Importer Security Filing Enforcement Begins

August 14, 2013

In recent communications to the importing public, U.S. Customs and Border Protection (CBP) announced that the enforcement phase of the Importer Security Filing (ISF) program has started. This was originally announced on the CBP website on June 7, 2013, and individual ports have followed with information notices of their own. The Port of San Francisco posted its information notice on July 15, 2013.

The ISF program requires importers and vessel-operating carriers to provide specific advance trade data to CBP on cargo shipments 24 hours prior to the cargo being laden aboard the vessel. The intention of these requirements is to allow CBP to screen and identify cargo that may be suspicious, and require further examination before loading.

The failure to file; to file on time; or to file incorrect or inaccurate information can result in CBP issuing a refusal to load; a refusal to unload or hold cargo that is non-compliant, or in the case of ISF importers, the assessment of a liquidated damage penalty of $5,000. Carriers are subject to similar liquidated damage penalties. Most liquidated damage penalties for ISF violations will be subject to significant reductions upon submission and consideration of a petition for mitigation.

Background

In November 2008, CBP published its Interim Final Rule (CBP Dec. 08−46) (73 FR 71730), requiring that CBP receive, by way of a CBP-approved electronic data interchange system, information pertaining to cargo destined to the United States by vessel. These regulations can be found in section 4.7 for carrier requirements and new section 149.1 et seq., of the Customs Regulations (Title 19, CFR) for Importer Security Filings.

ISF Importers, as defined in the regulations, are generally required to submit an ISF containing 10 data elements relating to cargo destined to arrive in the United States.

An ISF is required for each shipment, at the lowest bill of lading level (i.e., at the house bill of lading level, if applicable). The manufacturer (or supplier), country of origin, and HTSUS number must be linked to one another at the invoice line item level. The party required to submit the ISF is the party causing the goods to enter the limits of a port in the United States. The ISF Importer, as a business decision, may designate an agent to file the ISF on the ISF Importer’s behalf; however, the ISF Importer will remain responsible for the proper and timely filing of the information.

The party who files the ISF must also update the ISF if, after the filing and before the goods arrive within the limits of a port in the United States, there are changes to the information filed or if more accurate information becomes available. According to CBP, it is a violation to:

• fail to submit an ISF when one is required;
• submit a late ISF;
• submit an inaccurate ISF;
• submit an inaccurate update when one is required by 19 CFR § 149.2(d), and
• fail to withdraw an ISF when required by 19 CFR § 149.2(e).

Under 19 CFR § 113.62, CBP may assess a claim for liquidated damages against the party in the amount of $5,000 for any one of the circumstances identified above.

End of Delayed Enforcement Period

While the Interim Final Rule on filing requirements was effective January 26, 2009, CBP delayed the implementation of its enforcement phase to provide the trade community sufficient time to adjust to the new requirements and implement business process changes necessary to achieve compliance. The June 7, 2013, notice from CBP announced that this interim period is over, and it will now take appropriate enforcement actions, including but not limited to, issuance of a “Do Not Load” (DNL), as a prelude to a denial of a permit to unlade the container upon arrival in the United States. DNL holds are issued by CBP to alleviate risk. Penalties and liquidated damages; however, are appropriate responses for breaches of the bond conditions or obligations imposed by law or regulation. If the ISF requirements are not met, CBP may use any enforcement remedy available to it, including, but not limited to, the assessment of liquidated damages and other monetary penalties.

According to CBP all liquidated damage claims contemplated by ports for ISF violations will be reviewed by HQ prior to issuance. There are approximately 100 claims pending review since the lifting of the stay on enforcement, and some of these claims have been approved.

Petitioning For Relief of Liquidated Damages Claims for ISF Violations

In July 2009, CBP published guidelines on the Assessment and Cancellation of Claims for Liquidated Damages for failure to comply with the ISF Requirements (CBP Bulletin & Decisions, Dec. 09−26, VOL. 43, NO. 28). Tier 2 or Tier 3 C‑TPAT members are to receive additional mitigation above the amounts provided to non-Tier 2 or Tier 3 C‑TPAT importers.

First-Time Violations: If an ISF Importer incurs a liquidated damages claim for filing a late or inaccurate ISF or an inaccurate ISF update, the liquidated damages claim may be cancelled upon payment of an amount between $1,000 and $2,000, depending on the presence of mitigating or aggravating factors, if CBP determines that law enforcement goals were not compromised by the violation.

Subsequent Violations: If an ISF Importer incurs a subsequent liquidated damages claim for filing a late or inaccurate ISF or an inaccurate ISF update, the liquidated damages claim may be cancelled upon payment of an amount not less than $2,500 if CBP determines that law enforcement goals were not compromised by the violation.

1. Mitigating factors include, but are not limited to:

1. Evidence of progress in the implementation of the ISF requirement during the flexible enforcement period (i.e., January 26, 2009 through January 26, 2010).
2. Small number of violations compared to the number of shipments for which ISFs were required.
3. An ISF Importer which is a certified Tier 2 or Tier 3 C‑TPAT member may receive additional mitigation of up to 50% of the normal mitigation amount, depending upon tier of C‑TPAT participation.
4. Demonstrated remedial action has been taken to prevent future violations.
5. ISF information was filed late because of vessel diversion due to factors outside of the ISF Importer’s control (e.g., due to weather).
6. Regarding an inaccurate filing, the presenting party acquired the information from another party in accordance with ordinary commercial practices, and can demonstrate that it reasonably believed the information to be true, and it was not reasonably able to verify the information. This is an extraordinary mitigating factor that may warrant cancellation of a claim without payment.

2. Aggravating factors:

1. Lack of cooperation with CBP or CBP activity is impeded with regard to the case.
2. Evidence of smuggling or attempt to introduce or introduction of merchandise contrary to law. This may be considered an extraordinary aggravating factor.
3. Multiple errors on the ISF.
4. There is a rising error rate which is indicative of deteriorating performance in the transmission of ISF information.

An ISF importer has 60 days from the date of issuance of the demand for liquidated damages to file a petition for mitigation. A successful petition for mitigation should address the existence of mitigating factors and the absence of any aggravating factors.

Additional Statutory Penalties

Liquidated damages cannot be assessed for the failure to file an ISF if no bond is in place. CBP will withhold the release or transfer of the cargo until CBP receives the required ISF information. CBP also reserves the right to limit the permit to unlade so as to not permit unlading of merchandise for which no ISF has been filed, and, if such cargo is unladen without permission, it may be subject to seizure 19 USC § 1595a(b).

A penalty may also be assessed under 19 USC § 1595a(b), or any other applicable statutory authority, for serious or repetitive violations. Section 1595a(b) penalties will be mitigated in a manner consistent with current guidelines for section 1595a(b) penalties for violations of a statute other than 19 USC § 1448 or § 1499.

If you have any questions about these or other customs matters, please contact George R. Tuttle, III, at george.tuttle.iii@tuttlelaw.com or at (415) 986-8780.

George R. Tuttle, III, is an attorney with the Law Offices of George R. Tuttle in San Francisco.

The information in this article is general in nature, and is not intended to constitute legal advice or to create an attorney-client relationship with respect to any event or occurrence, and may not be considered as such.

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