NEWS FLASH

 

Jul 31, 2009

CBP Issues “10 + 2” Sanctions and Mitigation Guidelines

In the Customs Bulletin of July 17, 2009, CBP published its notice setting forth guidelines for assessment and cancellation of liquidated damages claims for failure to comply with the Importer Security Filing (ISF) and related requirements.  (CBP Dec. 09-26).  Please refer to our previous newsletters related to the substantive filing requirements.


The mitigation guidelines, which are summarized below, technically took effect on July 17, 2009, the day they were published, although we are still in CBPs phase-in period during which it will not assess liquidated damages claims.  


The interim final rules requiring an ISF prior to vessel loading at foreign ports became effective in January of this year, and CBP at that time noted that there would be a delayed compliance period of 12 months (January 26, 2009 to January 26, 2110) during which CBP will show restraint in enforcing the new ISF rules.  During this phase-in period, however, importers are expected to make “good faith” efforts to comply with the new ISF requirements, which are set forth in the Customs regulations at 19 CFR 149.2. 


In addition to ISF-related violations, the new mitigation guidelines cover failure to comply with vessel stow plan requirements and container status message requirements.  Other sanctions in addition to liquidated damages were also listed. 


Situations Giving Rise to Liquidated Damages Claims or Other Enforcement Actions by CBP
19 CFR 149.2(b) requires the ISF Importer or his agent to submit an ISF before cargo is laden at a foreign port for all non-bulk cargo destined to arrive in the U.S by vessel. There are a number of circumstances pertaining to the new ISF and related requirements that may result in the issuance of a liquidated damages claim or some other action by CBP.  They include the following:
Failure to File an ISF –  If the importer completely neglects to file the requisite ISF, the guidelines indicate that CBP may do one or more of the following:

  1. Issue a “do not load” (DNL) hold regarding the shipment,
  2. Delay or deny the vessel carrier’s preliminary entry permit or special license to unlade,
  3. Withhold the release or transfer of the cargo until CBP receives the required information,
  4. Seize the cargo if it is unladen without permission (all seizures must be approved by CBP Headquarters),
  5. Assess liquidated damages if a bond is in place.

Late Filing of ISF – The interim final rules, which became effective in February of 2009, require that the importer file the ISF no later than 24 hours prior to lading at a foreign port.  See 19 CFR 149.2(b). 
If an ISF importer submits a late ISF, Port Directors may assess a liquidated damages claim against the party of $5,000 per late filing. 

 
Filing an ISF Containing Inaccurate Information – In this situation, Port Directors are instructed that they may assess claims of liquidated damages in the amount of $5,000 for each inaccurate ISF, again for violation of 19 CFR 149.2. 


The guidelines provide that CBP will consider the transmission closest in time to, but prior to, 24 hours prior to lading, prior to lading, or 24 hours prior to arrival, whichever is applicable.
Submission of an Inaccurate ISF Update – If an ISF importer or agent submits an inaccurate ISF update pursuant to 19 CFR 149.2(d), Port Directors may assess a liquidated damages claim against the party for the first inaccurate ISF update in the amount of $5.000.


If there are successive filings of ISF data to correct the information submitted, CBP will consider only the filing closest to the allowed filing time frame in assessing liquidated damages claim.  The guidelines contemplate that liquidated damages will not be issued for each inaccurate transmission.


Failure to Withdraw an ISF – 19 CFR 149.2(e) provides that if the goods associated with the ISF are no longer intended to be imported into the U.S., the party who submitted the ISF must withdraw the filing and transmit to CBP the reason for such withdrawal.
Failure to do so may result in the Port Director’s assessment of a claim for liquidated damages against the party in the amount of $5,000.  


Mitigation Guidelines
First Offense – If an ISF importer is assessed a liquidated damages claim for filing a late or inaccurate ISF or an inaccurate ISF update, the full $5,000 claim may be cancelled upon payment of an amount between $1,000 and $2,000, depending on any mitigating or aggravating factors, and if CBP determines that its law enforcement goals were not compromised by the violation.

Subsequent Violations – If there are CBP claims for liquidated damages against the party for filing a late or inaccurate ISF or an inaccurate ISF update, the full claim may be cancelled upon a payment of not less than $2,500, again if CBP determines that law enforcement goals were not compromised by the violation(s). 
The guidelines make it clear that no relief will be granted from the full liquidated damages claim if CBP decides that its law enforcement goals were compromised.  The guidelines do not indicate what those law enforcement goals are.

Mitigating Factors
In making its determination as to whether to grant relief for the above ISF-related violations, CBP will consider all available information set forth in a  petition, including all mitigating, aggravating, and extraordinary factors in the case.  The guidelines list the following (non-exhaustive) mitigating factors:

  1. Evidence of progress in implementing the ISF requirement during the flexible enforcement period (January 26, 2009 through January 26, 2110);
  2. Small number of violations compared to the number of shipments for which ISFs were required;
  3. An importer who is a certified Tier 2 or Tier 3 C-TPAT member may receive additional mitigation up to 50% of the mitigation amount, depending on the tier of C-TPAT participation;
  4. Demonstrated remedial action has been taken to prevent future violations;
  5. ISF information was filed late because of vessel diversion due to factors out of the ISF Importer’s control (such as bad weather);
  6. For inaccurate ISFs, the presenting party received the information from another party in accordance with ordinary commercial practices and can show that it reasonably believed the information to be true, and it was not reasonably able to verify the data.  This is considered an extraordinary mitigating factor that may warrant cancellation of the claim altogether.

Aggravating Factors

  1. Lack of cooperation with CBP, or a CBP activity is “impeded” with regard to the case;
  2. Evidence of smuggling or an attempt to introduce merchandise contrary to law.  This would be considered an extraordinary aggravating factor;
  3. Multiple errors on the ISF;
  4. A rising error rate which is indicative of deteriorating performance in the transmission of ISF information.

Additional Statutory Penalties 
A penalty may be assessed under the provisions of 19 U.S.C. 1595a(b) with CBP Headquarters approval for serious or repetitive violations.  Section 1595a(b) penalties will be mitigated in a manner consistent with current guidelines for section 1595a(b) penalties for violations of a statute other than 19 U.S.C. 1448 or 1499. See page 16 of the Mitigation Guidelines: Fines, Penalties, Forfeitures and Liquidated Damages Informed Compliance Publication.

Guidelines Regarding Additional Carrier Requirements
In addition to the 24-hour rule and other ISF requirements outlined above, the new CBP interim rules set forth new carrier requirements regarding stow plans and container status messaging.  Mitigation guidelines are also published for violations of these requirements in the July 17, 2009 Customs Bulletin, effective on that date.

Vessel Stow Plan – Carriers must now transmit the stow plan so that it is received by CBP no later than 48 hours after the vessel’s departure from the last foreign port, and CBP must receive that information prior to the vessel’s arrival at the first U.S. port.  The plan must include the vessel name, operator and voyage number, as well as certain data regarding the containers onboard.  Port Directors may assess liquidated damages claims of $50,000 for each vessel arrival when a complete, accurate and timely vessel stow plan was not submitted.  For first violations involving failure to file, CBP may reduce the claim to between $5,000 and $25,000, depending on any mitigating or aggravating factors.  For late and inaccurate filings, the claim may be reduced to between $2,500 and $10,000 for a first violation.  On the other extremes, CBP may cancel the claim altogether if certain conditions are met, or no relief may be granted at all if it the agency determines that its law enforcement goals were compromised.

Container Status Messages (CSMs) – A CMS must be submitted to CBP for certain events relating to all carriers laden with cargo destined for the U.S. by vessel. See19 CFR 4.7d. Those events include (among others) 1) when the booking relating to a container is confirmed, 2) when the container undergoes a terminal gate inspection, 3) when the container arrives or departs a facility, 4) when it is loaded or unloaded from a conveyance, and 5) when the vessel with the container departs from or arrives at a port.  Carriers must submit the CSM message no later than 24 hours after the CSM is entered into the carrier’s own equipment tracking system.  Violations for failure to file, late filing, or inaccurate filing may result in liquidated damages claims of $5,000 per CSM message, up to a maximum of $100,000 per vessel arrival.  First violations may be reduced to between $1,000 and $2,000 for failure to file, and between $500 and $1,000 for late and inaccurate filings. 

The new guidelines also set forth mitigating and aggravating factors for stow plan and CSM violations.

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