 hours prior to arrival, other ports adhere to 24 hours prior to departure. Each port handling ISF enforcement differently due to local resources but all LD claims are reviewed by CBP-HQs during this measured period. 8

9 ISF Enforcement 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. Per CBP-HQ: Since 7/9/13, any ISF not filed timely, accurately and completely is in violation of ISF laws and at risk for claims. CBP s initial focus is measured approach focusing on egregious offenders (non-files, repeat late files, etc.). HQ reviews circumstances before port issues the 5955A. Per CBP HQ: Past ISF performance may not matter when the port issues a claim, but will always matter when CBP considers providing any mitigation. 9

10 ISF Exposure for Importers Financial Perspective Inventory 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 Range from $1,000 to $3,000 depending on port, storage time, etc. Liquidated Damage (LD) Exposure for ISF violations During measured enforcement period, CBP-HQ will continue to review alls ISF claims. Once this period ends, ports will have full authority to issue claims routinely as they do for other liquidated damage violations. 10

11 ISF Exposure for Importers Liquidated Damage Costs 100/Year % # Worst Best C-TPAT Average C1 Bond Violation% 3% 3 $ 15,000 $ 6,000 $ 3,000 $ 8,500 N/A Violation% 5% 5 $ 25,000 $ 11,000 $ 5,500 $ 16,000 N/A Violation% 10% 10 $ 50,000 $ 23,500 $ 11,750 $ 61,000 $ 50,000 Violation% 20% 20 $ 100,000 $ 48,500 $ 25,250 $ 73,500 $ 50, ISF transactions per year Violation Rate = % of ISF transactions with violations 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 of best case scenario. Average assumes mix of best case and worst case scenarios. C1 Bond assumes the $50,000 minimum (about 92% of all bonds on file) 11

12 ISF Exposure for Importers Entry Process Issue Outcome Late-File LD = $100 Non-File LD =# days late Incomplete/Inaccurate Corrected Entry ISF Process Issue Outcome Late-File LD = $5,000 Non-File LD = $5,000 Incomplete/Inaccurate LD = $5,000 Mitigation OIC or Petition Mitigation Only Petition/No OIC Liquidation One Year Liquidation ISFs don t liquidate Statute of Limitations 6 Years Statute of Limitations 6 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 don t insure after a loss occurs (i.e. provide flood insurance while flooded). Sureties don t want to write bonds for known claims either, but will do so with collateral. Bonds are not Insurance 12

13 Customs Bond Contract CBP requires ISF bonding per CBP 19CFR149(b) & 19CFR113-G FTZs unique: Activity Code 1 Importer/Entry Bond and Activity Code 4 FTZ Bond regulations updated to address ISF. Bond guarantees importer s compliance with laws and regulations Liquidated Damages result from breach of the surety contract Late File/Incomplete/Inaccurate ISF subject to $5,000 per any one violation; $10,000 maximum per any one transaction. Parties to a Customs Bond Contract Sureties obligate ISF importer s performance to comply with laws; can subrogate against importer to be made whole. 13

14 ISF Liquidated Damage Claims Volume (per CBP as of 01/22/14) # Received By CBP-HQ: Over 200 requested by ports # Approved By CBP-HQ: 24, 20 have been issued for late ISF Types of Violations Non Files (these don t really exist, all late files) Late Files (all ISF claims to date issued for this reason) Inaccurate/Incomplete (98% of ISFs accepted) Missing B/L Missing bond information Duplicate ISFs B/L Mismatch Makes ISF inaccurate Can also cause ISF to appear late due to mismatch 14

15 LD Claim Examples (Avalon Data) Departure Date ISF Filed Date/ Violation Date # of Days Late Date of Cargo Arrival in USA ISF Progress Report Status 7/12/2013 7/17/ /31/2013 Not Available Petition Pending 7/12/2013 7/24/ /29/2013 Not Available Petition Pending 7/12/2013 7/29/ /31/2013 Not Available Petition Pending 7/12/2013 7/30/ /29/2013 Not Available Petition Pending 7/12/2013 7/18/ /31/ % ISFs Late 5/1/13-7/31/13 7/22/2013 7/24/ /28/2013 Not Available Petition Granted reduced to $500 Petition Granted reduced to $500 15

16 Mitigation Guidelines Violation Type Cause Max. 1 st Violation AllOther C-TPAT ISF-10 Filing Late File $5,000 $1,000-$2,000 $2,500 50% ISF-10 Filing Inaccurate Filing $5,000 $1,000-$2,000 $2,500 50% ISF-10 Filing Inaccurate Update(s) $5,000 $1,000-$2,000 $2,500 50% 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 progress since 1/26/09; 2) Small # of violations to shipments (as %); 3) C-TPAT Tier 2 or 3 status; 4) Demonstrated action to reduce future violations; 5/6) ISF filed late or inaccurate, can mitigate if due to factors outside importer s control (such as carrier error). 4 Aggravating Factors: 1) Non-cooperative; 2) Multiple errors on the ISF; 3) Rising/Deteriorating Error Rate; 4) Smuggling/Fraud. 16 ISF-10 Filing Withdrawal/Deletion $5,000 $1,000-$2,000 $2,500 50%

17 Top 10 List of ISF Questions So Craig, can you share the hottest ISF News and Top 10 List of ISF questions from the trade? Sure Lisa, it s easy if the trade remembers we are now in full stages of ISF Enforcement effective 7/9/13.

18 Top 10 List of ISF Questions 8) Which ports are actively issuing LD Claims? 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 claims? This will vary by port depending on the compliance problems they are having with non-filers or repeat late-filers. 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? Yes for claims on or after 7/19/13 because ISFs do not liquidate and subject to 6 year statute per 28 USC 2415(a). Policy update to issue claims in 6 months or so. For claims prior to 7/9/13, No unless in cases of fraud. 18

19 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 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 Total Amount = A + B + C + D + E 19 A B C D E

20 Question 6 Mitigating ISF claims? Describe Nature of Error or Violation If clerical in nature, describe why it occurred? Is ISF Filer or Carrier at fault? Provide specific details. Was it a one-time or repeat violation? Explain. Outline how future violations will be avoided. Importer s ISF Performance Record 20 How long has importer been compliant with ISF? Emphasize importer s compliance record Timeliness/Accuracy (95% timely/98% accurate) Include ISF Progress Report (from Filer or ACE portal) Overall cooperation C-TPAT Status Request 50% mitigation based on C-TPAT status of importer and/or ISF Filer.

21 Question 5 ISF Progress Report 5) How does CBP consider if an ISF is timely filed? What is CBP measuring on the Progress Report? Vessel Departure Date of the Mother Vessel destined for the U.S. less 24 hours (based on local time). 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 importer s compliance rate, but also why the compliance record is just a best estimate of compliance. 21

22 Question 4 When will importers be subject to LD claims? Per CBP-HQ: CBP expects 100% compliance and ISF importers that don t fully comply expose themselves to liquidated damages. All violations are eligible for liquidated damages because ISF is in full enforcement effective July 9, CBP has advised that negligent importers will be the highest enforcement priority. Per CBP-HQ: 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. 22

23 Question 3 ISF Obligations and Updates 23 Does the ISF obligation cease at the first ocean port of arrival? Are changes to the ISF allowed during transit or required after arrival at the port of discharge? Updates to the ISF are always allowed during transit and encouraged to reflect the most current information available. Per CBP s FAQ: Generally, the requirement to update an ISF terminates when the vessel calls at the U.S. port of arrival. However, CBP will not restrict updates outside of this window. Although importers are not required to file any ISF updates after the ISF obligation ceases at the first U.S. port of arrival, importers may do so if they prefer to do so for records to match in the event of an audit. The only exception to this is a Flexible Filing (FR, FT, FX) which must be updated to a Complete Transaction (CT) at least 24 hours prior to arrival in the U.S.

24 Question 2 C-TPAT Cargo? When importers are C-TPAT certified Consolidate 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. How can the Trade better identify C-TPAT importers? You must participate in C-TPAT to have access to the C-TPAT Status Verification Interface to search participants. Also visit: 24

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

26 Bill of Lading Match in ACE 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 needs to query ACE to secure a B/L match This links ISF to Customs manifest in ACE to be visible to CBP CBP cannot target ISF without a B/L match CBP needs match 24 hours prior to 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 Potential for 2 LD claims, late ISF and inaccurate ISF if untimely B/L match Cap is $10,000 any one ISF transaction 26

27 Final Wrap-Up

28 ISF Compliance Best Practices Per CBP, always best to file ISF timely, 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, don t delete and redo an untimely ISF. ISFs can be updated until cargo arrives in the U.S 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. CBP requires updated information and ACE match at least 24 hours prior to cargo arrival for targeting purposes. A Flexible Filing (FR, FT, FX) must be updated 24 hours prior to cargo arrival as a Complete Transaction (CT). Failure to do so can result in a liquidated damage claim. CBP recommends fling as a Complete Transaction (CT) since updates can always be made.

29 ISF Compliance Best Practices Cannot transfer ISF liability once an ISF Bond is transmitted An ISF bond is obligated at the time the ISF transaction is filed; can only be voided when there is a duplicate or cancelled ISF. 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 cargo s 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. 29

30 ISF Compliance Best Practices Exposures for ISF Importer of Record ISF importer responsible for timely, complete, accurate ISF. 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. Exposure for ISF Filers (CHB or OTi) 30 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

31 Contact and Links to Information Avalon Underwriting Questions Group phone line: Gabriela Craver: Surety Underwriting Manager Claim Questions Zuleika Medina: Surety Claims Manager Web Merlin IT Questions: Additional ISF Information CBP CBP ISF Page curity_filing/ CBP ISF FAQs 7/9/ rriers/security_filing/10_2faq.ctt/10_2faq.doc ISF Liquidated Damage Mitigation Guidelines Continuous Bond Formulas and Sufficiency Information onds/pilot_program/bond_form.ctt/bond_form.pdf 31

32 More Questions?