Transcript Slide 1

October Meeting, Thursday, 10/24/13
Seminar
Introductions
Lisa Gelsomino, President/CEO – Avalon Risk Management
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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
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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 Headquarters
Office 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
Port
Date
ISF Timeline
ISF Action
Date
ISF Document
ISF Proposed Rule (NPRM) 01/02/08 1st notice of ISF bonds CBP 19CFR149(b)
ISF Interim Rule
01/26/09 CBP ISF Interim Rule
Flexible Enforcement
01/26/09 CBP FAQ dated 07/09/10
Informed Compliance
01/26/10
ISF Enforcement
07/09/13 CBP CSMS Enforcement Message
ISF Final Rule
CBP FAQ
CBP ISF Mitigation Guidelines
OR&R Review CBP ISF Web Page
After Final Rule [email protected]
ISF by the Numbers
January 26 – November 23, 2009
January 26 – September 21, 2010
3.4 million ISF-10s
6.2 million ISF-10s
1,900 ISF Filers (90% customs brokers)
2,350 Filers
99,700 ISF importers on file
194,000 ISF importers on file
95% importers filing ISF
97% importers filing ISF nationally
6,000 vessel January
stow plans
26, 2012 – October 21, 2013
82% compliance in NY/NJ
101 million container
status
messages
18,200,000
million
ISF-10s
2,500+ Filers
354,000 + ISF importers on file
90%+ importers filing ISF nationally
37,000+ vessel stow plans
603+ million container status messages
© Avalon Risk Management
ISF Enforcement effective 7/9/13
ISF-10 “U.S. Bound” Cargo
1.
2.
3.
4.
5.
6.
7.
8.
ISF-5 “Transit” Cargo
Carrier Requirements
(3461 Entries, IT, FTZ)
(FROB*, IE, TE)
Vessel Stow Plan
24 Hrs Prior to Lading*
24 Hrs Prior to Lading*
NLT 48 Hrs After Departure*
Importer of Record or FTZ Number
Consignee Number(s)
Seller (Owner) name/address
Buyer (Owner) name/address
Ship to Party name/address
Manufacturer (Supplier) name/address
Country of Origin
Commodity HTS-6 digit level
1.
2.
3.
4.
5.
Booking Party name/address
Ship to Party
Commodity HTS-6
Foreign Port of Unlading
Place of Delivery
*FROB ISF-5 is required
anytime prior to lading
*Anytime prior to arrival for
voyages less than 48 Hrs
For all vessels carrying containers
Container Status Message
(CSM) Data
w/in 24 Hrs of Creation or Receipt
ASAP, But NLT 24 Hrs Prior to Arrival
9. Container Stuffing Location
10. Consolidator (Stuffer) name/address
*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
ISFs must contain the lowest bill of lading number
(i.e., regular or house) as referenced in the
Automated Commercial Environment (ACE).
Port
Date
ISF Enforcement on Local Level
Each port will implement based
on local needs/resource
Port
Date
Notices are all similar, attend
local port meetings for details
Port Notice Link
LA/Long Beach
07/12/13
LA 13-026 Public Bulletin
NY/NJ
07/19/13
Pipeline 13-027-NWK
Seattle
07/22/13
CBP Trade Information Notice 13-17 WA
San Francisco/Oakland
07/25/13
Notice 782-13-09
Baltimore
08/05/13
BWI Port Information Notice 2013-16
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
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–
–
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.”
ISF Exposure for Importers
• Calculate Exposure from Financial Perspective
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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.
100/Year
Violation%
%
3%
#
3
Worst
C-TPAT
Best
Average C1 Bond
$ 15,000 $ 3,000 $ 6,000 $ 8,500 N/A
Violation%
5%
5
$ 25,000 $ 5,500 $ 11,000 $ 16,000
N/A
Violation% 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
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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 Importers
Entry Process
Issue
Outcome
ISF Process
Issue
Outcome
Late-File
LD = $100
Late-File
LD = $5,000
Non-File
LD = # days late
Non-File
LD = $5,000
Incomplete/Inaccurate
Corrected Entry
Incomplete/Inaccurate
LD = $5,000
Mitigation
OIC or Petition
Mitigation
Only Petition/No OIC
Liquidation
One Year
Liquidation
ISFs don’t liquidate
Statute of Limitations
6 Years
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
Customs Bond Contract
• 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.
Liquidated Damage Claims
• Volume (per CBP as of 10/21/13)
– # Received By CBP-HQ:
– # Approved By CBP-HQ:
Over 200
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
7/31/2013
Not 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
7/31/2013
40% Late
from 5/1/13-7/31/13
7/22/2013
7/24/2013
3
7/28/2013
Not Available
Mitigation Guidelines
Violation 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
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.
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.
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
= minimum bond amount or $50,000
Duties, Taxes & Fees x 10%
(rounded up by increments of $10,000, up to $100,000 and
(previous 12 months)
then by increments of $100,000)
+
+
Exact Amount
10% - unpaid bills not protested and less than
210 days or protested
+
+
Exact Amount
$ for $ - delinquent bills not protested and over
210 days or denied protest
+
+
Exact Amount
$ for $ debit vouchers unpaid
+
+
Exact Amount
$ paid by surety
Total Amount =
A
+
B
+
C
+
D
+
E
A
B
C
D
E
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 Single
ISF 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.
© Avalon Risk Management
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 3
3)
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
Top 10 List of ISF Questions
Number 1
Bill of
Lading
Match in
ACE
Bill of Lading Match in ACE
• 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
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–
–
–
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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.
Final Wrap-Up
25
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 Information
Avalon Risk Management
Underwriting Questions
Claims Questions
Group email: [email protected], phone line: 847-700-8473
Gabriela Craver: [email protected], Surety Underwriting Manager
Zuleika Medina: [email protected], Surety Claims Manager
Web Merlin IT Questions:
[email protected]
Additional ISF Information http://www.avalonrisk.com/isf.html
CBP
CBP 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
http://www.avalonrisk.com/questnewsletter/news/mitigation.pdf
ISF Liquidated Damage
Mitigation Guidelines
Continuous Bond Formulas http://www.cbp.gov/linkhandler/cgov/trade/trade_programs/bonds/pilot_pr
and Sufficiency Information ogram/bond_form.ctt/bond_form.pdf
Questions?
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