Challenges of the ISF:
Customs Brokers’ Perspective
Mary Jo Muoio, LCB, CCS
Senior Vice President
Barthco Trade Services, division Ozburn-Hessey Logistics
President
National Customs Brokers and Forwarders Association of America
Alan Klestadt, BA, JD
Partner
GDLSK, LLP
Customs Counsel to the
National Customs Brokers and Forwarders Association of America
NCBFAA - Clearing The Way For Trade
Learning Objectives
Upon completion, participants will be able to:
 Recognize the challenges of the ISF filing for
customs brokers and importers.
 Identify the additional liability inherent in ISF
filings.
 Discuss possible software and process solutions
for automating the filing.
NCBFAA - Clearing The Way For Trade
Outline
 Introductions
 The 10 + 2 Basics
 the Where, the What, the When, the
Concerns
 Additional Liabilities
 T&C, POA, Surety Questions
 Technical Specifications
 What Brokers Need To Know
 The NCBFAA Action Plan
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Who Is Required To File
 Carrier – the 2
 “Carrier” is Defined by 19 CFR
 The 2 Data Elements
 Importer – the ISF ’10 or 5’
 New Definition of Importer under 19 CFR 149
 “the party causing goods to arrive within
the limits of a port in the United States.”
 For FROB, IE, T&E, and FTZ –
 party filing the FROB, IE, T&E, or FTZ
documentation.”
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How and When Will the ISF Be Filed?
How
 How To File
 In the Entry Message
 In the Manifest
 As a Separate Filing
 NPRM Indicates via Current Methods
 AMS
 ABI
 When
 24 Hours Prior to cargo being laden on a
vessel destined for the United States

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Sources of Information
DATA ELEMENTS
IMPORT
ER
SUPPLIER / SHIPPER
OVERSEAS FORWARDER
Manufacturer
YES
YES
?
Seller
YES
YES
NO / ?
Buyer
YES
NO /?
NO/ ?
Ship to
YES
YES
YES
Stuffing location
YES / ?
YES
YES
Consolidator
YES / ?
YES
YES
Importer
YES
NO
NO
Consignee
YES
NO
NO
Country of Origin
YES
YES / ?
? / NO
HTS
YES
NO
NO
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Questions to Consider
Importer
 Exposure
 Where will information come from?
 Who will provide information to my filer?
 Who will file the information for me?
 When will the information be needed?
 How will the information be given to my filer?
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Questions to Consider
Importer
 Is my data secure?
 What if there are changes that need to be made
to the ISF filing?
 What if a supplier ships cargo without our
knowledge?
 Can my Customs Broker do my filing for me?
 Should I file ISF with the entry, or not?
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The Logical Filing Party
The Licensed U.S. based Customs Broker

Confidentiality of importer’s information is
required by law-The Customs Broker is required by law to
maintain the confidentiality of the
transactions they handle for their clients.
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§ 111.24 Records confidential
The records referred to in this part and pertaining
to the business of the clients serviced by the
broker are to be considered confidential, and the
broker must not disclose their contents or any
information connected with the records to any
persons other than those clients, their surety on a
particular entry, and the Field Director, Office of
International Trade, Regulatory Audit, the special
agent in charge, the port director, or other duly
accredited officers or agents of the United States,
except on subpoena by a court of competent
jurisdiction.
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The Broker is the Logical Filing Party
 Accountability to client
The Customs Broker has a special
accountability to their clients.
The Customs Broker is charged with the
duty to look after the best legal interests of
their clients in their dealings with U.S.
Customs.
The Customs Broker is concerned with
helping their clients meet the requirements
of the law rather than simply filing any kind
of data, good or bad just to get the cargo
out the door.
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The Broker is the Logical Filing Party
 Proficient in ever changing U.S. Customs laws
and requirements
The licensed U.S. Customs Broker is faced with
a multitude of laws administered by numerous
government agencies through the Customs and
Border Protection. The laws and regulations
involved in importing are constantly changing.
The Customs Broker is the party who is closest
to all of this change and has to keep themselves
abreast of the on-going changes. No other
party in the supply chain has this type of
exposure.
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The Broker is the Logical Filing Party
 Only party in the supply chain licensed by CBP
The licensed U.S. Customs Broker is the only
party in the supply chain licensed by Customs
and Border Protection. The historical
significance of this is that in the evolution of
the industry the government recognized the
significance of the transactions involved and
the fiduciary responsibilities involved in
representing someone in the intricacies of
importing and decided that for the protection
of the revenue and the importing public that
Customs Brokers should be licensed.
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The Broker is the Logical Filing Party
 Familiarity with importer’s product and
requirement
There is virtually no other single party in the
supply chain, outside of the importer
themselves, who must have a greater familiarity
with an importers product and the requirements
of importing that product than the Customs
Broker who is filing the entry on behalf of the
importer. As such, the Customs Broker is in a
unique position to ascertain the veracity of
information being presented ISF filing.
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The Broker is the Logical Filing Party
 A part of the importer’s team
The licensed Customs Broker is already a part of
the importer’s team. They are for the most part
familiar with the importer’s suppliers, and other
parties to the supply chain. The licensed broker
is like an extension of the importer’s own office.
Other parties do not have this same relationship
or accountability with the importer.
No major carriers are planning to file the ISF 10
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Questions to Consider
Customs Brokers
 Who will provide you the information
The importer?
The overseas shipper/seller?
An overseas non-related forwarder?
Your own overseas agent or office?
 When will the information be provided?
This is a very big question and needs to be
addressed in standard operating procedure.
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Questions to Consider
In what format will it be provided?
Transmitted into your system from importer.
Transmitted into your system from overseas
source.
Given to you by hard documents.
•
Who will you notify of CBP acceptance of ISF
filing and how will you notify the respective
parties?

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Questions to Consider
• Will you be able to receive the info into your
system, and link to the entry?
• Should I file the ISF with the entry, or
independently?
• Filing as an independent ISF if monumental in
itself. Filing the whole ISF as one filing with the
entry will be an entirely different challenge.
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Questions to Consider
 How much re-keying will you have to do?
 Will there be an additional cost for surety
bonds?
 What additional software will you need?
 Will you have to go to 24/7 staffing?
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New Issues of Potential Liability
 The ISF raises creates new issues of potential
liability between the importer and the broker.
 Who will be responsible for late transmissions
or formatting errors? How will the parties
assign responsibility for updating ISF filings
while the merchandise is in transit?
 Who’s bond will be obligated by the ISF?
 What happens if cargo is not laden on board
due to a failure to properly transmit the ISF?
 What will be the broker’s ultimate liability for
ISF errors?
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ISF Bond Requirement
 NPRM provides that the ISF filer must have a
bond
 NPRM amends the basic bond conditions to
provide that the principal on the bond is liable
for a default “with respect to any obligation”
relating to the ISF.
 NPRM does not specify the form nor amount of
bond
 Brokers are not currently required to obtain
bonds to file entries and it is unclear at this time
whether brokers will be required to obtain a
bond (and if so, in what amount), to file the ISF
on behalf of their clients.
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Managing the New Risks
Develop written procedures that clearly specify:
 1. How and when the ISF information be provided.
 2. Who is responsible to provide the broker with
updated ISF information?
 3. Who should be notified that the ISF filing has been
accepted and how will those parties be notified?
 4. Specify that the importer’s bond will be obligated for
ISF purposes and that the importer has financial
responsibility for any CBP fines or penalties.
 5. Utilize updated Terms & Conditions which limit the
ISF filer’s financial liability. The NCBFAA has recently
updated its recommended Terms & Conditions to
incorporate such language.
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ISF Filer Issues
 The language in the standard NCBFAA power of
attorney is broad enough to authorize the broker
to file the ISF.
 Brokers who do not use the standard NCBFAA
form should check the text of their power of
attorney to verify their authority to file the ISF.
 The NCBFAA will be formatting a new ISF power
of attorney which limits the authority of a third
party to ISF filings only.
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Verification of Information
 In addition to potential liquidated damages exposure
for untimely, incomplete or inaccurate filings, the
NPRM provides that the ISF filer must verify the ISF
data in accordance with “ordinary commercial
practices.”
 This language could be interpreted as creating a
reasonable care requirement for the ISF filer.
 Where another party makes the ISF, the broker
must consider whether they will assume
responsibility for reconciling that data against the
entry data and, if the broker decides to do so, how
and to whom the broker will report discrepancies in
the ISF data.
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Off-Shore Processing Centers
There are several unanswered questions relating to the use of
off-shore processing centers:
 If separately incorporated, will the prohibition on sharing
of customer information with third parties in 19 CFR
111.24 affect the operation?
 Will the off-shore office require a separate POA?
 Will the importer’s information be kept confidential?
 What recordkeeping requirements will apply?
 Since the current regulations do permit the off-shore office
to prepare or transmit a combined ISF/entry, what
safeguards will be established to demonstrate that the
activities performed by the off-shore office do not rise to
the level of “customs business?”
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Draft Technical Specifications
 Published as a result of multiple trade requests
(including NCBFAA, COAC, TSN)
 Published on June 2, 2008
 Documentation can be found at:
http://www.cbp.gov/xp/cgov/trade/automated/a
utomated_systems/sf_transaction_sets/
 Link on NCBFAA website
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ISF 10 Loop - Entry
Transmission Identifiers
 CBP to assign a unique number to the ISF filing
 SF Transaction Number
 Filer Code + Year + Numeric Sequence #
What Does This Tell Us?
 There is a tracking number for future actions
 It will be sent to the filer via a return message
 Paves the way for a status or query message
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ISF 10 Loop - Entry
Updating ISF Filings
 Add, Delete, Replace Action Codes
 Reason Code Record Space Allocated
What Does This Tell Us?
 Updates will happen electronically
 We will be able to delete records not needed
 CBP will want a reason for changes
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ISF 10 Loop - Entry
 Master Bill of Lading – Optional
 Entry Number - Optional
 House or Regular Straight Bill –Required
 Multiple Bills can be reported on one ISF
What Does This Tell Us?
 CBP will link the ISF with the AMS and Entry by
the House or Straight Bill
 Other Numbers used as reference
 The ISF Filing is by “shipment”
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ISF 10 Loop - Entry
Parties to the Transaction
What Does This Tell Us?
 Product linking is done by manufacturer
 Multiple Shippers, Manufacturers, Consignees,
etc. are possible
 Data is sent and reviewed on a shipment level
 Similar in structure to the FDA BTA data
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ISF 10 Loop - Entry
ISF Output Records
 Acceptance
 Rejections with Reason Code
 Acceptance with Warnings
 Narrative to accompany rejections
 Appearance of appendix indicates there will be
an error code reference table
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ISF 10 Loop - Entry
What Else Do We Need To Know?
 Comments indicate that there will not be a “NO
LOAD” message to carriers for ISF10 failure to
file
 Further revisions to the DRAFT Technical
Specifications are anticipated
 Indication that CBP is listening and responding
to concerns raised by the trade
 ISF will affect everyone in the supply chain
 Automation Changes will be required
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Final Rule??
 Commissioner Basham’s testimony before
Congress
 Phased in Approach is indicated
 Ensure concerns, questions, issues are forwarded
to the CBP address:
[email protected]
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NCBFAA Action Plan
 Terms and Conditions Revisions
 Completed and available in the next week
 Power of Attorney Minor Revisions
 Customs Broker
 NVOCC and FF
 Combined CHB-NVOCC/FF
 ISF Filer
 Surety Communications
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NCBFAA Action Plan
 How To Kits
 Customs Broker
 CHB to Importer / Client
 CHB to Software Vendor
 CHB to NVOCC / FF
 NVOCC / FF
 NVOCC / FF to Importer / Client
 NVOCC / FF to Software Vendor
 NVOCC / FF to Carrier
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NCBFAA Action Plan
 How To Kits
 Importer
 Importer to Suppliers
 Importer to Carriers
 Importer to Vendors (CHB, NVOCC, FF)
 Software Vendor Conference Calls
 NVOCC and Freight Forwarder Webinar
 August 7th, 1 PM EST
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Wondering What to Do
About 10 + 2?
Questions??
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Thank You!
www.ncbfaa.org/education
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