Contributing Lawyers

Canada

Cyndee Todgham Cherniak

United States

Susan Kohn Ross

Australia

Andrew Hudson



ISF Penalty Guidelines Published

As has been widely publicized, Customs has published the penalty guidelines for the Importer Security Filing program. Carrying on its goal of getting importers to participate as soon as possible, the first mitigating factor listed by Customs is an importer’s history of compliance with ISF.

Vessel operators will be penalized if they fail to timely file stow plans or container status messages, but of the greatest interest is how Customs intends to deal with importers. Let’s begin with the logical starting point. Who will be penalized if the ISF is not filed, filed late or filed with inaccuracies – the importer. Bulk cargo remains exempt, break bulk may or may not be exempt depending on how it is loaded on the ship, but containerized cargo certainly must have ISF filed 24 hours prior to loading. Determining when loading occurs remains a challenge, although Customs has said it will start consulting vessel operator data as to dates of departure, how importers are expected to figure this out remains up in the air. At the same time, figuring out when you have to file remains a challenge, but the flexibility as to how to declare certain data elements and flexibility as to when to declare others has not changed. So what are importers facing under these new regulations?

Well, first, the amount of the penalty will be $5,000 and will be based on the final version of the ISF. However, if you fail to file, Customs has said it will withhold release or transfer of the shipment. The agency may also deny a permit to unlade and if the shipment is unladen without permission, the shipment may be seized. Just as Customs will issue a penalty if the ISF is late or inaccurate, a similar $5,000 penalty will be issued if the ISF should have been withdrawn and was not, as for example, if the shipment will not arrive in the U.S.

Customs has also said there will be penalties for serious and repetitive errors. Those penalties will be issued under 19 USC 1595a(b) and so are not subject to the same $5,000 limitation but are rather tied to the value of the shipment.

In terms of mitigating those penalties, if law enforcement goals are compromised, there will be no mitigation. Otherwise, for late or inaccurate ISFs, or the failure to withdraw one already on file, the first offense will be mitigated to between $1,000 and $2,000 and subsequent offenses will go no lower than $2,500.

Customs also provided a listing of mitigating factors:

1) Progress in implementing ISF during the flexible enforcement period – pre-January 26, 2010;

2) Small number of violations compared to number of shipments;

3) Tier 2 or Tier 3 C-TPAT member;

4) Demonstrated remedial action;

5) Vessel diversion due to factors outside the ISF importer’s control, e.g. weather, but accidents should be included and were not mentioned by Customs; and

6) For inaccurate filings, did the importer acquire data from a third party and reasonably rely on it, plus was not reasonably able to verify the data – considered an extraordinary factor.

At the same time, aggravating factors were articulated as:

1) Lack of cooperation with CBP;

2) Impeding CBP activity;

3) Evidence of actual or attempted smuggling (may be considered an extraordinary aggravating factor);

4) Multiple errors on the ISF; and

5) Rising error rate indicating deteriorating performance.

In the case of third party data, Customs has said it will consider ordinary commercial practices and how the presenting party acquired the data, and whether and how that presenting party is able to verify that data. If the importer is unable to verify the data, the standard is "reasonably believes to be true." If Customs agrees the importer could reasonably believe the data was accurate, it may lead to outright cancellation.

Customs has also said that if you are a Tier 2 or Tier 3 member, that status may account for up to 50% further mitigation. Finally, in terms of additional options, Customs retains the right to 1) issue Do Not load messages; 2) Delay or denial the carrier’s preliminary entry permit to unlade; 3) Withhold release or transfer of cargo; and 4) Apply statutory penalties, such as 19 U.S.C. 1595a(b), for aiding unlawful importations.

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