Tuesday, November 25, 2008

10 + 2: Back On Topic

By now it is old news that Customs and Border Protection has published the interim final rule on the new Security Filing popularly known as 10+2. I'm going to assume that if you find you way to this blog you know what 10+2 is all about. If not, read this 55 page notice. So, I'm just going to post a few observations:

Regarding enforcement, Customs has said that it will show restraint during a transition period as importers and carriers implement 10+2 systems. This restraint, though, is dependent on a showing that importers are making satisfactory progress on good faith efforts to implement the requirements. This period of flexibility will last for about a year from the effective date of the rule. That means until about January 26, 2010. After that, an importer's compliance efforts can be considered as a mitigating factor in an enforcement action.

In case you are wondering, enforcement of 10+2 (technically known as Importer Security Filing, Vessel Stow Plan, and Container Status Message Requirements) will apparently rely mostly on liquidated damages claims. This means new conditions need to be added to customs bonds requiring that the principal (i.e., the importer) comply with the reporting requirements. Failure to comply might result in liquidated damages equal to the value of the merchandise. Similar requirements will be added to international carrier bonds. Violations relating to the vessel stow plan may result in liquidated damages of $50,000. Violations relating to the container status message may result in liquidated damages of $5,000 for each violation up to $100,000 per vessel arrival.

Customs has expressed a willingness to be flexible with respect to some of the required data. According to its Fact Sheet:
In lieu of a single specific response, importers may submit a range of responses for each of the following data elements: manufacturer (or supplier), ship to party, country of origin, and commodity HTSUS number. The ISF must be updated as soon as more accurate or precise data becomes available and no later than 24 hours prior to the ship's arrival at a U.S. port.

For example, questions had been raised about changes in the ship to party that might occur while the goods are in transit. So, that flexibility might be helpful.

There will also be some flexibility on the timing of reporting certain data. Again, according to the Fact Sheet:


The ISF will also need to include two data elements that must be submitted as early as possible, but no later than 24 hours prior to the ship's arrival at a U.S. port. These data elements are:

  • Container stuffing location; and
  • Consolidator
One last thing that surprised me: there were comments filed suggesting that CBP adopt a 100% screening of cargo approach in lieu of this data collection. I get that 100% cargo screening would reduce the risk of the tools of terrorism reaching the U.S. in a cargo container. I also get that the 10 + 2 proposal is intended to improve CBP's ability to target risky shipments and avoid delays for legitimate trade. What surprised me was that someone commented in favor of 100% screening. Usually when this comes up in informal conversation the context is that anyone in Congress who thinks that 100% screening is a good idea does not understand trade and that it would lead to devastating delays. I'm not certain that is true. There are pilot screening programs ongoing, so we need to see how they work. I'm just registering my surprise that someone went on the record suggesting it as an alternative.

What do you think, is more screening a better alternative to the Importer Security Filing and Additional Carrier Requirements?

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