U.S. Customs

The Reality of ISF Enforcement and What it Means for Importers

We’ve been waiting for a couple of years for active ISF enforcement. Apparently Customs has finally decided to get tough on ISF filings. The decision to start more strictly enforcing ISF filings was an apparent reaction to the big drop in ISF compliance in the beginning of the year. Customs apparently saw a decrease in ISF compliance from the mid 90 percentile to the 80 percentile range.

 

What we have seen in the past year or two is that shipments with ISF non-compliance were at a greater risk of an x-ray (NII – Non-Intrusive Inspection) exam. However this was by no means consistent, nor were we ever informed specifically that Customs was examining the shipment because of ISF non-compliance. As of July 15th, we have seen the following:

  • The port of Oakland started making use of newly activated cargo hold abilities for shipments that were non-compliant. All shipments are now required to be compliant and will be held until they come into compliance.
  • We have seen a dramatic increase in x-ray / NII exams. Almost every shipment with ISF non-compliance is marked for an x-ray exam. In fact, we are now able to see through our Customs Entry messaging whether the exam is being held due to ISF non-compliance. We have in only a few instances been able to mediate and prevent the exam.
  • The exam sites around the United States, not just Oakland, have been extremely busy due to the sudden increase in x-ray exams. In Oakland, where most of the x-ray exams are done at the terminals, we have seen delays extending past the normal five free days of storage time. The terminals have been offering free time extensions in these cases. We received a message today from Price Transfer’s exam site in Los Angeles that Customs is only today (August 7th) working on examining containers that in-gated at their facility on July 31st. That is a full 7-8 day delay!
  • We have NOT yet seen the any liquidated damage claims from Customs although they have made it very explicit that they will begin assessing penalties of up to $5000 per violation.

What can importers take away from the new realities of ISF enforcement?

  1. Make sure the ISF is being filed ON TIME. This requires getting the ISF information in a timely manner so that it can be filed 24 hours prior to vessel departure.
  2. Expect longer delays at the ports when your shipments are scheduled for an x-ray / NII exam. This is regardless of whether the exam is a result of ISF non-compliance or some other reason. The sheer number of x-ray exams due to ISF non-compliance has resulted in dramatic increase in the number of days it takes to complete the exams.
  3. As the number of shipments increase along with the urgency of those shipments during the peak shipping months, it becomes even more paramount for importers to make sure they have their Customs documentation and information clear, organized, and on time for ISF and Customs entry filing in order to avoid what we can expect to see is a congested Customs exam system.

– Jimmy Ting

Great World Customs Service

jimmyting@great-world.com

t: 650-873-9050 x.1019

More Information on Customs Enforcement of ISF Penalty Provisions

I was at a Customs seminar this morning. One of the issues discussed with our local members of Customs was ISF penalties and the confusion regarding how Customs plans on issuing penalties.
Apparently Customs will take a two pronged approach with penalties. The first step will be taken at the local port level. Customs officers at the local port level will initiate penalties. The second step will be taken on a national level. Once the penalty is issued, Customs at a national level will review the penalty before formally sending it out.
What does this practically mean? My personal take at this moment is that there may be variation from port to port on when penalties are issued. As I mentioned in my previous post about ISF enforcement, there are a few different possibilities for an ISF to be considered non-compliant.
Option 1.) The ISF may never have been filed.
Option 2.) The ISF may have been filed late. Note there are many possible reasons this could have happened.
Option 3.) The ISF may have been filed incorrectly (AMS bill of lading number being the top culprit). Most ISF filers usually catch the incorrectly filed ISF’s, but mistakes still happen.
If penalties are initiated at a port level, I could definitely see some ports taking a tougher, hard-line approach than another ports. Here in San Francisco, the local Trade Program Manager for U.S. Customs has indicated to us that they will go after extreme offenders. Importers who have large numbers of shipments with ISF non-compliance. I would hope that other ports will follow this thought process. I think the reality is that most large importers are the ones who are already compliant. The non-compliant importers tend to be small, one-time or first-time importers. Whether or not Customs at a national level will be able create uniformity in the assessments of ISF penalities is difficult to predict.
Regardless, the warning is now out there. Importers and ISF filers need to get their ISF filings straightened out right away.
-Jimmy Ting
jimmyting@gwlcorp.com
tel: 650-873-9050 x 1019

Customs to Begin Issuing Penalties for ISF Non-Compliance???

I’m putting question marks on the title of this posting as CBP’s two sentence posting on the CSMS messaging systems has left many in the importing community waiting for details. Here is a copy of the CBP message in entirety:

In order to achieve the most compliance with the least disruption to the trade and to domestic port operations, CBP has been applying a measured and commonsense approach to Importer Security Filing (ISF or 10+2) enforcement. On July 9, 2013 CBP will begin full enforcement of ISF, and will start issuing liquidated damages against ISF importers and carriers for ISF non-compliance.

Please visit http://www.cbp.gov/xp/cgov/trade/cargo_security/carriers/security_filing for more information and send questions to security_filing_general@cbp.dhs.gov.

If you actually visit the CBP website above, you will not currently find any new additional information about ISF filings. The open ended nature of the CBP message is leaving the importing community with number of unanswered questions.

1.) Is CBP going to focus on serial offenders who regularly and consistently fail to file ISF or are they going after each and every ISF non-compliance issue? How will they handle regular importers who might happen to have a late filing once every 100 shipments?

2.) Is CBP going to focus penalties on non-filing OR are they also going to be concerned with late filing of ISF?

3.) How is CBP going to handle possible clerical errors? How is CBP going to handle ISF’s that were filed on time, but with incorrect AMS matching of bills of lading?

Until these questions are answered, the importing community must assume the worst. That every possible instance of ISF non-compliance is subject to penalties. Here are some steps that I would recommend for the importing community.

1.) Importers need to make certain of who is the party responsible for making sure that the ISF is filed on time and correctly for each shipment. There could be multiple parties who maintain partial responsibility. For example, the freight forwarder may be responsible for getting ISF information to the importer in a timely and correct manner. The importer may be responsible for sending this information to the Customs Broker. 

2.) The importing community must make sure they keep records of just when the ISF information are sent over to the party responsible for the ISF filing.

3.) The importing community must make sure that the ISF information they receive is accurate. The #1 leading cause of ISF discrepancy that we see is a bad/incorrect AMS bill of lading number. When we receive an AMS bill of lading number that is not on file, there are two possible reasons that the number is not on file:

  • Either the bill of lading number is incorrect (bad or missing number). OR
  • The AMS filer (carrier or NVOCC) has not yet filed the bill of lading with AMS.

Whenever the ISF filer received a “bill not on file” message, the filer cannot assume that the bill of lading number they used was either correct or incorrect. It is entirely possible that they used the correct number, but the AMS filer just hasn’t completed their AMS filing yet. The ISF filing party must double-check with whomever gave them the ISF information to make sure that the number is accurate and be vigilant about each ISF filing until they receive the “bill on file” message.

Customs may have intentionally left their message vague and open-ended in order to reserve the right to penalize for any ISF non-compliance. Based on the number of messages and phone calls I have received from the importing community about this issue, I would hope that Customs will soon send out a follow up message clarifying how they intend to penalize importers.

Stay tuned. I will send updates when I receive them.

-Jimmy Ting

Great World

jimmyting@great-world.com

t: 650-873-9050 x1019

Retroactive Merchandise Processing Fee (MPF) Billing

Most importers are aware that the MPF was increased last year from 0.21% to 0.3464%. The minimum and maximum remained at $25 and $485 respectively. It was signed into law on October 21, 2011 with a retroactive date of effect of October 1, 2011. However Customs did not complete their programming of their computer systems to accept the new rate until November 5, 2011. All entries from October 1, 2011 and November 4, 2011 were initially entered at the old rate of 0.21%. Customs advised that these entries would be billed for the difference at a later time.

Customs did not get around to retroactive billing of MPF until the week of June 11, 2012. Importers who had entries from October 1, 2011 through November 4, 2011 should slowly begin to receive bills from Customs. Customs indicates that the additional bills will be sent out in batches from June to September 2012. Please note that de minimis amounts (increases of less than $20) will not be billed.

There are a few issues I would like to point out to our importers now that I have started to see the billings come in.

  • CBP has indicated that they will not assess interest on bill amounts for the increased MPF. However if you look closely at the CBP bills, you will likely find two amounts to be paid as well as an interest rate. One amount represents the additional MPF due. The other amount represents the amount due if the payment is received late. We urge importers to quickly send their payment to Customs before the “late date” in order to avoid paying interest for a late payment.
  • Please check closely to make sure that the bill from Customs is for an entry that was actually entered between October 1, 2011 and November 4, 2011. One importer already showed us a bill from Customs for an entry that was entered in September 2011, before the MPF increase. Furthermore, we received a message from Customs today acknowledging that they did make some errors in billing. Entries prior to October 1, 2011 should NOT have received this additional billing. If you receive an additional billing for an entry prior to October 1, 2011, please check with the Customs broker to confirm if the bill should be paid. Customs has indicated they will reliquidate these incorrectly billed entries by October 4, 2012 at the original rate of 0.21%. If you have already paid the additional amount, you should see a refund in the next couple of months. If you don’t received a refund by the end of October 2012, it is important that you discuss with your Customs Broker to file a Protest to claim back the incorrectly paid MPF.
  • Importers can pay Customs with one check, as long as a supplemental spreadsheet is provided, which lists each bill number and bill amount.

For those of you who have MPF additional bills that must be paid, get the payment sent out to Customs ASAP. Failure to pay bills due to Customs can lead to sanctioning. Feel free to contact us if you have any questions.

-Jimmy Ting

jimmyting@great-world.com