Corporate TreasuryFinancial Supply ChainTrade Risk & LawImporter Security Filing – Is Your Company Ready?

Importer Security Filing - Is Your Company Ready?

On 26 January 2009, the US Customs & Border Protection’s (CBP’s) much maligned Interim Final Rule requiring all importers of ocean borne cargo to file an Importer Security Filing (ISF) on all shipments bound for the US came into effect. This is significant because, unlike the voluntary Customs-Trade Partnership Against Terrorism (C-TPAT) programme, it is mandatory and impacts all stakeholders operating in a maritime environment (shippers, importers, carriers, non-vessel operating common carriers (NVOCCs) and forwarders). It also comes with stiff monetary penalties for non-compliance.

We are nearing the half way mark of a one-year non-enforced phase-in of this rule and, unless otherwise delayed, on 26 January 2010 the CBP will begin full enforcement of this new requirement. If a company is not ready on this date, it might be a very painful and expensive experience. The most important take-away from this article is the heightened sense of urgency and anxiety about this looming deadline, especially if a company hasn’t filed its first ISF yet.

Here are a few good reasons why a company should be concerned if it is a maritime importer and has not yet addressed ISF. First, to implement an ISF, a number of changes or new procedures may be necessary within the supply chain to gather all 11 data elements required, including the bill of lading number. Of course with change comes the need for intensive communication, training, testing and debugging.

As with most US import laws and regulations, the importer of record owns 100% of the liability for filing a timely and accurate ISF. This liability cannot be absolved or otherwise abdicated, even if the firm has an agent file on its behalf. The importer may have recourse in a civil proceeding against that agent but, in the eyes of the CBP, the importer owns all of the liability and penalties that may be assessed. In fact, it is the importer of record’s surety bond that assures and guarantees the payment of potential penalties.

With regards to penalties, a sensitive and sometimes painful subject for some importers, the CBP and Congress are deadly serious about ISF infractions or errors once full enforcement of the rule begins in January 2010. The ISF mitigation guidelines have not been issued as of yet, but they are expected to be released shortly. From all indications, both publicly and privately, the CBP is being pretty hard-nosed about the enforcement phase and mistakes or untimely filings after the 2010 deadline will cost US$5,000 each. Furthermore, the CBP has publicly advised that it is unwilling to push out or consider a further delay in the enforcement period.

The industry is already nearly half way through the enforcement moratorium and the retail peak season lies just ahead and January will be upon us. Companies need to prepare for this because they don’t want to be caught in the last minute rush to implement.

The CBP is keeping track of each company’s ISF performance or, as the case may be, the lack thereof. The first series of 100 ISF performance reports were released by the CBP to the trade the week of 4 May 2009 and more reports are expected soon. The report contains three areas of interest: the company’s submission volume, rejection error frequency and timeliness performance. Companies interested in receiving their report should read the CBP Message CSMS #09-000161 dated 6 April 2009 and follow the instructions contained. According to the CBP, early adopters are likely to receive special consideration during the mitigation process if errors resulting in penalty actions occur after the enforcement date. Those companies who adopt late will be at the mercy of the fines, penalties and forfeiture officer.

Finally, if a company is holding out on ISF implementation because it thinks that at the last moment the rule will be repealed, significantly diluted or otherwise delayed, the likelihood of such actions at this juncture are virtually nonexistent. This initiative or regulation has a ‘national security tag’ on it which affords it special deference within the government and makes it almost invincible. An ISF is yet one more layer of the CBP’s multi-layered supply chain security strategy.

If an organisation is now convinced that a ‘call to action’ is necessary if it has heretofore been lackadaisical with regard to ISF, what steps or actions are necessary? First, it will have to locate the 10 data elements necessary for reporting purposes:

  1. Manufacturer (or supplier) name and address.
  2. Seller (or owner) name and address.
  3. Buyer (or owner) name and address.
  4. Ship-to name and address.
  5. Container stuffing location.
  6. Consolidator (stuffer) name and address.
  7. Importer of record number/foreign trade zone applicant identification number.
  8. Consignee number(s).
  9. Country of origin.
  10. Commodity Harmonised Tariff Schedule number.

The eleventh, or so-called phantom, data element is the bill of lading number and in some areas of the world this is proving challenging to obtain. It will require close communication and co-ordination with the importer’s forwarder and carrier to ensure that they provide this information accurately and timely. The bill of lading number is critical because it is what the CBP uses to match the ISF filings to the ocean carrier’s filing.

After the firm has obtained all of the necessary data elements and have a solid procedure in place for reporting, the next thing it needs to consider is who will do the filing. Many importers, given the serious nature of the penalties and liability, are electing to prepare and file the ISF directly. Moreover, absorbing new fees (ranging from a low of US$35 to a high of US$150) is a bitter pill to swallow during these difficult economic times. Internet-based ISF solutions make the direct-filing ofan ISF simple and cost effective. An ISF can be filed in a matter of seconds and takes only two screens to complete. Direct-filing makes sense because it is the importer who will generally gather the necessary ISF information, and it is also the importer who is liable for timely and accurate filing. Because filing an ISF is not considered to be ‘customs business’ by the CBP, direct-filing importers do not need to worry about obtaining a CBP Filer Code. Plus, no permits or licenses are necessary.

Conclusion

The bottom line is that if an importer is not currently filing ISFs, or doesn’t have an implementation plan underway, then it should immediately take stock of this article and any other information it can get its hands on and start designing its process. Time is truly of the essence and woe be to the unprepared company come 26 January 2010.

If a company only imports air freight and it is thinking “Thank goodness none of this applies to me!”, think again. The ISF for maritime is only the first step – one day the CBP will announce its plans for air, rail and motor carrier ISFs. And if a firm is thinking it has escaped because it only exports, be advised that other countries are closely studying the ISF rule and preparing their own versions of this advanced data initiative.

For more information on the CBP’s ISF Requirements, visit its web site at www.cbp.gov.

Related Articles

How can Supply Chain Finance help private equity-owned companies deliver higher value?

Supply Chain Finance How can Supply Chain Finance help private equity-owned companies deliver higher value?

1w The Global Treasurer
A comprehensive introduction to supply chain finance (including views of corporate treasurers)

Financial Supply Chain Regional A comprehensive introduction to supply chain finance (including views of corporate treasurers)

2w Will Moody
A bright future for trade finance

Letters of Credit/Open Account A bright future for trade finance

3w Dan Scanlan
Green bond demand continues to rise as ESG returns grow

Corporate Treasury Green bond demand continues to rise as ESG returns grow

2m Aaran Fronda
Trade finance gap remains a significant issue, survey finds

Financial Supply Chain Trade finance gap remains a significant issue, survey finds

2m Austin Clark
Navigating volatility: a proactive approach

Financial Supply Chain Navigating volatility: a proactive approach

2m Kerstin Braun
Brexit could push payment terms over the edge for thousands of small businesses

Accounts Payable Brexit could push payment terms over the edge for thousands of small businesses

4m Paul Christensen
The methods and tactics behind risk and control self assessment

Operational Risk The methods and tactics behind risk and control self assessment

4m Nash Riggins

Whitepapers & Resources

Are You Ready to Implement your GRC Solution?

Are You Ready to Implement your GRC Solution?

2m
Enhancing your strategic position: Digitalization in Treasury

Payments Enhancing your strategic position: Digitalization in Treasury

4w
Netting: An Immersive Guide to Global Reconciliation

Netting: An Immersive Guide to Global Reconciliation

4m
Sanction Screening: The risk for companies is real

Payments Sanction Screening: The risk for companies is real

3w