ISF liquidated damages delayed to 4Q

      The official start of enforcement for the Importer Security Filing begins Tuesday, but under the graduated approach outlined last week by U.S. Customs and Border Protection importers shouldn’t worry about getting hit with liquidated damages right out of the box.
      CBP will not start issuing claims for liquidated damages associated with ISF compliance violations until the fourth quarter of 2010, said Richard DiNucci, the Field Operations official in charge of the program, at a trade seminar in Los Angeles organized by the American Association of Exporters and Importers.
      “Don’t get nervous about the 26th. You’re not going to see a sudden rush” to hit importers with damages for late or incomplete filings, DiNucci told about 75 trade professionals at the Toyota North America campus.
      Liquidated damages is a Customs term that means an importer or their agent failed to meet the conditions of a bond, such as filing complete, accurate and timely documentation. The “10+2” rule allows for liquidated damages of $5,000 per ISF violation, which could reach $10,000 on a shipment if amendments to the ISF are filed with errors.   
Penalties are issued for violations of law, such as fraudulent activity, and are intended to be punitive.

Richard DiNucci director, Secure Freight Initiative office, U.S. Customs and Border Protection
“We’re not in the game of gotcha. We want the data.”

      CBP delayed enforcement of the rule for one year so that importers could adapt to the new requirements for advance, electronic filing of 10 pieces of commercial data and ocean carriers could submit two data sets for each vessel sailing. Jayson Ahern, then-acting commissioner, said in December that the agency would not immediately move to strict enforcement, but DiNucci publicly spelled out details of the phased approach for the first time.
      During the first quarter, CBP officers will monitor ISF submissions and issue warnings to those with errors or shipments that do not have an ISF attached to their file. The warnings will be accompanied with some tips on how to meet the requirements of the “10+2” rule.
      There still will be consequences for shipments for which there is no ISF on file by the time of vessel arrival in the United States, despite the postponement of liquidated damages. Importers in that circumstance should expect their shipments to receive further scrutiny and delay as CBP requests additional documentation, non-intrusive inspections or full physical exams before the cargo is released, DiNucci said. CBP has heightened its focus on cargo security following the attempted Christmas Day attack on an airliner by a suicide bomber.
      A first-time importer without a track record with CBP that has not filed an ISF form, for example, should expect its shipment will undergo an intensive examination in which the contents of the container are stripped out and searched.

Ahern

      “I guarantee you that shipment is going to be looked at,” DiNucci said, adding that ignorance of customs rules after more than a year of reminders is not an excuse.
      The costs for delayed release can add up in terms of fees for non- intrusive exams, physical searches at a private container examination station, truck delivery to and from the exam warehouse, storage, demurrage, general order charges, and a big bond premium.
      During the second and third quarters of the year, CBP will escalate enforcement by holding shipments for inspections that do not have an ISF or have serious errors or discrepancies, DiNucci said.
      Companies that do not have a special ISF bond, or a continuous bond, and have not filed an ISF are likely to face the most scrutiny early on, said Bruce Leeds, an attorney with Braumiller & Schulz and former industry liaison on the Commercial Operations Advisory Committee that provides input to CBP. The agency will not release the shipment until the importer files an ISF, but obtaining a bond at that late stage may be difficult and expensive, he warned.
      Claims for liquidated damages will begin in the fourth quarter, DiNucci said.
      The early stages of enforcement essentially are to build a baseline on how each importer is complying, he explained, which means that the agency will not go back and issue a claim against first and second quarter shipments, or for those occurring during the past year of practice runs, unless there was a serious smuggling or other law enforcement violation involved. An importer’s overall record will be taken into consideration as a mitigating factor when determining whether to issue claims, DiNucci said. That means CBP is not likely to go after a company for a few mistakes if that complies with ISF requirements 98 percent of the time.
      “We’re not in the game of gotcha. We want the data,” DiNucci said.
      CBP previously announced that all claims for ISF violations will be routed from ports of entry through headquarters for review to help ensure the rule is being enforced uniformly across the country.   
DiNucci said his office has developed a process and a software package for receiving and reviewing the claims. DiNucci will review each case and make a recommendation to higher ups on whether to approve the assessment, which will be sent back to the originating port to issue the notice of liquidated damages.
      DiNucci said ISF claims review will be centralized for at least a year before a decision is made whether to return responsibility for issuing damage claims to the ports of entry. — Eric Kulisch