ISF Enforcement – The Time Has Come!
Information presented during recent CBP ISF webinar.
Wednesday May 13 marked the end of the final one-year limited Liquidated Damage (LD) "three strikes" phase of the six-year evolution of ISF enforcement.
In summary, here is a brief overview of the changes effective May 14, 2015:
- CBP Ports, who will continue to have flexibility in their processes, may commence issuing Liquidated Damages without HQ review and approval.
- Ports will no longer be under HQ mandate to issue three warnings before assessing Liquidated Damages.
What You Need to Know...
- Liquidated Damages (LD) are penalties resulting from the breach of a Surety contract which is protected by a Customs Bond.
- A customs bond is required to cover the ISF filing. A continuous bond covers both the ISF filing and Customs entry.
- ISF data elements and filing timeliness requirements remain the same – 24 hours prior to loading in a foreign port!
- Non-compliant ISF's are subject to cargo holds! CBP personnel at the local level will determine what a 'significantly late' filing is based on shipment parameters.
- A record of ISF non-compliance can threaten your C-TPAT status and/or participation.
- Ports have been advised to issue ISF claims within 6 months of a violation date but have the right to issue claims up to 6 years per statute (mostly in fraud cases).
- Liquidated Damage focus continues to be on egregious and/or repeat offenders.
Types of Violations include:
- Late filed ISF's
- Bill of Lading Mismatch (Inaccurate ISF data) at time of arrival into the U.S.
- Incomplete or Inaccurate ISF's
- Worst Case Scenario - $5,000 penalty liquidated damage per violation, no mitigation
- Best Case Scenario - $1,000 for 1st violation, $2,500 all subsequent violations
- C-TPAT Participants (Tier II & III only) - assumes 50% reduction of Best Case Scenario
Mitigating Factors include:
- ISF progress since 01/26/09
- Small number of violations to shipments (%)
- C-TPAT Tier II or III Status
- Demonstrated action to reduce future violations
- ISF filed late or inaccurate if due to factors outside of importer's control (i.e. carrier error)
Aggravating Factors include:
- Multiple errors on the ISF
- Rising / Deteriorating Error Rate
- Smuggling / Fraud
The Keys to Success:
- Know your responsibilities
- Educate all parties in your supply chain on the ISF filing requirements
- Establish clear lines of communication throughout your supply chain
- Incorporate sound procedures for ISF handling & filing into daily activities
- Remain diligent in your oversight and efforts
FAQ: Updated Importer Security Filing (ISF) Enforcement Strategy
This information can be found on the CBP Website.
What are the key points behind the new strategy?
- CBP has implemented a revised enforcement strategy which provides for local discretion at the port level based on infrastructure and staffing resources (i.e., holding freight vs. issuing liquidated damage claims).
- The strategy further provides for a standardized approach which will permit CBP HQ to conduct analysis into non‐compliant ISF filings with the intent to conduct focused outreach.
- The tenets of the strategy include at least three warnings (informed compliance outreach) to each violating importer before CBP will pursue a liquidated damage claim against that importer’s bond.
- The informed compliance outreach may be by e ‐ mail, telephone, or letter.
- This approach allows CBP to have greater visibility into who are the repeat violators, and it exposes any geographic areas that may require more focused ISF outreach.
- The 12‐month HQ review period that began on July 9, 2013 was also changed as part of the revised enforcement strategy. The last enforcement review concluded on May 13, 2015. HQ will be conducting analysis of the informed compliance records, effectively reviewing each record of violation to ensure that the violation aligns with the intent of the enforcement strategy.
- Liquidated damages claims should be expected within 6 months of the violation; however, this policy does not preclude CBP’s six‐year statute of limitations for liquidated damages claims.
- Ports have been advised to focus enforcement actions on the most severe violations (i.e., significantly late, or missing ISFs).
- “Significantly late” will be defined by the individual ports, and is intended to only apply to those shipments where the ISF filing (or lack thereof) negatively impacted CBP’s ability to effectively assess risk and hold cargo.
- ISF filings after arrival are always late and exposed to both liquidated damages claims and ISF holds.
What is affected by the new strategy?
- The initiation of liquidated damages claims for ISF violations.
- The port directors retain the discretion to enforce ISF by using the cargo holds that were introduced on July 9, 2013.
How will CBP track the violations?
- CBP will use an internal database to keep track of the violations. The database is visible nationwide, so officers on the west coast will be able to see actions taken by officers on the east coast against specific importers.
- CBP HQ will perform analysis of the data with the intent of identifying locations or importers where enhanced compliance outreach is required.
Is the enforcement only for ISF ‐ 10?
- Yes. Enforcement actions (including liquidated damages) for ISF ‐ 5 violations are not currently enforced, pending changes to the regulation.
Isn’t this policy unfair to high ‐ volume importers?
- No. The law has been in place since January 26, 2009, and CBP believes ample time has been provided for adjustment to the requirements of the law. Conversely, an enforcement approach that considered percentage based on volume is certainly unfair to less experienced importers.
What is CBP going to do about the liquidated damages claims that were requested prior to May 13, 2014?
- Unless in cases of fraud or criminal activity, CBP HQ will not be approving liquidated damages claims prior to May 13, 2014.