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ISF Penalty Mitigation Guildlines

I have been working on a fascinating off-topic post involving popular music, technology, and quantum physics. Instead of that, you get Guidelines for the Assessment and Cancellation of Claims for Liquidated Damages for Failure to Comply with the Vessel Stow Plan, Container Status Message, and Importer Security Filing Requirements. It is in the Customs Bulletin, see page 29.

This is the much anticipated notice in which Customs and Border Protection explains how it will calculate penalty amounts relating to the ISF (formerly known as 10 + 2).

Customs initially notes that the penalties related to ISF include:

• Liquidated damages
• Do not load orders
• Denial of carrier preliminary entry permits/special licenses to unlade
• Any other applicable statutory penalty (meaning 19 USC 1595a penalties)
• Denial of release

It does not make a lot of sense for me to try and summarize the penalties here. Frankly, the Bulletin Notice does a fine job of that.

For the importer part of this, a late filing can result in a $5,000 claim for liquidated damages per inaccurate ISF. Inaccurate filings, inaccurate updates, and the failure to withdraw an ISF can also result in $5,000 claim for liquidated damages.

Customs recognizes that filers may be dependent on information provided by third parties. Where that is the case, Customs will consider whether and to what extent the filer is able to verify the information. Where the filer is not reasonably able to verify the information, CBP will permit the filer to present information on the basis of what it reasonably believes to be true. That means that for third party information, the filer will not be held strictly liable for the accuracy of that information. That's good.

On the flip side, in its discussion of mitigation, Customs makes clear that mitigation will not be available if the violation compromised law enforcement goals. It would be nice if CBP would define those goals. Otherwise, it presents a potentially large whole in the mitigation scheme.

Before mitigation is even addressed, Customs states that first violations relating to ISF can be cancelled upon payment of an amount between $1,000 and $2,000 dollars. The actual amount will depend on the presence of mitigating or aggravating factors. Subsequent violations may be cancelled on the payment of not less than $2,500 provided law enforcement goals were not compromised. In the event that law enforcement goals were compromised, no relief is available.

In terms of mitigating factors, CBP has identified the following:

• Progress in implementing ISF filing procedures prior to January 26, 2010
• Few violations compared to total ISF shipments
• Tier-2 or Tier-3 C-TPAT members may receive up to 50% additional mitigation
• Remedial action
• Factors outside the filer's control (e.g., weather) caused the late filing
• Filer received the incorrect information from a third party and was not reasonably able to verify it

Aggravating factors include:

• Lack of cooperation
• Evidence of smuggling or attempted illegal imports
• Multiple ISF errors
• A rising error rate indicative of deteriorating systems

A complete failure to file will result in Customs withholding release or prohibiting unlading of the cargo. If the cargo is unlade without a permit, it becomes subject to seizure.

Full post as published by Customs Law on July 17, 2009 (boomark / email).