ISF Enforcement Recap A Surety Perspective

1. ISF Enforcement Recap A Surety Perspective Presented by: Jason Palumbo Account Executive September 18, 2013

2. Liquidated Damages • LD enforcement phase officially began July 9 • Limited LD activity to date • Major concern to importers, brokers, & sureties is poor compliance rate • CBP policy is to withhold release until ISF filing • I.e., to get out of “ISF Jail” an ISF must be filed (late)

3. Some Disturbing Numbers • As of September 6, “compliance rate” was just over 90% • Eight weeks earlier, it was said to be around 80% • These CBP numbers measure only filing/non-filing of ISFs on shipments requiring them: • Late file percentage unknown • “Timely” = vessel departure minus 24 hours • Faulty data percentage unknown

4. Temporary Enforcement Phase • Until mid-2014 or later, HQ is to approve all LD claims prior to mailing to importer & surety • CSMS giving 30 days notice to be transmitted prior to end of HQ review requirement • Exact form of next phase unclear • Eventually, issuance of LD for late ISFs to become “automatic” (similar to current process on late filing of 7501s)

5. What to Expect if No ISF Filed • In general, ISF holds • No release until an ISF filed + • NII or intensive exam + • Possible LD (since ISF filing will be late) • Expectations similar if ISF is filed just before arrival

6. What Not to Expect • Uniform port-to-port handling • Due to variable volumes/resources, CBP HQ will not dictate “operations policy” to ports • This will affect: • LD issuance • Frequency of holds • Frequency of NIIs, intensive exams • Release of consolidated containers – partial compliance

7. Don’t Expect… • No-load messages • CBP is clearly viewing this as a rare step to be taken only when “national security threat” is foreseen • General increase to Activity Code 1 continuous bond amounts • But selective increases for specific non-compliant importers is a possibility consistent with current Revenue Division practice

8. Also Deemed Rare… • Long case issuance delays/large LD backlogs • The “six year distraction” • All bond originated liabilities are subject to 28 U.S.C. § 2415 • ISF: Statute essentially starts at due date • Other LD: Essentially starts at 5955A date • Supplemental duties: Statute essentially runs from liquidation • HQ wants LD assessed timely (within 30 – 60 days)

9. Ready to File but Late – What to Do? • Sureties will probably require collateral to do an ISF STB, but there are other possibilities • Activity Code 1 (also 2, 3, or 4) continuous bond on file as of ISF due date • ISF Submission Type 5 (late ISF-10 with no bond)/Type 6 (late ISF-5 with no bond) • Worst thing to do – not file the ISF

10. Lingering Concerns • 5955A inconsistencies • Delays of up to two weeks in mailing • Inadequate information • To date, notices have not shown ISF numbers or filer IDs • Data inadequacies (ASI) • No ISF number • No B/L number • No Filer ID

11. Mitigation…The Big Question Mark • July 2009 Mitigation Guidelines specify: • Minimum assessment (after mitigation) for first violation - $1,000 • Minimum for any subsequent violation - $2,500 • Additional relief available if importer C-TPAT certified • Interim final rule (November 2008): “…mitigation will be the exception and not the rule….”

12. Questions??