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IntroductionsLisa 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 http://www.avalonrisk.com/isf.html• 847-700-8192 or [email protected] ISF Hotline: 847-700-TISF(8473)
Anthony Maresca, Deputy Chief Officer – Customs & Border Protection• Officer Maresca is assigned to the New York/Newark Sea Port• He is responsible for Anti-Terrorism sea cargo targeting • For ISF, contact problem resolution unit at [email protected]• http://www.cbp.gov/xp/cgov/trade/cargo_security/carriers/security_filing
M. Craig Clark, ISF Program Manager – CBP HeadquartersOffice 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 202-344-3052 or [email protected] • Or send questions to [email protected]• Refer to CBP ISF website for current information
ISF Timeline
ISF Action DateISF Proposed Rule (NPRM) 01/02/08
ISF Interim Rule 01/26/09 Flexible Enforcement 01/26/09
Informed Compliance 01/26/10
ISF Enforcement 07/09/13 ISF Final Rule OR&R ReviewCBP FAQ After Final Rule
ISF Document1st notice of ISF bonds CBP 19CFR149(b)
CBP ISF Interim Rule
CBP FAQ dated 07/09/10
CBP ISF Mitigation Guidelines
CBP CSMS Enforcement Message
CBP ISF Web Page
Port Date
ISF by the Numbers
© Avalon Risk Management
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
6,000 vessel stow plans
101 million container status messages
January 26 – September 21, 2010
6.2 million ISF-10s
2,350 Filers
194,000 ISF importers on file
97% importers filing ISF nationally 82% compliance in NY/NJJanuary 26, 2012 – October 21, 2013
18,200,000 million ISF-10s2,500+ Filers354,000 + ISF importers on file90%+ importers filing ISF nationally37,000+ vessel stow plans603+ million container status messages
Since ISF Enforcement on 7/9/13, 90% of importers are now filing ISFs nationwide.
ISF Enforcement effective 7/9/13
Vessel Stow Plan
Container Status Message (CSM) Data
1. Booking Party name/address 2. Ship to Party3. Commodity HTS-64. Foreign Port of Unlading 5. Place of Delivery
(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 5. Ship to Party name/address 6. Manufacturer (Supplier) name/address 7. Country of Origin 8. Commodity HTS-6 digit level
9. Container Stuffing Location10. Consolidator (Stuffer) name/address
ASAP, But NLT 24 Hrs Prior to Arrival
ISF-5 “Transit” Cargo
24 Hrs Prior to Lading*
*FROB ISF-5 is required anytime prior to lading
Carrier Requirements
NLT 48 Hrs After Departure*
w/in 24 Hrs of Creation or Receipt
*Anytime prior to arrival for voyages less than 48 Hrs
For all vessels carrying containers
ISFs must contain the lowest bill of lading number (i.e., regular or house) as referenced in the
Automated Commercial Environment (ACE).*Must be linked together as a line-item at the ISF shipment level
*ISFs for “exempt” break bulk shipments are required NLT 24 hrs prior to arrival
ISF Enforcement on Local 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, attend local port meetings for details
Port Notice Link
LA 13-026 Public Bulletin
Pipeline 13-027-NWKCBP Trade Information Notice 13-17 WA
Notice 782-13-09
BWI Port Information Notice 2013-16
Port Date
LA/Long Beach is Unique• Not enough resource to issue 400 LD claims/day to address all ISF violations.• Did not start out holding consolidated shipments, but is doing so effective 10/7/13
only on cargo that arrives without an ISF 48 hours prior to arrival. • Each port handling enforcement differently.
ISF Compliance – 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?– When ocean cargo arrives without an ISF– When an ISF is not timely or completely filed– Entry can’t be made w/out ISF
ISF Compliance – Cargo Holds
• 2Q is the code for Carrier Holds Overseas– Only used when there is a threat to national security– You should not expect the ocean carrier to hold cargo
for non-compliant ocean shipments.– Any instances of CBP holding cargo or containers
overseas without a 2Q code should be reported to CBP. • Once ISF data received, security assessment made
– Other enforcement could include: NIIs or intrusive exams;– Liquidated Damages could be assessed in addition to holds– Enforcement will vary by port depending on local needs– Estimated costs = $$$$$
ISF Compliance – 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.– “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. – “Past ISF performance may not matter when the port
issues a claim, but will always matter when CBP considers providing any mitigation.”
• Calculate Exposure from Financial Perspective– Inventory carrying 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– Liquidated Damage (LD) Exposure (now or future potential)– One day, ISF violations will receive LD claims routinely like Entry Process.
ISF Exposure for Importers
100/Year % # Worst C-TPAT Best Average C1 BondViolation% 3% 3 $ 15,000 $ 3,000 $ 6,000 $ 8,500 N/AViolation% 5% 5 $ 25,000 $ 5,500 $ 11,000 $ 16,000 N/AViolation% 10% 10 $ 50,000 $ 11,750 $ 23,500 $ 61,000 $ 50,000 Violation% 20% 20 $ 100,000 $ 24,250 $ 48,500 $ 73,500 $ 50,000
Remember C1 bond limits LD exposure to $50,000/year.
• 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• Average, mix of each
ISF Exposure for ImportersEntry Process
Issue OutcomeLate-File LD = $100
Non-File LD = # days late
Incomplete/Inaccurate Corrected Entry
Mitigation OIC or Petition
Liquidation One Year
Statute of Limitations 6 Years
ISF ProcessIssue Outcome
Late-File LD = $5,000
Non-File LD = $5,000
Incomplete/Inaccurate LD = $5,000
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 to cover the potential or known claim amount.
• Bonds are not Insurance
• CBP requires ISF bonding per CBP 19CFR149(b) & 19CFR113-G– Bond guarantees ISF importer’s compliance with all laws and regulations– Liquidated Damages result from breach of the surety contract– Late File/Incomplete/Inaccurate ISF subject to $5,000/$10,000 max.
• Parties to a Customs Bond Contract– Sureties obligate ISF importer’s performance to comply with laws; can
subrogate against importer and expect to be made whole.
Customs(Obligee)
Importer(Principal)
Surety Agent(Avalon)
$ IF Importer defaults
Surety(T-listed insurer)
CustomsBroker
$
$ $
$
Customs Bond Contract
Liquidated Damage Claims
• Volume (per CBP as of 10/21/13)– # Received By CBP-HQ: Over 200– # Approved By CBP-HQ: 24, 20 have been issued
• Types of Violations– Non Files– Late Files– Inaccurate/Incomplete– B/L Mismatch (will make ISF late, also inaccurate)
LD Claim Examples (Avalon data)
Departure Date
ISF Filed Date/Violation Date
# of Days Late
Date of Cargo Arrival in USA ISF Report Card Info
7/12/2013 7/17/2013 6 7/31/2013 Not Available
7/12/2013 7/24/2013 13 7/29/2013 Not Available
7/12/2013 7/29/2013 18 7/31/2013Not Available, claim has since been cancelled by local port
7/12/2013 7/30/2013 19 7/29/2013 Not Available
7/12/2013 7/18/2013 4 7/31/201340% Late
from 5/1/13-7/31/13
7/22/2013 7/24/2013 3 7/28/2013 Not Available
Mitigation GuidelinesViolation Type Cause Maximum 1st Violation All Other C-TPAT
ISF-10 Filing Late File $5,000 $1,000-$2,000 $2,500 50%
ISF-10 Filing Inaccurate $5,000 $1,000-$2,000 $2,500 50%
ISF-10 Filing Updates $5,000 $1,000-$2,000 $2,500 50%
ISF-10 Filing Withdrawals $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 implementation progress since 1/26/09;
2) Small # of violations/shipments; 3) C-TPAT Importer Tier 2 or 3; 4) Demonstrated action to reduce future violations; 5) ISF filed late, or
6) inaccurate, if due to factors outside importer’s control. • 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
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 and Yes because ISFs do not liquidate; subject to 6 year
statute of limitations per 28 USC § 2415(a).– For claims prior to 7/9/13, No unless in cases of fraud.
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 an LD claim?– This will vary by port depending on the compliance problems
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
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
B
A
C
D
E
B A C D E Total Amount = + + + +(rounded up by increments of $10,000, up to $100,000
and then by increments of $100,000)
© Avalon Risk Management
Question 6 – Use of ISF Type 5?• Yes, CBP still allows use of ISF Submission Type 5 (ISF Late-No Bond)• CBP FAQ pp 51-52, CSMS Message #11-000149, Quest 7/19/13
ISF-D SingleISF Submission Type 5
“ISF 10 Late – No Bond”
Potential issuance of LD for $5,000; mitigate 1st time violation $1,000-$2,000
“Admission of guilt or non-compliance,” only use for the “one-time” importer.
Cost of Bond Premium + Collateral/Fees($1,100 to $5,500 range
depending on mitigating factors)
Cost of NIIs or full examinations plus storage and delay of cargo for inspections
($3,000 to $5,000 range)
CBP prefers an importer file an ISF for security purposes and be properly
bonded to meet ISF requirements during full enforcement period.
CBP-HQ has advised that abuse can result in penalties against the ISF Importer
under 19 U.S.C. 1595a(b) reserved for serious and repetitive violations.
Question 5
5) How does CBP consider if an ISF is timely filed? What is CBP measuring on the ACE Report Cards?– 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.”
Question 4
4) When will importers be subject to LD claims?– “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 highest enforcement priority.”
– “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 33) Is CBP placing holds on consolidated cargo?
– Yes, but each port has a different practice.– CBP indicates less than 1% of all cargo is being held.– 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, such
as commodity or origin, should be of concern to CBP. – Some cargo holds may result in abandoned cargo and G.O.
Open Discussion
Question 2 –What about C-TPAT Cargo?
• When importers are C-TPAT certified….– Consider consolidating 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 for C-TPAT
• 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
• 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 must continue to query ACE to secure a match– This will link ISF to Customs manifest data in ACE to be visible to CBP
• CBP cannot target ISF or verify ISF timeliness without match– CBP needs match at least 24 hours prior to cargo 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. an i – Potential for 2 LD claims, late ISF
and the other for an inaccurate ISF. – Cap is $10,000 any one ISF transaction.
Bill of Lading Match in ACE
ISF Compliance Best Practices• Per CBP, always better to file ISF timely and 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 the 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.
– Thus, amendments made after 24 hours prior to arrival may be considered inaccurate.
ISF Compliance Best Practices
• Cannot transfer ISF liability once an ISF Bond is transmitted– An ISF-D Single is obligated at the time the ISF transaction is filed;
can only be voided when there is a duplicate or cancelled ISF.– Cannot transfer bond liability from ISF-D Single to C1 Bond.– If ISF Filer uses own bond, they assume liability of ISF importer.– 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.
ISF Compliance Best Practices• Exposures for ISF Importer of Record
– ISF importer responsible for timely, complete, accurate filing.– 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)– 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
Contact and Links to InformationAvalon Risk Management
Underwriting Questions Group email: [email protected], phone line: 847-700-8473Gabriela Craver: [email protected], Surety Underwriting Manager
Claims Questions Zuleika Medina: [email protected], Surety Claims Manager
Web Merlin IT Questions: [email protected]
Additional ISF Information http://www.avalonrisk.com/isf.html
CBPCBP ISF Page http://www.cbp.gov/xp/cgov/trade/cargo_security/carriers/security_filing/
CBP ISF FAQs 7/9/2010 http://www.cbp.gov/linkhandler/cgov/trade/cargo_security/carriers/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/bonds/pilot_program/bond_form.ctt/bond_form.pdf
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