CBP Update on 10+2 (Penalty Mitigation Guidelines Expected Next Week)

The following are highlights of his comments:

Penalty Mitigation Guidelines to be Posted in Next Week's Bulletin

The 10+2 penalty mitigation guidelines will be included in next week's (July 16th or 17th) CBP Bulletin.

Four Situations May Initiate Issuance of Liquidated Damages

According to the penalty mitigation guidelines, four situations may initiate the issuance of liquidated damages:

1. Failure to file. When there is a complete failure to file an ISF, CBP may choose one of the following: the issuance of a Do Not Load (DNL) message to the carrier at the foreign port of lading; withholding permission for the carrier to unload the subject goods at the first U.S. port of arrival; delay in issuing permission to unload at the first U.S. port of arrival; issuance of a seizure notification; withholding Customs release of the goods for movement to General Order (G.O.); or the issuance of a liquidated damages case.
2. Inaccurate submission. A liquidated damages case will be issued in the amount of $5,000. DiNucci noted that CBP acknowledges that some data is beyond the control of the importer, such as rolled bookings and vessel diversions. In those cases CBP will take these factors into account when issuing liquidated damages cases.

In addition, if there are successive filings of the ISF data, CBP will consider only the filing closest to the allowed filing timeframe, which is typically the last ISF filed, for the issuance of liquidated damages for inaccurate submissions.

1. Late submission. A liquidated damages case will be issued in the amount of $5,000. As CBP expected, the phase-in period has demonstrated several commercial challenges in obtaining all of the information required in a timely manner. CBP indicates that they will be fair in evaluating the timeliness of the filing and will continue to work with those parties who have participated in the process to date.
2. Failure to withdraw a filing. A liquidated damages case will be issued in the amount of $5,000. CBP has indicated that it is important that importers and filers withdraw an ISF when it is known to be invalid. This may be a result of the cancellation of an order, the discovery of a significant change in the information necessitating a new ISF filing, a complete change in routing, or for other commercial reasons.

Six Mitigating Factors

There are six mitigating factors for use in determining the mitigation or cancellation of liquidated damages cases:

1. Evidence of progress in implementing ISF compliance during the phase-in period.
2. The number of ISFs compared with the number of violations.
3. C-TPAT Tier 3 and Tier 2 importers will receive consideration of up to 50% mitigation for violations.
4. The importer has demonstrated that remedial actions have been taken to address the circumstances surrounding the violation.
5. Inaccurate filings due to circumstances beyond the importer's control, such as vessel diversions and rolling bookings completely due to carrier actions.
6. Receiving incorrect information from another party in the supply chain, if this information is found to be incorrect at a date later than allowed under the correction timeline. Under certain circumstances the liquidated damages may be canceled without payment.

Four Aggravating Factors

DiNucci added that there are four aggravating factors:

1. The lack of cooperation with CBP.
2. Smuggling attempts and other actions contrary to law in association with the shipment.
3. Multiple errors on one ISF.
4. A rising error rate calculated over all ISFs.

Bond Guidelines to Follow Penalty Mitigation Guidelines

DiNucci stated that he expected bond guidelines to be issued shortly after the penalty mitigation guidelines were published. The Single Transaction Bond process and the ISF stand alone continuous bond limit of liability is expected to be fully outlined in the bond guidelines.

Updated 10+2 Statistics

DiNucci also provided the following updated 10+2 statistics:

Timeliness. Based on data from April 27 - June 27, 2009, using the first bill of lading filing dates, ISF-10 filings were timely 46% of the time and untimely 54% of the time.

DiNucci noted that BOLs are often filed several days in advance of actual vessel lading; therefore, some of the "untimely" ISFs are actually timely. CBP will soon use the "vessel departure date" in addition to the first BOL filing date to better assess ISF timeliness. These two reference dates are merely used as indicators of timeliness.

Flexibility option rarely used. The trade is rarely using the flexibility option for the six "flexible" 10+2 data elements. The option is most used for the six-digit HTS number, where it is used 2% of the time. All others are used less than 1% of the time.

(CBP's interim final rule provides certain flexibilities for the following data elements: manufacturer (or supplier), ship to party, country of origin, commodity Harmonized Tariff Schedule (HTS) number, container stuffing location, and consolidator (stuffer).)

Over 1.4 million ISFs received. As of July 6, 2009, CBP has received 1,416,524 ISFs Of that number, 1,271,714 were accepted; 61,430 were conditionally accepted; and 83,380 were rejected. CBP has also received 44,126,601 container status messages.

Reject rate for ISF-10 filings. ISF-10 filings are increasing in each successive month, while the number of rejected ISF-10 filings is decreasing. In June 2009, the rejection rate was about 3% (in January 2009 it was around 21%).

Response times. CBP is responding to most ISFs in less than two minutes. CBP is continuously working to improve its response times.

Top 5 error messages. The top fiver error messages are:

CBP notes that a single ISF may contain multiple errors.

Canada is Developing Their Own ISF-12 Requirements

DiNucci noted that the government of Canada is developing its own ISF-12 requirements.

(See ITT's Online Archives or 12/23/08 news, 08122310, for the final part of BP's summary on the details of CBP's 10+2 interim final rule, with links to previous parts.

See ITT's Online Archives or 03/10/09 news, 09031015, for the final part of BP's summary on CBP's 10+2 FAQ, with links to previous parts.)