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

ISF Enforcement

Lisa Gelsomino

President/CEO – Avalon Risk Management

M. Craig Clark

Program Manager – CBP Headquarters Office of Cargo and Conveyance Security

Introductions

Lisa Gelsomino,

• 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 http://www.avalonrisk.com/isf.html

• 847-700-8192 or lgelsomino@avalonrisk.comISF Hotline: 847-700-TISF(8473)

M. Craig Clark,

• 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 craig.clark@cbp.dhs.gov

• Or send questions to security_filing_general@cbp.dhs.gov • Refer to CBP ISF website for current information

ISF Timeline

ISF Action Date

ISF Proposed Rule (NPRM)

01/02/08

ISF Interim Rule

01/26/09

“Flexible” Enforcement 01/26/09

ISF Document

1

_{notice of ISF bonds}

_{CBP 19CFR149(b)}

CBP

ISF Interim Rule

CBP

ISF Web Page

CBP

ISF Mitigation Guidelines

“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

CBP

ISF Mitigation Guidelines

CBP

CSMS Enforcement Message

Questions or comments to:

security_filing_general@cbp.dhs.gov

ISF by the Numbers

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

January 26 – September 21, 2010

6.2 million ISF-10s

2,350 Filers

194,000 ISF importers on file

97% importers filing ISF nationally

95% importers filing ISF

6,000 vessel stow plans

101 million container status messages

97% importers filing ISF nationally

82% compliance in NY/NJ

January 01, 2013 – December 31, 2013

10,508,000 ISF-10s

2,500+ Filers

264,000 + ISF importers on file

90%+ importers filing ISF nationally

22,000+ vessel stow plans

ISF Enforcement Effective 7/9/13

Vessel Stow Plan

1. Booking Party name/address 2. Ship to Party

3. Commodity HTS-6

(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

ISF-5 “Transit” Cargo

24 Hrs Prior to Lading*

Carrier Requirements

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

4. Foreign Port of Unlading 5. Place of Delivery

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

*FROB ISF-5 is required anytime prior to lading

w/in 24 Hrs of Creation or Receipt

ISFs must contain the lowest bill of

lading number (i.e., regular or house

B/L) as referenced in the Automated

Commercial Environment (ACE).

line-item at the ISF shipment level *ISFs for “exempt” break bulk shipments are required NLT 24 hrs

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

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.

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.

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

Notices are all similar, contact local port for details

Port Notice Link

LA 13-026 Public Bulletin

Pipeline 13-027-NWK

CBP Trade Information Notice 13-17 WA

Seattle 07/22/13

San Francisco/Oakland 07/25/13

Baltimore 08/05/13

CBP Trade Information Notice 13-17 WA

Notice 782-13-09

BWI Port Information Notice 2013-16

• 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.

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 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.”

•

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.

ISF Exposure for Importers

• 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.

ISF Exposure for Importers

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

•

Liquidated Damage Costs

Violation% 10% 10 $ 50,000 $ 23,500 $ 11,750 $ 61,000 $ 50,000 Violation% 20% 20 $ 100,000 $ 48,500 $ 25,250 $ 73,500 $ 50,000

• 100 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 1st _{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.

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

Liquidation One Year

Statute of Limitations 6 Years

Mitigation Only Petition/No OIC

Liquidation ISFs don’t liquidate

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

• 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.

Customs Bond Contract

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.

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)

– 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

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 7/17/2013 6 7/31/2013 Not Available Petition Pending 7/12/2013 7/24/2013 13 7/29/2013 Not Available Petition Pending 7/12/2013 7/24/2013 13 7/29/2013 Not Available Petition Pending 7/12/2013 7/29/2013 18 7/31/2013 Not Available Petition Pending 7/12/2013 7/30/2013 19 7/29/2013 Not Available Petition Pending

7/12/2013 7/18/2013 4 7/31/2013 40% ISFs Late

5/1/13-7/31/13

Petition Granted reduced to $500 7/22/2013 7/24/2013 3 7/28/2013 Not Available Petition Granted reduced to $500

Mitigation Guidelines

Violation Type Cause Max. 1st_{Violation All Other 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.

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.”

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. they are having with non-filers or repeat late-filers.

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

(previous 12 months) +

10% - unpaid bills not protested and less than 210 days or protested

= 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

B

A

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

C

D

E

B

A

C

D

E

Question 6 – Mitigating ISF claims?

•

Importer’s ISF Performance Record

•

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

–

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.

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. 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.”

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, 2013. CBP has advised that negligent importers will be the 2013. 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.”

Question 3 – ISF Obligations

and Updates

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.

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:

https://help.cbp.gov/app/answers/detail/a_id/779/~/c-tpat--certified-participants

Number 1

Number 1

Top 10 List of ISF Questions

Bill of

Lading

Match in

•

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

Bill of Lading Match in ACE

– 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

Final Wrap-Up

Final Wrap-Up

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.

•

ISFs can be updated until 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.”

– 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.

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

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)

=

is also subject to penalties under

19 U.S.C. 1595a(b)

=

value of cargo.

•

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.

Contact and Links to Information

Avalon

Underwriting Questions Group email: Bond-underwriting@avalonrisk.com,

phone line: 847-700-8473

Gabriela Craver: gcraver@avalonrisk.com

Surety Underwriting Manager

Claim Questions Zuleika Medina: zmedina@avalonrisk.com Surety Claims Manager

Web Merlin IT Questions:

helpdesk@avalonrisk.com

Additional ISF http://www.avalonrisk.com/isf.html

Additional ISF Information

http://www.avalonrisk.com/isf.html

CBP

CBP ISF Page http://www.cbp.gov/xp/cgov/trade/cargo_security/carriers/se

curity_filing/

CBP ISF FAQs 7/9/2010http://www.cbp.gov/linkhandler/cgov/trade/cargo_security/ca

rriers/security_filing/10_2faq.ctt/10_2faq.doc

ISF Liquidated Damage Mitigation Guidelines http://www.avalonrisk.com/questnewsletter/news/mitigation.pdf Continuous Bond Formulas and Sufficiency Information http://www.cbp.gov/linkhandler/cgov/trade/trade_programs/b onds/pilot_program/bond_form.ctt/bond_form.pdf

More Questions?

More Questions?