Saturday, October 24, 2009

Importer Security Filing Fines, Penalties, and Their Mitigation

As noted in the previous posting, up until recently the required Importer Security Filing (ISF) information was typically provided after the order had shipped.

Because of the change in information and document flow ISF compliance requires, U.S. Customs has allowed a period of “flexible reporting” and “flexible enforcement” ending January 26, 2010. This is when fines, penalties, and “Do Not Load” messages will begin.

Flexible Reporting –

The actual manufacturer or supplier, country of origin, HTSUS (U.S. customs tariff classification), and final ship-to party may not be accurately known 24 hours before the cargo is loaded. Until January 26, 2010 importers will be permitted to submit an initial response based on their knowledge or data available at the time of filing. They must then update the ISF with accurate information no later than 24 hours prior to arrival at the first U.S. port.

Flexible Enforcement –

CBP will refrain from assessing fines or penalties as long as the importer is “showing good faith” in filing accurate and on-time ISFs during this period. CBP has begun issuing “report cards” documenting current accuracy and timeliness, and expects continued importers compliance improvement.

The “flexible reporting” and “flexible enforcement” period ends January 28, 2010, when CBP will begin issuing fines. They will then also issue “Do Not Load” messages via AMS to the carriers, effectively “stranding” containers at origin.

ISF Penalties and Mitigation

CBP has now released their guidelines for determining and levying ISF penalties and what it considers potential mitigating circumstances regarding severity of the penalties.

The ISF ruling and guidelines on penalties and mitigation are written vaguely. They provide CBP almost unprecedented discretion and a wide range of actions in both assessing and resolving claims of infraction. In fact, CBP may simply allege failure to file, incomplete or incorrect data, and treat as breach of the importer’s bond; i.e. the importer failed to comply with U.S. import laws and regulations.

First offenses are subject to fines and penalties (liquidated damages) up to us$5,000, and may increase with subsequent violations. The most serious violation is obviously failure to file and blatant deception.

Major offenses under ISF include failure to file, filing late, filing inaccurate information, failing to file updated information, and failure to withdraw a filing the importer has learned is inaccurate.

Published mitigating factors for importers include:

Evidence of good faith progress providing ISF data during the “flexible period”
Relatively low number of violations compared to total ISF filings
ISF failure due to reasons beyond the control of the importer (i.e. carrier had to divert ship to another port)
Faulty ISF data was based on commercial or shipment information from another party but within normal international commercial acceptance.

Cancellation of ISF fines and penalties may be possible if the importer can demonstrate it was not able to verify the data before the filing and / or it was reasonable to believe the information was true, and corrective action has been taken. Up to 50% reduction of fines is possible if the ISF importer is C-TPAT certified.

Published aggravating factors are:

X ISF failures were intentional deception, part of smuggling, or supporting violations of other import laws or regulation
X Consistent faulty data or violation for the same data field
X Consistent multiple errors on the same ISF
X Obstruction or failure to cooperate with Customs investigations of any violation

Due to the fast approaching final deadline (January 26, 2010) to be in full ISF compliance, it is highly recommended that U.S. importers advise their suppliers of these new requirements. It would also be appropriate to revise and amend foreign purchasing agreements, Letters of Credit, etc., to clarify and define supplier or seller support for this data collection. If you are a Supplier or Agent for a U.S. Importer and have not been contacted by your clients please reach out to them now.

If you do not fully understand the Importer Security Filing requirements, need assistance in selecting a partner or implementation, or have any other questions, please contact us immediately!

1 comment:

Anonymous said...

Good article on ISF. Another source is the recent Global Trade News blog posting which provides tips on how to get started on developing an approach for filing your ISFs. You can find that post at