Challenges of the ISF: Customs Brokers’ Perspective Challenges of the ISF: Customs Brokers’ Perspective Mary Jo Muoio, LCB, CCS Senior Vice President Barthco

Challenges of the ISF:Challenges of the ISF:Customs Brokers’ PerspectiveCustoms Brokers’ Perspective

Mary Jo Muoio, LCB, CCSMary Jo Muoio, LCB, CCSSenior Vice PresidentSenior Vice President

Barthco Trade Services, division Ozburn-Hessey LogisticsBarthco Trade Services, division Ozburn-Hessey LogisticsPresident President

National Customs Brokers and Forwarders Association of AmericaNational Customs Brokers and Forwarders Association of America

Alan Klestadt, BA, JDAlan Klestadt, BA, JDPartnerPartner

GDLSK, LLPGDLSK, LLP Customs Counsel to the Customs Counsel to the

National Customs Brokers and Forwarders Association of AmericaNational Customs Brokers and Forwarders Association of America

NCBFAA - Clearing The Way For Trade

Learning ObjectivesLearning Objectives

Upon completion, participants will be able to: Recognize the challenges of the ISF filing for

customs brokers and importers. Identify the additional liability inherent in ISF

filings. Discuss possible software and process solutions

for automating the filing.


Introductions The 10 + 2 Basics

the Where, the What, the When, the Concerns Additional Liabilities

T&C, POA, Surety Questions Technical Specifications

What Brokers Need To Know The NCBFAA Action Plan

OutlineOutline


Who Is Required To FileWho Is Required To File

Carrier – the 2 “Carrier” is Defined by 19 CFR The 2 Data Elements

Importer – the ISF ’10 or 5’ New Definition of Importer under 19 CFR 149

“the party causing goods to arrive within the limits of a port in the United States.”

For FROB, IE, T&E, and FTZ – party filing the FROB, IE, T&E, or FTZ

documentation.”


How and When Will the ISF Be Filed?How and When Will the ISF Be Filed?

How How To File

In the Entry Message In the Manifest As a Separate Filing

NPRM Indicates via Current Methods AMS ABI

When 24 Hours Prior to cargo being laden on a

vessel destined for the United States


Sources of InformationSources of Information

DATA ELEMENTS

IMPORTER

SUPPLIER / SHIPPER OVERSEAS FORWARDER

Manufacturer YES YES ?

Seller YES YES NO / ?

Buyer YES NO /? NO/ ?

Ship to YES YES YES

Stuffing location YES / ? YES YES

Consolidator YES / ? YES YES

Importer YES NO NO

Consignee YES NO NO

Country of Origin

YES YES / ? ? / NO

HTS YES NO NO


Importer Exposure Where will information come from? Who will provide information to my filer? Who will file the information for me? When will the information be needed? How will the information be given to my filer?


Questions to ConsiderQuestions to Consider


Importer Is my data secure? What if there are changes that need to be made

to the ISF filing? What if a supplier ships cargo without our

knowledge? Can my Customs Broker do my filing for me? Should I file ISF with the entry, or not?


The Licensed U.S. based Customs Broker Confidentiality of importer’s information is

required by law--The Customs Broker is required by law to maintain the confidentiality of the

transactions they handle for their clients.


The Logical Filing Party

§ 111.24 Records confidential§ 111.24 Records confidential

The records referred to in this part and pertaining to the business of the clients serviced by the

broker are to be considered confidential, and the broker must not disclose their contents or any information connected with the records to any persons other than those clients, their surety on a particular entry, and the Field Director, Office of International Trade, Regulatory Audit, the special agent in charge, the port director, or other duly accredited officers or agents of the United States, except on subpoena by a court of competent jurisdiction.


The Broker is the Logical Filing Party

Accountability to client The Customs Broker has a special

accountability to their clients. The Customs Broker is charged with the duty

to look after the best legal interests of their clients in their dealings with U.S. Customs.

The Customs Broker is concerned with helping their clients meet the requirements of the law rather than simply filing any kind of data, good or bad just to get the cargo out the door.


Proficient in ever changing U.S. Customs laws and requirementsThe licensed U.S. Customs Broker is faced with a multitude of laws administered by numerous government agencies through the Customs and Border Protection. The laws and regulations involved in importing are constantly changing. The Customs Broker is the party who is closest to all of this change and has to keep themselves abreast of the on-going changes. No other party in the supply chain has this type of exposure.



Only party in the supply chain licensed by CBPThe licensed U.S. Customs Broker is the only party in the supply chain licensed by Customs and Border Protection. The historical significance of this is that in the evolution of the industry the government recognized the significance of the transactions involved and the fiduciary responsibilities involved in representing someone in the intricacies of importing and decided that for the protection of the revenue and the importing public that Customs Brokers should be licensed.



Familiarity with importer’s product and requirementThere is virtually no other single party in the supply chain, outside of the importer themselves, who must have a greater familiarity with an importers product and the requirements of importing that product than the Customs Broker who is filing the entry on behalf of the importer. As such, the Customs Broker is in a unique position to ascertain the veracity of information being presented ISF filing.




A part of the importer’s teamThe licensed Customs Broker is already a part of the importer’s team. They are for the most part familiar with the importer’s suppliers, and other parties to the supply chain. The licensed broker is like an extension of the importer’s own office. Other parties do not have this same relationship or accountability with the importer.

No major carriers are planning to file the ISF 10


Customs Brokers Who will provide you the information

The importer?The overseas shipper/seller?An overseas non-related forwarder?Your own overseas agent or office?

When will the information be provided?This is a very big question and needs to be addressed in standard operating

procedure.



In what format will it be provided?Transmitted into your system from

importer.Transmitted into your system from

overseas source.Given to you by hard documents.

• Who will you notify of CBP acceptance of ISF

filing and how will you notify the respective parties?



• Will you be able to receive the info into your system, and link to the entry?

• Should I file the ISF with the entry, or independently?

• Filing as an independent ISF if monumental in itself. Filing the whole ISF as one filing with the entry will be an entirely different challenge.



How much re-keying will you have to do? Will there be an additional cost for surety

bonds? What additional software will you need? Will you have to go to 24/7 staffing?



New Issues of Potential LiabilityNew Issues of Potential Liability

The ISF raises creates new issues of potential liability between the importer and the broker.

Who will be responsible for late transmissions or formatting errors? How will the parties assign responsibility for updating ISF filings while the merchandise is in transit?

Who’s bond will be obligated by the ISF? What happens if cargo is not laden on board

due to a failure to properly transmit the ISF? What will be the broker’s ultimate liability for

ISF errors?


ISF Bond RequirementISF Bond Requirement

NPRM provides that the ISF filer must have a bond

NPRM amends the basic bond conditions to provide that the principal on the bond is liable

for a default “with respect to any obligation” relating to the ISF.

NPRM does not specify the form nor amount of bond

Brokers are not currently required to obtain bonds to file entries and it is unclear at this time whether brokers will be required to obtain a bond (and if so, in what amount), to file the ISF on behalf of their clients.


Managing the New RisksManaging the New Risks

Develop written procedures that clearly specify: 1. How and when the ISF information be provided. 2. Who is responsible to provide the broker with

updated ISF information? 3. Who should be notified that the ISF filing has been

accepted and how will those parties be notified? 4. Specify that the importer’s bond will be obligated for

ISF purposes and that the importer has financial responsibility for any CBP fines or penalties.

5. Utilize updated Terms & Conditions which limit the ISF filer’s financial liability. The NCBFAA has recently updated its recommended Terms & Conditions to incorporate such language.


ISF Filer IssuesISF Filer Issues

The language in the standard NCBFAA power of attorney is broad enough to authorize the broker to file the ISF.

Brokers who do not use the standard NCBFAA form should check the text of their power of attorney to verify their authority to file the ISF.

The NCBFAA will be formatting a new ISF power of attorney which limits the authority of a third party to ISF filings only.


Verification of Information

In addition to potential liquidated damages exposure for untimely, incomplete or inaccurate filings, the NPRM provides that the ISF filer must verify the ISF data in accordance with “ordinary commercial practices.”

This language could be interpreted as creating a reasonable care requirement for the ISF filer.

Where another party makes the ISF, the broker must consider whether they will assume responsibility for reconciling that data against the entry data and, if the broker decides to do so, how and to whom the broker will report discrepancies in the ISF data.


Off-Shore Processing CentersOff-Shore Processing Centers

There are several unanswered questions relating to the use ofoff-shore processing centers: If separately incorporated, will the prohibition on sharing

of customer information with third parties in 19 CFR 111.24 affect the operation?

Will the off-shore office require a separate POA? Will the importer’s information be kept confidential? What recordkeeping requirements will apply? Since the current regulations do permit the off-shore office

to prepare or transmit a combined ISF/entry, what safeguards will be established to demonstrate that the activities performed by the off-shore office do not rise to the level of “customs business?”


Draft Technical SpecificationsDraft Technical Specifications

Published as a result of multiple trade requests (including NCBFAA, COAC, TSN)

Published on June 2, 2008 Documentation can be found at:

http://www.cbp.gov/xp/cgov/trade/automated/automated_systems/sf_transaction_sets/

Link on NCBFAA website


Transmission Identifiers CBP to assign a unique number to the ISF filing SF Transaction Number Filer Code + Year + Numeric Sequence #

What Does This Tell Us? There is a tracking number for future actions It will be sent to the filer via a return message Paves the way for a status or query message


ISF 10 Loop - EntryISF 10 Loop - Entry

Updating ISF Filings Add, Delete, Replace Action Codes Reason Code Record Space Allocated

What Does This Tell Us? Updates will happen electronically We will be able to delete records not needed CBP will want a reason for changes



Master Bill of Lading – Optional Entry Number - Optional House or Regular Straight Bill –Required Multiple Bills can be reported on one ISFWhat Does This Tell Us? CBP will link the ISF with the AMS and Entry by the

House or Straight Bill Other Numbers used as reference The ISF Filing is by “shipment”



Parties to the Transaction

What Does This Tell Us? Product linking is done by manufacturer Multiple Shippers, Manufacturers, Consignees,

etc. are possible Data is sent and reviewed on a shipment level Similar in structure to the FDA BTA data



ISF Output Records Acceptance Rejections with Reason Code Acceptance with Warnings Narrative to accompany rejections Appearance of appendix indicates there will be

an error code reference table




What Else Do We Need To Know? Comments indicate that there will not be a “NO

LOAD” message to carriers for ISF10 failure to file Further revisions to the DRAFT Technical

Specifications are anticipated Indication that CBP is listening and responding to

concerns raised by the trade ISF will affect everyone in the supply chain Automation Changes will be required


Final Rule??Final Rule??

Commissioner Basham’s testimony before Congress

Phased in Approach is indicated Ensure concerns, questions, issues are forwarded

to the CBP address: [email protected]


NCBFAA Action PlanNCBFAA Action Plan

Terms and Conditions Revisions Completed and available in the next week

Power of Attorney Minor Revisions Customs Broker NVOCC and FF Combined CHB-NVOCC/FF ISF Filer

Surety Communications



How To Kits Customs Broker

CHB to Importer / Client CHB to Software Vendor CHB to NVOCC / FF

NVOCC / FF NVOCC / FF to Importer / Client NVOCC / FF to Software Vendor NVOCC / FF to Carrier



How To Kits Importer

Importer to Suppliers Importer to Carriers Importer to Vendors (CHB, NVOCC, FF)

Software Vendor Conference Calls NVOCC and Freight Forwarder Webinar

August 7th, 1 PM EST


Wondering What to Do Wondering What to Do About 10 + 2? About 10 + 2?

Questions??Questions??


Thank You!Thank You!

www.ncbfaa.org/educationwww.ncbfaa.org/education


Documents

Challenges of the ISF: Customs Brokers’ Perspective Challenges of the ISF: Customs Brokers’ Perspective Mary Jo Muoio, LCB, CCS Senior Vice President Barthco