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Importer Security Filing (10 + 2) Proposed Rules Overview NOTE: This presentation has audio embedded in each slide. There is a five second delay on each before it starts. Notice of Proposed Rulemaking • On January 2, 2008 the Department of Customs and Border Protection published a notice of proposed rule making covering requirement of advanced security filings by importers and ocean carriers. • The NPRM is intended to fulfill the requirements of section 203 of the Security and Accountability for Every Port Act of 2006 (SAFE Port Act) and section 343(a) of the Trade Act of 2002. • This legislation requires that the Secretary of Homeland Security acting through the Commissioner of Customs and Border Protection (CBP) promulgate regulations requiring the electronic transmission of data elements for the purpose of high- risk targeting of cargo bound for U.S. ports. Notice of Proposed Rulemaking • Within the NPRM CBP is proposing that importers electronically transmit 10 data elements, plus bill of lading numbers, to be using for targeting purposes. This data must be transmitted 24 hours prior to loading at the port of origin. • Similar to the Container Security Initiative (CSI), The 24 Hour Rule and the Customs-Trade Partnership Against Terrorism (C-TPAT) the regulations are designed to enhance national security while protecting the economic vitality of the United States. • Since 2003 ocean carriers have been submitting shipment data 24 hours prior to sailing from the foreign port. This is commonly known and referred to as the “24 hour rule”. Current Status • In late 2004 COAC (Advisory Committee on Commercial Operations of Customs and Border Protection and Related Homeland Security Functions) forwarded their recommendations to Customs and Border Protection. • This proposed rule is informally referred to as 10+2, however, that name has been replaced by “Importer Security Filing”. • Since January the NPRM had been in a “public comment period”, which is required by law. Industry groups requested that CBP extend this comment period by an additional 30 days. • It is apparent that Customs intends to move quickly with implementation, as evidenced by the short extension to the comment period of only 15 days as opposed to the 30 days that had been requested. The extended comment period ended on March 18th of 2008. Overview • Ocean carriers currently submit manifest data 24 hours prior to sailing. The proposed rules are quite different from the 24-Hour Rule in that the importer, not the carrier, is legally responsible for the accurate and timely transmission of the required elements. • An ISF (Importer Security Filing), of at least 10 data elements, must be made no later than 24 hours prior to loading of any container and most break bulk cargo at a foreign port. • CBP has indicated that they will not “approve” or “reject” these transmissions. They will only acknowledge that the transmission was made. • Without proper management and communication it is possible for a container to be loaded with no ISF filed resulting in a penalty equal to the value of the cargo. There is no indication that CBP will stop a container from loading if there is no ISF filed. The Importer • CBP defines the importer is as “the party causing the goods to arrive within the limits of a port in the United States”. • Neither the supplier nor freight forwarder is responsible to file the data. Though they may choose to allow a broker to transmit the data the importer is ultimately solely responsible for the timeliness and accuracy of the filing. • FROB (Foreign Cargo Remaining on Board) is not exempted from the requirement to file an ISF. For these shipments the importer is construed as the carrier. • Foreign Trade Zone (FTZ) cargo, cargo to be immediately exported (Immediate Exportation – IE), and cargo moving in bond to be exported (Transportation and Exportation – T& E) is also not exempted from the requirement to file an ISF. For this type of cargo the importer is construed as the party filing the in- bond or FTZ documentation. The Carrier • The carrier is required to provide the “+ 2” data elements. • The carrier must transmit a stow plan no later than 48 hours after departure. • Additionally the carrier must transmit container status messages (CSM). – Within 24 hours of the reported event. – CSMs reflect events such as booking, arrival or departure from a facility, intra-terminal movement and loading/unloading. – CSM data will not be publically available. • There is no indication in the NPRM that the carrier would know if the ISF has been transmitted. CBP will have to address this. The cost to hold the container would be minor compared to a penalty in an amount equal to the value of the cargo. QUESTIONS?? We will pause for a moment and address a few of the most frequently asked questions. Please press your spacebar to continue Frequently Asked Questions Why do I have to worry about this, won’t our broker take care of it? – V. Alexander will be able to make the ISF filings on behalf of our customers, however, there is a lot of work to be done by both of us to insure that there is proper flow of documentation and information along with absolute cooperation from your suppliers. Proper set-up on the front end and proper on-going maintenance and communication are the keys to a successful ISF program. When will the regulations go into effect? – The effective date is unknown at this point. CBP will consider the input provided during the public comment period which ended on March 18. We know that they are receiving a substantial response but we also know that CBP is under pressure to move quickly on this program. While no one knows for certain, a publication of final rule making as early as May 15 certainly seems possible. CBP acknowledges the need for a “phase-in period” but has not provided any details as to length or structure. Will a shipment be stopped from loading if an ISF is not filed? – There is no indication within the NPRM as to CBP issuing no-load messages in cases where the ISF was not transmitted. This will have to be addressed in the Notice of Final Rule Making. The “10” • The ten data elements are: 1. Manufacturer (or Seller) Name and Address • Entity that last manufactures, assembles, produces, or grows the commodity, or name and address of the supplier of the finished goods in the country from which the goods are leaving. 2. Seller Name and Address • Name and address of the last known entity by whom the goods are sold or agreed to be sold. If non-purchase then the name and address of the owner of the goods. 3. Buyer Name and Address • Name and address of the last known entity to whom the goods are sold or agreed to be sold. If non-purchase then the name and address of the owner of the goods. 4. Ship To Name and Address • Name and address of the first deliver-to party scheduled to physically receive the goods after they have been released from customs custody. The “10” • The ten data elements are (continued): 5. Container Stuffing Location • Name and address(es) of the physical location(s) where the goods were stuffed into the container. For break bulk cargo, report the name and address of the physical location where the goods were made “ship ready”. 6. Consolidator (Stuffer) Name and Address • Name and address of the party who stuffed the container or arranged for the stuffing. For break bulk cargo, report the name and address of the physical location where the goods were made “ship ready” or who arranged for the goods to be made “ship ready”. 7. Importer of Record Number / FTZ Application Identification Number • IRS, EIN, SSN or CBP assigned number of the entity liable for payment of all duties and responsible for meeting all statutory and regulatory requirements incurred as a result of importation. For goods intended to be delivered to a FTZ, report the IRS, EIN, SSN or CBP assigned number of the party filing the FTZ documentation. The “10” • The ten data elements are (continued): 8. Consignee Number(s) • IRS, EIN, SSN or CBP assigned number of the individual(s) or firm(s) in the United States on whose account the merchandise is shipped. 9. Country of Origin • Country of manufacturer, production, or growth of the article based upon the import laws, rules and regulations of the United States. 10. Commodity HTSUS Number • Duty/Statistical (tariff) number under which the article is classified in the Harmonized Tariff Schedule of the United States (HTSUS). This is required at the six digit level at a minimum. • The Manufacturer (or supplier) name and address, country of origin and commodity HTSUS number must be linked to one another at the line-item level! The Data • The data elements must be transmitted no later than 24 hours prior to the cargo being laden on board the vessel at the foreign port. This will likely require a dramatic change from the way information and documentation flow in the typical supply chain today. • Must be based on “best information” available at the time of filing, however all 10 data elements are required with the initial filing. • The importer is required to amend the ISF if any information changes prior to entering the limits of a port in the United States. • Due to the sensitive nature of the ISF data it is considered highly confidential. It will not be publically available, even to the importer. Also, the data is for targeting purposes only and will not be used for commercial enforcement purposes by CBP. Frequently Asked Questions Is it true that importers are not allowed to access their own information??? – While this is true and CBP will not allow importers nor their agents to query the transmitted data, the ISF filing information will be available to clients within their VNET account. I don’t have any idea who or what the “stuffer” is, how am I supposed to get this information? – V. Alexander will provide Internet-based software that will allow the supplier to provide shipment information in time for the ISF transmission. Shippers will have a web based portal very similar to the VNET portal that clients use today. What if a my supplier ships the cargo and we did not know about it? – In this case the importer would be subject to a penalty up to the value of the cargo. This punctuates the absolute necessity that the importer have control of their supply chain and require that the supplier work within our Internet-based system. Other Comments • ISF filing is not required on bulk cargo. • Current proposed rules only apply to ocean cargo, however, other modes of transport will be considered in the future. • CBP is proposing changes to the importer’s bond. Under the new bond format the importer would agree that if they fail to comply with the ISF requirements the principal and surety (jointly and separately) would pay liquidated damages equal to the value of the merchandise. • Any party, with the proper power of attorney and properly bonded, is able to submit the ISF provided that they establish an electronic connection with CBP through ABI or AMS. Carriers are allowed to file ISF transmissions, however, many have indicated that they do not plan to provide ISF filing services. Most importers will elect to have their broker handle the ISF filing. Supply Chain Timing Typically containers are loaded and the vessel has sailed before the supplier prepares commercial documents. After the ISF rules become effective suppliers will be forced to prepare documentation in the short 2 to 4 days between loading the container and when the container is loaded on board the vessel. VNET ISF Solution – Setup V. Alexander is developing software to accommodate these new rules! • The VNET Global Desktop facilitates total collaboration of all parties from the supplier, to the forwarder, your V. Alexander account team as well as cartage companies. VNET ISF Solution – The Process • When the rule is enacted our clients will be able to see and manage all ISF transactions within their VNET accounts. • V. Alexander will manage the flow of communication and data and documentation between the importer and supplier. Questions and Comments Frequently Asked Questions 1. Can the supplier, a forwarder or the Customs Broker take responsibility and assume liability for this ISF? – No. While it is allowable for another party properly bonded and under power of attorney to file the ISF with CBP, the importer is always and ultimately responsible for timely and accurate ISF transmission. 2. If the bill of lading has a description such as “auto parts” can only one tariff number be used to cover generic auto parts? – No. The NPRM requires the commodities to be broken out to at least the six digit HTS number level. Further, the manufacturer and country of origin must be associated to each HTS number. In this case auto parts may consist of many different HTS level classifications and would need to be reported individually. 3. Will there need to be one ISF per bill of lading or can multiple bills of lading be consolidated to one ISF? – As long as the bills of lading consist of one shipment to one importer CBP is inclined to allow multiple bills of lading on one ISF. Frequently Asked Questions 4. Will CBP provide a method for importers to file the ISF over the Internet or manually? – No. The NPRM only allows for electronic submission of data via ABI or AMS. 5. What could happen if it is discovered after the cargo has sailed that an ISF was not transmitted or it is transmitted late? – The importer would be subject to paying liquidated damages equal to the value of the merchandise. 6. A penalty in an amount equal to the value of the cargo is very severe. Is this really possible? – Yes, the NPRM clearly describes that the penalty for filing violations will be in an amount equal to the value of the cargo. This underscores the necessity for proper attention and management of the supply chain. Frequently Asked Questions 7. If any information changes or the merchandise is sold in transit does this have to be reported to CBP? – Yes. Any changes to the originally filed ISF and any changes that occur prior to the vessel entering the limits of a US port must be transmitted to CBP. 8. If an importer is C-TPAT certified will they receive any special consideration or exemption from the ISF rules? – No. CBP is not proposing to allow exemption from, or alteration of, the requirement that C-TPAT partners submit an ISF. 9. Will the regulations have a “phase-in” period? – The NPRM mentions the possibility of a phase in period but this has not been defined. Frequently Asked Questions 10. If the carrier fails to submit the “+2” information or customs has a problem with that data will it delay my cargo? – It is unknown at this time if problems with the carrier’s transmission would have any adverse affect on the movement of the cargo. 11. Our responsibilities and exposure is great. Will we be given the opportunity to review , and perhaps approve the ISF information. – Clients will be able to review and direct amendments of ISF data within their VNET account. A client can have as much or little direct control over the data as they desire including the ability to approve ISF information prior to transmission. 12. Will this also affect air shipments? – Currently the NPRM only affects ocean shipments. However, it does indicate that CBP will be looking to extend the rule to other modes of transport in the future. Frequently Asked Questions 13. Will the VNET ISF portal be capable of accepting data transfers of either purchase order information or supplier invoice information? – V. Alexander currently electronically communicates with importers, suppliers and agents globally. Our ISF module will be capable of accepting data in many different common file formats including XML, EDI and flat file. 14. This is very sensitive data for our company, how do I know this will be kept confidential? – The NPRM is very clear that all ISF data will be used for targeting purposes only and will not be publically available to any party outside of CBP. 15. We do know have some of this data and it will be burdensome to collect it, can the shipper be responsible for some data? – No, the importer is solely responsible for providing a complete and accurate transmission to CBP. Frequently Asked Questions 16. How Much Will this Cost? Until CBP publishes the final rule for ISF and all of the filing requirements are known, it is difficult to estimate the cost for a filing. Certainly some of the factors that will determine the cost will be: • Scope of what is required by the final rule. • Number of different items in a shipment. • Who files the ISF transmission • The complexity of the supply chain • Cooperation from the supplier as well as the timeliness and accuracy of the data they supply. • Ability to obtain advance commercial documentation electronically • Having a complete, updated and accurate parts dictionary • Client ability to keep the supplier database current Questions and Comments We welcome your questions and comments! Please email Marc Torrence email@example.com To participate in a public discussion of ISF please visit our recently released discussion board at http://www.importersecurityfiling.com