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10+2 Interim Final Rule

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Overview

 

· The interim ISF rule was published on November 25, 2008 and will take effect 60 days later on January 26, 2009.

· The purpose of the Importer Security Filing AKA “ISF”, AKA “10+2” is to enhance CBP’s ability to identify high-risk cargo shipments.

· The interim rule includes a delayed compliance period of 1 year after January 26 during which CBP will “show restraint” in enforcing the rule as long as importers are making a good faith effort and satisfactory progress toward compliance.

· An importer or its agent may file the ISF via AMS or ABI.

The ISF filing is for ocean cargo only and CBP is not exploring the expansion of the ISF to other modes of transportation.

Significant Changes to the Rule

Some data elements, including manufacturer, ship to party, HTS and country of origin, may be submitted based on the best available data prior to shipment and then may be updated when more precise or accurate information is available, but no less than 24 hours prior to arrival at the first US port.  There is, however, no special timing flexibility for these elements.  They must be filed 24 hours prior to lading, but can be updated later in the voyage before arrival at the first US port.

In addition, CBP will allow some flexibility in the reporting of the above data elements.  For example, an importer could identify the manufacturer as being 1 of 3 typically used factories with more precision provided in subsequent updates.  An importer could submit the identity of the importer, consignee or facility where the goods will be unladen in the event the ship to party is unavailable.  An importer may provide the country where the final stage of production took place in lieu of the actual country of origin if, in good faith, the importer is unable to determine the actual country of origin at time of shipment.  The importer must update the ISF submission when more accurate data is available.

· The interim rule requires the reporting of 8 data elements no later than 24 hours before cargo is laden aboard a vessel destined to the US – seller, buyer, importer of record number, consignee number, manufacturer, ship to party, country of origin, HTS (manufacturer, COO & HTS linked at the item level).

· The interim rule also requires the reporting of 2 data elements no later than 24 hours prior to the ship’s arrival at the first US port – container stuffing location and consolidator name.

The liquidated damages amount for violations of the ISF has been changed from the value of the merchandise to $5000 per violation.

 

CBP Structured Review & Comment Period

CBP will conduct a structured review regarding barriers that importers may experience in submitting all 10 data elements 24 hours before lading.  CBP also invites comments on compliance costs for your industry segment and written comment on the 6 ISF elements that are subject to flexibility (manufacturer, COO, HTS, ship to party, stuffing location, consolidator name).  CBP will collect information and conduct an analysis in cooperation with the new administration to determine whether to eliminate, modify or maintain these requirements. Comment must be received by CBP on or before June 1, 2009 which is also the end of the information gathering phase of the structured review.  Comments should be identified by docket number and be made via http://www.regulations.gov or via mail to Border Security Regulations Branch, Office of International Trade, US Customs and Border Protection, 799 9^th Street, NW, Washington, DC  20001.  Commenters are urged to reference specific portions of the rule, explain the reason for any recommended change and include data, information or authorities that support such a change.

 

Data Elements & New Definitions

· CBP has redefined the label for the party required to submit the ISF from “importer” to “ISF Importer”.  The ISF importer is construed as the owner, purchaser, consignee or agent (agent can be a party that acts on behalf of the importer if they so choose, such as a licensed Customs broker).  The ISF importer is the party causing the goods to enter the limits of a port in the US.  CBP further clarifies that the party causing the goods to enter the US may be different depending on the terms of the transaction and this party may be a party other than the importer of record (e.g. “to order” shipments).  The ISF importer now has an obligation to ascertain and report the ISF data elements that CBP requires.

The importer of record number must be submitted by the ISF Importer for the entity liable for payment of all duties and responsible for meeting all statutory and regulatory requirements incurred as a result of importation.

· The supplier definition has also been clarified to the “party supplying” the finished goods in the country from which the goods are leaving.  When a manufacturer has more than one address, CBP would like the address where the goods were actually manufactured.  CBP understands that, in certain cases, this address may not be known to the ISF Importer and, therefore, will accept the corporate address for the manufacturer or supplier.

· CBP will now accept widely recognized commercially accepted identification numbers such as Dun and Bradstreet Data Universal Number System (DUNS) numbers as an alternative to the manufacturer name and address in the ISF.  In addition, CBP will accept the party’s DUNS number in place of the name and address for the seller, the buyer, the manufacturer (or supplier), the ship to party, the container stuffing location and the consolidator.

· If the buyer’s name and address is not available at the time of shipment, the identity of the owner, consignee or the buyer’s agent should be provided instead on the ISF.  For buying agent transactions, the buying agent should be provided for the buyer element and the party who sold the goods to the buying agent should be provided for the seller element.  When/if more accurate information becomes available, the ISF Importer must update the filing.

· The ship to party has been clarified by CBP to be the party scheduled to physically receive the goods after the goods will be released from CBP custody.  As the importer’s corporate offices usually differ from the actual delivery address, the actual ship to address must be provided.  If the party scheduled to receive the goods is not known 24 hours prior to lading, the filer must provide the identity of the facility where the goods will be unladen.  The ship to party must be identified even if it is not a separate legal entity from the importer.  CBP will now accept the DUNS or FIRMS code for the ship to party in lieu of the full name and address.  The ship to party is the first deliver to party scheduled to physically receive the goods after Customs clearance.  A container freight station can be the ship to party if it meets the parameters of the definition of the first place of delivery after the goods have been Customs released.

· CBP has clarified stuffing location to be the manufacturer’s factory location if the container is a factory load.  When a container is stuffed at more than one location or when more than one container is on a single bill of lading, all of the stuffing locations for the goods listed on the bill must be provided.  CBP agrees that the “scheduled” stuffing location will be accepted.  The filer must update this information, however, if information changes or more accurate information becomes available.

· Only one consolidator will be reported per ISF.  This is the party who stuffed the container or arranged for the stuffing of the container and might be the steamship line, the NVOCC, or the supplier.

· CBP is aware and accepts that the same entity might often be reported for more than one data element (e.g. consolidator and stuffing location might be the same).

CBP will not accept the MID in lieu of the manufacturer’s name and address.

 

General Guidelines for Filing the ISF

· One party must aggregate and submit all of the required data elements for each individual security filing (10 data elements).

CBP will assert the applicable exemptions to withhold ISF information from public disclosure unless authorized by law or required by court order.

 

Updating the ISF

· The party who files the ISF must update the ISF if, after the filing and before the goods arrive at the first US port, there are changes to the information filed or more accurate information becomes available.  If cargo is diverted to a different shipment type which requires different data elements (regular ISF to T&E, etc.), that data must be updated/added.  If a shipment is split from one bill of lading to several, the additional data must be reported.  If a shipment is rolled to a different vessel but the bill of lading number remains the same, no amendment is required.  If, however, a new bill of lading is issued or shipment details change, the data must be updated.  If the address of a party to the transaction changes while the goods are en route, an amendment must be filed.

· If goods are sold in transit, the original ISF filer must notify CBP that the goods have been sold, including the party to whom the goods have been sold.

When the ISF and entry filing are combined, both can be amended via the same electronic transmission.  If the ISF is filed separately, however, it cannot be updated via an entry summary transmission.

 

Compliance – The Importer’s Obligations under the Rule

· The ISF Importer is ultimately responsible for the timely, accurate and complete submission of the ISF.

· Where the ISF Importer receives any of the required information from another party, CBP will take into consideration how, in accordance with ordinary commercial practices, that party acquired the information, and whether and how the importer is able to verify the information.  Where that party is not reasonably able to verify such information, CBP will permit the party to electronically present the information on the basis of what the party reasonably believes to be true.  CBP will make this determination on a case by case basis.

If an importer does not know an element that is required, they must take steps to obtain that information and may have to alter business practices to do so in a timely fashion.

· CBP will consider an entity’s progress in the implementation of the rule during the delayed enforcement period as a mitigating factor in any enforcement action following the delayed enforcement period.  It is, therefore, recommended that companies record the steps they take to implement the rule including attendance at seminars, internal meetings, communication with vendors and suppliers, etc.

CBP may issue claims if an ISF is not filed in a timely, accurate and complete manner.  Failing to file is a serious violation in that it deprives CBP of the ability to analyze and assess the risk with regard to loading the cargo for transport to the US.  If an ISF Importer does not know an element that is required pursuant to the regulations, the importer must take steps necessary to obtain the information.  While CBP will not consider levels of culpability in claim assessment, the agency will issue mitigation guidelines for violations of these regulations

 

HTS Data

· CBP will compare the HTS data submitted in the ISF with HTS data used at entry to analyze and assess risk and to validate the ISF.  In addition, CBP is collecting data from more than one party in order to more effectively validate information.

· As the HTS number is required at the 6 digit level, a single HTS number may be provided for multiple parts when the numbers are the same at the six digit level.

The manufacturer (or supplier), country of origin and HTS must be linked at the entry line level and not the invoice line item level.

 

CBP’s ISF Responses and Query Capability

CBP will send a response to the ISF filer indicating whether the ISF has been accepted or rejected.  The response will contain a unique number generated by CBP.  The ISF filer may choose to share this ISF number with other parties.  CBP will not issue a new identifier if the ISF is deleted or amended.  CBP will also notify the filer of the bill of lading that an ISF has been received for the bill of lading through AMS.  The party who submits the AMS information and any notify party on the bill of lading will receive all status notifications posted to that bill, including notification that an ISF was accepted for a bill of lading.  Having good documentation procedures to include listing your ISF filer as the notify party on the bill of lading will be, therefore, critical to successful implementation.

· CBP will accept that the ISF has taken place at the time of submission (vs. time of receipt).  In absence of evidence of time of submission, however, CBP will use the time of receipt.  It is essential, therefore, that importers have a process to track submission.  CBP will publish FAQ’s regarding the protocol for procedures to be followed when CBP is experiencing technical difficulties for filings.

CBP will not provide any query capability for the ISF so importers must maintain their own records or develop systems through their agent filers.

 

Do Not Load Messages and Security Enforcement

· CBP will not notify the party who filed the ISF if a “DNL” (do not load message that instructs the carrier NOT to load the specified container onto the vessel because of a security concern) message is issued that is not related to their own ISF.  It will be up to the carrier to communicate this information to the importer directly (e.g. carrier fails to include a container in their stow plan so CBP issues a DNL; CBP will not notify the importer. Carrier must notify the importer directly).

· DNL messages will be sent to the AMS filer of the bill of lading and any secondary notify party associated with the bill of lading making documentation procedures even more important.  CBP will also communicate electronically to the filer of the ISF when there are ISF-related inaccuracies.  CBP will send status notification messages to the AMS filer and any secondary notify party when an ISF has been submitted and matched by CBP with a bill of lading.  It is possible that the ISF could be transmitted prior to the AMS filing and vice versa.  The two records must match at the lowest bill of lading level.  DNL’s will only be issued if one of the records is missing after the required time period has passed (i.e. 24 hours prior to lading).

· DNL’s are placed for security reasons & the status of a shipment as “perishable” does not indicate increased or decreased security risk.  CBP will work with the trade to communicate holds & DNL’s as quickly as possible.  It is the responsibility of the ISF Importer to resolve issues that result in a hold or DNL.

· CBP’s delayed compliance period during which CBP will work with the trade to help them achieve full compliance, will minimize the issuance of DNL’s.

· CTPAT membership will continue to be viewed in a positive light for targeting purposes.  It is more likely that shipments made by CTPAT members will be readily and expeditiously cleared, and not be delayed for greater scrutiny.

CBP will monitor any unexplained increases in land border traffic through its working relationship with both Canadian and Mexican border enforcement agencies and will take appropriate security measures if warranted.

Container status messages from the steamship line will now be used by CBP to track the physical movement of ocean cargo as it moves through the supply chain.

 

Customs Bond Requirements & Powers of Attorney

· An agent can file the ISF under the ISF Importer’s bond or under the bond of an agent designated by the ISF Importer.  The agent must agree, however, to use its own bond in writing.

· The ISF Importer is required to post their bond to secure timely, accurate and complete ISF.  When necessary CBP will issue penalties and claims for liquidated damages against that party.

· The regulations have changed to remove the requirement that the filer have a separate bond.  An ISF Importer will obligate its bond for purposes of the submission of the ISF.  CBP has amended the relevant bond provisions to provide that the principle agrees to comply with ISF requirements.  Therefore, the ISF Importer must possess a basic importation and entry bond, a basic custodial bond, an international carrier bond, a foreign trade zone operator bond or an importer security bond (new ISF bond type).  If the importer does not have one of these bonds, the party must obtain a bond or designate a bonded agent to file under the agent’s bond if the agent agrees to do so in writing.

· A Customs broker who submits an ISF on behalf of another party must do one of the following 1) submit the filing under its own bond 2) at the ISF Importer’s direction, submit the filing under that party’s bond.

· Continuous bonds will be accepted for the ISF.  Requests to use single entry bonds for ISF’s will be evaluated by CBP on a case by case basis.

· CBP is not increasing bond amounts through this rulemaking.  If CBP does increase bond amounts in the future, it will do so through established procedures.

Powers of attorney for ISF’s must be obtained in English and be maintained along with applicable letters of revocation for 5 years from revocation.  CBP is not designating a specific POA format, but references the existing POA form used for entry transactions as an acceptable general POA with unlimited authority.

 

The ISF & Customs Entry

· CBP is not amending, at this time, the procedures governing entry release and FTZ admission of imported goods.  They will carefully consider, however, the merits of completing targeting and pre-clearance at an earlier point in the vessel mode in the near future.

· The entry/entry summary and the ISF will be accepted or rejected individually as separate and distinct filings.  The ISF information and any updates to that information will be used exclusively for ensuring cargo safety and security and preventing smuggling and will not be used for determining merchandise entry or for any other commercial enforcement purposes.  CBP will not use data collected through the ISF for assessment of a penalty pursuant to 19 U.S.C. 1592.

4 of the ISF data elements are identical to elements submitted in the entry summary including importer of record number, consignee number, country of origin and HTS.  An importer may submit these elements once to be used for both the ISF and the entry.  If this option is elected, filing of a single transmission entry/ISF must be self filed by the importer or filed by a licensed Customs broker no later than 24 hours prior to lading.

 

CBP’s Cost & Supply Chain Delay Estimates

· CBP has revised their cost/benefit analysis by assuming a 2-3 day delay during the first year of implementation with a decrease in delay in subsequent years (keep in mind that the decrease is unlikely as carriers never revised their closing schedules after the 24 hour rule implementation and are unlikely to do so for this, more complex filing).

· Based on the magnitude of the impact of potential delay and costs estimated at billions of dollars annually, CBP has determined that a 12 month delayed compliance period for the rule along with flexible requirements are prudent and necessary steps to minimize the delay and costs that could result from the rule and to ensure that these high costs are not, in fact, realized.

· Costs are highest in the first year as the potential for supply chain delays are greatest during initial implementation.  CBP also accounts for software costs incurred by importers and agents.  CBP amortizes these costs over a 3 year period in their estimates.

· CBP estimates increase in costs of $48 - $390 per shipment or roughly 0.13% - 1.03% of the value of each shipment.

CBP estimates that the rule may also increase the time shipments are in transit, particularly for goods transported in containers and especially for cargo transported in consolidated containers.  For consolidated cargo, the supply chain is more complex and the importer has less control of the flow of goods and exchange of associated security filing information.

· CBP advises that the costs associated with these delays include 1) higher inventory carrying costs 2) the need to hold larger buffer stock inventories to accommodate variation in arrival time 3) depreciation in shipment value 4) costs of storage at the manufacturer, freight forwarder, consolidator or port 5) costs for additional security to protect the freight from tampering.

CBP estimates that carriers have additional costs as well.  We believe that these costs will likely be passed along to the party paying for the freight charges depending on terms of sale.

 

CBP’s Estimates Regarding Vessel and Consolidation Closing Schedules

In order to ensure that ISF data is provided by the shippers and is then transmitted to and accepted by CBP in advance of the 24 hour deadline, CBP estimates that carrier and consolidators will like advance their cut off times for receipt of shipments and associated ISF data.  These advanced cut offs would help prevent a carrier or consolidator from having to unpack or unload a container in the event the security filing for one of the shipments contained in the consolidation is inadequate or not accepted by CBP.  For example, CBP estimates that carriers or consolidators may require shippers to submit, transmit or obtain CBP acceptance of their ISF before their shipments are stuffed in the container, before the container is sealed or before the container is delivered to the port for lading.

 

Information and CBP Resources

For information or to submit questions, visit www.cbp.gov or email security_filing_general@cbp.dhs.gov.

CBP will conduct an extended round of structured outreach activities to engage with the trade including regional seminars and trade roundtable discussions.  The first sessions will be held in New York/New Jersey and in Boston.  In addition, CBP will publish FAQ’s and a general “How To Guide” at www.cbp.gov.

CBP will use existing resources to resolve problems associated with ISF filings.  Members of the trade can contact their CBP Client Rep or the CBP Technology Support Center for resolution of technical problems.  CBP has also established a dedicated email account for ISF related issues.  Visit www.cbp.gov for the latest information about these contacts.

 

Carrier Obligations under the Rule

· Vessel operators must also report vessel stow plans (where your cargo is located on a vessel during its journey to the US) and “CSM’s” (container status messages) to CBP.  CSM include information about when a booking is confirmed, when a terminal gate inspection is performed, when a container arrives or departs a facility, when a container is loaded or unloaded from a conveyance (including vessel, feeder, barge, rail & truck movements, etc.), when a vessel departs or arrives at a port, when a container is stuffed or stripped, etc.

Carriers must also report any hazardous merchandise aboard the vessel by providing the HAZMAT-UN code or any HAZMAT code when applicable.

 

Requirements for Other Entry Types (T&E, FTZ, etc.)

· ISF’s are also required for FTZ, IE & T&E shipments.  For these transactions, the ISF Importer is the party filing the documentation with CBP and not merely the party delivering the form to CBP.  The ISF Importer definition here is otherwise the same as listed in the previous point.

· For FROB, T&E and IE shipments, CBP requires an ISF containing the booking party, the foreign port of unlading, the place of delivery, the ship to party and the HTS number.

· FTZ ISF’s may be filed separately or in a combined transaction with the FTZ entry.

· Bulk cargo is exempt from the filing requirement.  Any importers of bulk cargo that are exempted from the filing requirement of 149.2 must present the ISF 24 hours prior to cargo arrival at the first US port.

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10 + 2 Summary & Fact Sheet

Based on CBP’s 10+2 Final Rule Published on November 25, 2008

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