Recent Trade & Tariff Perspectives

March 9, 2022  |  Alyson Brinkman  Senior Manager Compliance

Don’t Put Your Importer Security Filing Compliance on the Back Burner

As global supply chain issues weigh on importers and U.S. Customs and Border Protection (CBP) continues ramping up enforcement measures on a variety of priority trade issues, it can be overwhelming for importers to maintain a line of sight on all areas of compliance and their business. Receiving a $5,000 penalty for Importer Security Filing (ISF) violations can be a shock to the system—one that will invariably snap your focus back to something that’s likely been sitting on the back burner. Read on to explore your obligations and the steps you should take to ensure ISF compliance.

ISF enforcement: An overview

ISF (also known as the “10+2 Rule”) went into effect in 2009, requiring importers and ocean carriers to submit key data elements electronically, 24 hours prior to cargo being laden onboard a vessel destined to the United States. The regulations went into full enforcement in 2010, and CBP then began to target non-compliant shipments and importers. 

Enforcement of ISF non-compliance is on the rise by CBP, and importers should take this opportunity to review their compliance measures around this key requirement. Together—with their supply chain partners—importers should review and identify areas to improve or increase compliance for ISF filings.

ISF enforcement non-compliance

CBP uses two primary strategies for enforcement of ISF compliance—holds and exams and liquidated damages. Although both have an equally stunning impact on an importer, ISF holds increase delays and costs on the front end of a shipment, while an ISF liquidated-damages claim may appear unexpectedly several months later.

ISF holds at the port of discharge can delay the release of the cargo for several days, even after the ISF filing issue is resolved. At a time when delays at the port seem unending and importers are anxious to receive their long-awaited cargo, a hold because of ISF non-compliance can seem like an insult to injury. In situations with consolidated cargo, a single shipment with no ISF filing can delay the entire container. CBP can also decide to examine the cargo if no ISF is filed prior to arrival or if filed late.

ISF liquidated damages claims can start at $5,000 and could potentially increase to $10,000 if CBP determines there were multiple non-compliance violations for an ISF. There are five non-compliance categories for which CBP can levy a penalty against an importer, including:

• Failure to file an ISF
• Late ISF filing
• Inaccurate ISF filing
• Inaccurate update to an ISF filing
• Failure to withdraw an ISF filing

Inaccurate ISF filing penalties have frequently been issued for incorrect bill of lading information transmitted and not updated prior to arrival. More recently, CBP has also issued penalties for inaccurate classification numbers, comparing the classification number(s) filed in the ISF against what was filed in the customs entry. If the classification number declared in the ISF does not match the goods, CBP can levy a penalty against an importer.

How can you monitor and manage your ISF compliance?

Importers should be diligent when managing their ISF compliance program. Working with all parties involved in these shipments is crucial to its success.

Be engaged in your supply chain: It is essential to work with your suppliers, logistics partners, and ISF filers to ensure the most accurate information is provided and transmitted to CBP timely. Check with your ISF filers to see if they offer any online visibility or other mechanisms to monitor and manage your ISF transactions. Additionally, ensure your freight forwarders notify you immediately of any updates or changes that would impact the ISF filing as well, such as:

• AMS bill of lading number: Your freight forwarders must be diligent in providing you with the correct Automated Manifest System (AMS) bill of lading number at time of ISF filing. The AMS bill of lading is how CBP electronically tracks the shipment from its origin to destination. An incorrect bill of lading declared in the ISF is like having no ISF filed at all. If a shipment arrives with a “No Bill Match,” it can be placed on hold, and penalties may be issued by CBP.
• Changes in vessel routing: Port congestion, inclement weather conditions, vessel diversions, and other unpredictable situations can suddenly change whether an ISF filing is required or not. Your nominated freight forwarder should alert you to any changes in routing that may also impact your ISF filing. Ensure you notify your ISF filer—if different from the freight forwarder—to update the ISF filing accordingly.

Provide quality data and timely updates: It is important your ISF filer receives the best information known prior to departure to properly declare the ISF filing. If more accurate information becomes available after freight departs from its origin, the importer should ask their ISF filer to submit those changes prior to arrival to ensure compliance and prevent any penalty being issued. CBP regulations allow for updates to any of the ten ISF data elements if updates are completed prior to arrival at the U.S. port of discharge.

Monitor your ISF progress reports: Importers should reach out to parties filing ISF on their behalf and request copies of their CBP ISF Progress Report. Importers with their own ACE Portal account can access these reports directly—and for all ISF filers. The progress reports provide a snapshot of an importer’s ISF filings for a revolving three-month period. They do not identify specific shipments but will give a general breakout as follows:

• ISF-10 submission volume: Number of ISF filings, including those that were replaced or deleted
• Rejection error frequency: Frequency and type of reject messages received
• Timeliness performance: Number of ISF filings considered timely or late, and the number of filings that do not have their bill of lading match

What to do if you receive an ISF penalty?

CBP regulations only permit 60 days from the date the penalty was issued to submit a petition for mitigation—so, timing is of the essence. Reach out to your ISF filer to help investigate the cause for the penalty and assist in the preparation and submission of the petition to CBP.

CBP mitigation guidelines for ISF have a tiered approach to how much a penalty may be mitigated. A first-time offence for non-Customs-Trade-Partnership-Against-Terrorism (CTPAT) importers can usually be mitigated down between $1,000 to $2,000—depending on the factors involved with the ISF filing. Subsequent violations for late or inaccurate ISF transactions are likely to be mitigated no less than $2,500, if mitigation is even afforded at all.

Examples of mitigating factors include, but are not limited to:

• An importer having a small number of violations compared to overall ISF filings submitted
• Compliance procedures in place to manage and monitor ISF compliance and demonstrated remedial action plans to prevent future violations
• ISF was filed late because of factors outside the importer’s control (e.g., vessel diversion because of weather)
• CTPAT Tier 2 or 3 importers may receive additional mitigation of up to 50% of the normal mitigated amount

If CBP believes law enforcement goals were compromised or determines there are aggravating factors that would prevent the penalty from being mitigated, the full payment of $5,000 will be demanded.

How can C.H. Robinson help?

C.H. Robinson offers a variety of ISF filing services, tools, and resources to assist you with your ISF filing needs. If C.H. Robinson is currently filing ISFs on your behalf, be sure to reach out to your local office to review our available resources to monitor your ISFs and/or request copies of your CBP ISF Progress Reports. Connect with one of our trade policy experts to learn more.

Resources

• CBP Importer Security Filing ‘10+2’ Resource Page
• FAQs: Importer Security Filing “10+2” Program
• ISF Penalty Mitigation Guidelines