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.

Comments

Trade-Compliance.org said…
$5,000 penalty per ISF and up to $100,000 penalty for failure to submit CSM per vessel... ouch, my wallet hurts just thinking about this!

Thanks for translating the legalese!
Jul 24, 2009, 4:22:00 PM
Post a Comment

Popular posts from this blog

Ruling of the Week 2015.8: Old Jersey and Pitcairn Island

Image
For today's ROTW, I set out looking for a ruling dealing with some far off and preferably warm location. Turns out that, with the exception of coastwise transit issues, there are no Customs and Border Protection rulings involving Pitcairn Island or any of several Pacific Ocean microstates including Tuvalu , Niue , and Kiribati . Pitcairn Island What I did find is an interesting question about the country of origin marking for products of the Bailiwick of Jersey Island, Channel Islands. The ruling is HQ 561938 (Mar. 18, 2002). For those of you who may not know, Jersey is an island off the coast of Normandy, France. It is an independent international actor and not part of the U.K. although the U.K. is responsible for its defense and external relations. Also, the Queen is the Head of State in her capacity as "the Crown in Right of Jersey." It is, according to the U.S. Department of State, a " Crown Dependency " along with the Isle of Man and the Bailiwick o...
Read more

CAFC Decision in Double Invoicing Case

The Federal Circuit has issued a decision on the merits in United States v. Inn Foods, Inc.  There had been a previous decision on jurisdiction, which was followed by a trial at the Court of International Trade and then this appeal on the substance. The initial issue is whether Inn Foods' invoicing practice amounts to fraud.  Inn Foods had been receiving an invoice from growers in Mexico that had a relatively low sales prices on it.  Subsequent to entry, Inn Foods created a second invoice at something more similar to market value, retaining the original invoice number, and paid at that higher amount.   Superficially, this looks like a standard-issue double-invoicing scheme.  But, in the age of reconciliation, is it really more like a provisional pricing mechanism?  It might have been possible to make that argument had Inn Foods adjusted its entries accordingly.  It didn't and the loss of revenue was approximately $624,000.  Based on testimony and evidence indicating both knowl...
Read more

Ninestar and UFLPA Exhaustion

Image
Exhaustion is a key doctrine in administrative law. When applicable, it requires that a party unhappy with an agency’s determination complete the administrative appeal process before turning to the courts for judicial review. Requiring exhaustion typically promotes judicial efficiency by ensuring that disputes are resolved at the agency and, if they are not, that there is a complete record of the agency process. Exhaustion also ensures that the judiciary respects the executive agencies and their expertise.  There are, on the other hand, times when the courts will find that exhaustion is not necessary or appropriate. Such is the case in  Ninestar Corporation et al. v. United States  et al., a decision of the U.S. Court of International Trade.  Ninestar is also interesting because it is one of the first cases in the CIT involving the Uyghur Forced Labor Prevention Act, known as UFLPA. In my hiatus from active blogging, I missed the rise of UFLPA as a major compliance t...
Read more