E-Day! ISF enforcement period begins

E-Day! ISF enforcement period begins

   Importers should experience 'a fairly seamless transition' Tuesday to full enforcement of a new advance cargo data requirement, said Richard DiNucci, director of the Importer Security Filing at U.S. Customs and Border Protection.

   'You shouldn't see a lot of holds,' DiNucci said Monday in a teleconference with reporters.

   DiNucci's team spent last week briefing trade associations about the agency's enforcement posture after a one-year grace period designed as a practice run for industry and regulators. Under the policy, enforcement will ratchet up in phases culminating in the late third, or early fourth, quarter with the issuance of liquidated damages claims against shippers who continue to file improper Importer Security Filing documents, he said.

   The ISF must be filed 24 hours prior to vessel loading overseas and include 10 sets of data related to the cargo contents, shipper, logistics provider and consignee, and is linked with two sets of container data from the ocean carrier — hence its moniker '10+2.' The rule has instigated significant changes in import business practices as companies hustle to track down the data from overseas partners, and develop information technology tools for collecting and transmitting it.

DiNucci

   During the first quarter, DiNucci reiterated, CBP will start measuring each importer's compliance and whether filings are on time, accurate and complete. Data that doesn't meet the requirements will result in a warning notice identifying problems with the document. Poor compliance during this period will not result in liquidated damages, but could lay the groundwork for damages later in the year if the importer hasn't cleaned up its act.

   Liquidated damages are assessed for failure to meet the conditions of a bond purchased to guarantee compliance with Customs regulatory requirements. They are technically different from penalties, which are dispensed as punishment for smuggling and other violations of law. Importers are subject to damages of $5,000 per ISF transmission, which could reach $10,000 for some shipments if amended documents are filed that also include errors.

   An importer that does not file an ISF increases the possibility of the shipment being considered high risk and held for security reviews, which could result in requests for extra documentation, container imaging or unloading the container for a physical inspection, DiNucci said.

   CBP expects to issue more hold notices for inspections during the second and third quarters as ISFs with serious errors get greater scrutiny, he said.

   The ISF program chief abstained from making any hard-and-fast rules on the exact timing of the liquidated damage phase, only saying the agency will look at the circumstances surrounding any compliance violation and always reserves the right to take enforcement measures related to security.

   In line with the stated purpose of the rule, a potential security risk identified by the ISF data could ultimately result in a 'Do Not Load' message at the foreign port of origin.

   CBP has received more than 4.5 million '10+2' files in the past year and is processing about 30,000 to 40,000 ISFs per day, DiNucci said Jan. 20 at a trade seminar in Los Angeles. There are about 2,100 unique entities (importers or agents) that have filed the document representing about 120,000 importers, up from 1,200 filers several months ago.

   The error rate has increased to 4 percent of all ISFs in recent weeks from 2 percent or 3 percent, which DiNucci attributed to the larger number of companies now filing the '10+2.'

   The biggest reason for mistakes is duplicate filings because filers panic when they do not get an immediate response from CBP's system confirming receipt of the ISF, and file again. DiNucci said the average system response time is two minutes and urged filers to be patient when transmitting.

   CBP is pleased that the majority of frequent importers appear to be filing and taking steps to correct data glitches, but DiNucci acknowledged that there is a large segment of importers that procrastinated and are not prepared to comply. They will likely face tougher enforcement actions because one of the mitigating factors for damages is whether a company filed ISFs during the one-year delayed enforcement period and worked with CBP to identify and correct problem areas.

   DiNucci said his office would continue its efforts to educate the trade community about the rule and how to implement it by speaking at industry events and conducting a second round of seminars at ports of entry in the spring and summer.

   CBP has received about 135 million vessel stow plans, one of the two data sets required of ocean carriers. The stow plans show the location of all the containers in the vessel.

   The information has enabled the agency to identify many containers that are not listed on the manifest on file with CBP. Under a separate rule, carriers must submit their cargo manifest 24 hours prior to loading.

   CBP officers are working with the carriers to quickly obtain the information about who the containers belong to without delaying vessel departure or the container loading process, DiNucci said.

   Eventually, CBP will strictly enforce manifest compliance too, he said.

   The agency will continue its practice of issuing progress reports to ISF filers as a way to help importers identify compliance problems, but many traders have complained that the high-level summaries do not help a company drill down and figure out problems with specific shipments so those mistakes can be corrected in the future.

   DiNucci said in Los Angeles that the program will attach a unique identifier to each shipment listed on the progress report to make it easier for customs brokers, freight forwarders and importers to figure out which shipments had data or late errors by tracking back to the transaction details already in their possession or in the possession of business partners.

   The program's staff has been instructed to develop the unique identifier as soon as possible, he said.

   He ruled out data dumps of detailed ISF material as a way to solve the problem because such a move was too complicated, expensive and risky from a data privacy standpoint.

   DiNucci said CBP would be lenient on late filings until it resolves problems with measuring the time of filing. The agency originally benchmarked the ISF against the first bill of lading listed on the cargo manifest filed by the ocean carrier. Each ISF must include the bill of lading number so CBP can match the documents. The process ends up penalizing importers who may file the ISF on time but appear late because the carrier filed the manifest earlier than CBP's deadline — also 24 hours prior to loading.

   The agency is adding a second tool by measuring whether the ISF is filed 24 hours before vessel departure. The new measuring stick was expected to improve on-time performance, but technical glitches resulted in some filers recently receiving progress reports with worse scores. CBP is correcting the problem and says scores should improve as a result.

   'We aren't going to be hammering liquidated damages on timeliness until we solve the measurement issue,' DiNucci said in Los Angeles.

   About 60 percent of ISF filings are on time based on the strict manifest comparison, he said. ' Eric Kulisch