The webinar lasted almost 90-minutes and began with an overview of the ISF program by the former CBP ISF Program Manager Craig Clark (Craig will be moving to another CBP program and Peyman Jamshidi will takeover as the new ISF Program Manager). Other items on the agenda were:
- Bill of Lading Match
- Cargo Holds
- Liquidated Damages
The two biggest changes that will occur on May 15, 2015 are; that CBP Headquarters will no longer be reviewing liquidated damages cases issued by the ports of entry and the ports issuing those claims are no longer required to use the "three strike rule" of warnings prior to issuing a liquidated damage claim. These changes are for ISF-10 only, ISF-5's are not impacted by this move to full enforcement because ISF-5 is still in the Notice of Proposed Rule Making (NPRM) phase. CBP has conducted more than twenty ISF Outreach Sessions around the country and they are projecting that more than 12 million ISF's will be filed by importers in 2015. Currently there are approximately 289,000 regular ISF filers. 85-90% of ISF's are filed by customs brokers and the current national compliance rate is at 92%.
CBP has two tools in their tool chest to encourage and enforce timely and accurate ISF filings, cargo holds and liquidated damages. The policy for cargo holds will not change on May 14th, it will be subject to local CBP port policy. But one thing is for sure, a cargo hold by CBP will result in a delay and that's costly.
The other tool CBP has is liquidated damages. While Craig Clark kept emphasizing the point that on May 15th it will not become, "The Wild West as it relates to liquidated damage cases" more cases are expected. CBP will continue to focus their primary enforcement efforts on repeat offenders. Importers who file inaccurate or "significantly late" ISF's will be exposed to the potential of liquidated damages in the amounts of $5,000 per transaction, to a maximum of $10,000 per transaction (Customs-Trade Partnership Against Terrorism (C-TPAT) importers get an automatic mitigation reduction of 50% of the liquidated damage amount). What does "significantly late" mean? CBP's Craig Clark said that the term is, "Intentionally nebulous" because CBP understands that transit times from various regions of the world differ significantly (i.e. the Caribbean islands to the U.S. is a matter of days, versus Asia to the U.S.). The bottom line is this; if the ISF is not filed timely (24 hours prior to vessel departure) and that prevents CBP from doing effective targeting of the shipment, you will most likely incur a liquidated damage claim. Mr. Clark also indicated that some CBP ports may use their discretion to continue issuing warnings, but that after May 14th they are not obligated to do so.
Having a bill of lading (B/L) match to an ISF is absolutely imperative, without it CBP cannot see the ISF and an importer will be exposed to liquidated damages. The B/L number is the phantom 11th data element on an ISF-10. CBP cannot target the shipment of verify timeliness without a B/L match. The B/L used on an ISF should be at the lowest common denominator (house or regular B/L). ISF filers should always ensure that they receive a 3Z and S1 disposition codes from CBP. The 3Z links the ISF to the Automated Manifest System (AMS). The S1 codes indicates a valid B/L match. If your shipment arrives in a U.S. port without a 3Z or S1 you are definitely exposed to a possible liquidated damage claim.
The Automated Commercial Environment (ACE) system will query a B/L match for 60 days only. If you are filing your ISF's more than 60 days prior to U.S. arrival it is likely that you will need to refile it. In most cases the ISF should not be deleted.
Some importers have experienced B/L match drops from ACE. This is where the ISF shows a valid B/L match one day and then with no changes is switches back to "no match." CBP is in the process of deploying fixes to this issue. If you are one of the importers experiencing such issues document your first filing carefully and use this in your mitigation letter to CBP.
CBP will not be using the 2Q disposition code, in the enforcement of ISF; this code is for national security threats only. The 2Q amounts to a "Do Not Load" message to the carrier. If importers or brokers see a 2Q message they are encouraged to refer it to CBP headquarters for clarification with the port of entry.
ISF timeliness measurements are made based on the ISF being filed 24 hours prior to vessel departure date. This date is based on the Vessel Departure Message (VDM) received by CBP from the carrier.
ISF liquidated damages are $5,000 per transaction; $10,000 maximum per transaction. These cases will most likely be initiated by the local CBP port when no ISF is on file and the shipment has arrived in the U.S. or when there is no B/L match. CBP local ports have up to six (6) months to issue the liquidated damage claim and this does not absolve CBP of its right to issue claims up to six (6) years per statute. Craig Clark continued to emphasize that liquidated damage cases will continue to be focused on repeat and egregious offenders.
ISF bonding exemptions will remain in effect for those items listed below:
- 03 Household/Personal Effects
- 04 Government/Military
- 05 Diplomatic
- 06 Carnets
- 09 International Mail
- 11 Type 11 informal entries (value <$2,500)
Mr. Clark advised that during the CBP Headquarters review period the, "Vast majority of the liquidated damage cases were being initiated for late ISF's and B/L mis-match." All future liquidated damage claims will be issued on the CBP CF-5955A.
Once again, the B/L match must occur for the ISF to be considered by CBP to be accurate and timely. And, the match should occur before the U.S. CBP port of arrival performs their targeting, usually within 4-5 days of arrival. ISF filers should always update a timely filed ISF, do not delete it and redo it. Updates to ISF's are allowed during transit to reflect the most current information. Importers or filers can also update ISF after the goods have arrived, however such updates will not be seen by CBP and are only for the importer's records.
CBP discouraged importers from using the Flexible Filing options stating that a "Compliant Transaction" filing offers plenty of flexibility. Less than 1% of all importers are using Flexible Filing options today.
As the webinar wrapped up Craig Clark announced that he will be moving to become the Program Manager for the Air Cargo Advanced Screening (ACAS) pilot. ACAS will most likely become the "ISF for international air cargo" and the initiative was born our of the terrorist events involving toner cartridges being shipped from Yemen. In his absence, Peyman Jamshidi will become the new CBP Program Manager for ISF. Peyman can be reached at firstname.lastname@example.org.
In closing Craig Clark reiterated that CBP Headquarters is not totally divorcing itself form ISF Enforcement, they will still be providing some guidance and oversight to the local CBP ports. Within the next week we will be posting the link to the recording of this webinar and the slides. Within the next 2-3 weeks CBP should be issuing the refreshed ISF FAQ. We will be updating our site with all of that information as soon as it is published. The two biggest takeaways from the webinar were, effective May 15, 2015:
- CBP Headquarters will no longer be reviewing liquidated damage cases before they are initiated, this responsibility and discretion now lies with the local CBP port and;
- The three strike rule has essentially been eliminated and while some ports may still issue warning letters before a liquidated damage case, they are not obligated to do so