CBP to Enforce ISF-5 Requirements Mostly Through Liquidated Damages, Not Cargo Holds

CBP plans to mostly pursue Importer Security Filing-5 requirements noncompliance through liquidated damage claims, said Craig Clark, CBP's director of the Border Security and Trade Compliance Division, during a March 15 webinar. Clark said this differs from the agency's enforcement approach for ISF-10. "The common sense approach with ISF-5 is kind of the flip side of the common sense approach with ISF-10," he said. During the webinar, Clark, along with Sandra Langford-Coty, director of operational development at A.N.Deringer, and Lisa Gelsomino, CEO of Avalon Risk Management, explored multiple scenarios and what would be required from an ISF perspective.

CBP began its enforcement on the ISF-5 requirement on March 15 and is set to begin issuing liquidated damages claims for non-compliance (see 1902120017). A CBP final rule issued in April 2018 expanded the definition of "importer" for foreign cargo remaining on board (see 1804110010). "It doesn't make a lot of sense to place cargo holds on FROB cargo," Immediate Exportation (IE) or Transportation and Exportation (T&E), Clark said.

Nearly all of CBP's claims involve late or missing filings, Gelsomino said. In terms of liquidated damages claims mitigation, she said Customs-Trade Partnership Against Terrorism membership can help reduce claims by half for first violations for inaccurate bill of lading issues, though repeat claims may result in escalation. Although there were previous concerns that CBP could issue two claims for both a late filing and an inaccurate filing related to the same filing, "we really haven't seen CBP do that," she said.

As of March 15, there was about an 88 percent compliance rate for ISF-5, Clark said. "Obviously, that's not stellar," though it is "really pretty good" and marks an increase from 72 percent compliance as of a year ago, he said. Industry compliance with ISF-5 has increased over the last year, but CBP hopes to see further improvement in the future now that the requirements will be enforced, he said.

While having the cargo owner act as the ISF importer is not technically non-compliant, Clark noted there could be some added risk. "That of course is a business decision, but from my perspective, that isn't something that makes a whole lot of sense," he said. The "importer in the traditional sense" is "not a party that will necessarily know that this is FROB cargo in the ISF timeline," he said. "The law requires the carrier or the [Non-Vessel Owning Common Carrier (NVOCC)] to provide the ISF-5 for FROB and pushing that further down the supply chain is a risky move, and I would not recommend going that direction." The importer of record is different than the ISF importer, said Clark, who noted that that issue remains a point of confusion.

There's also no need to file an ISF-5 if an ISF-10 was already filed, Clark said. "You can always provide an ISF-10 in lieu of ISF-5," though "it does not work the other way around," he said. If the NVO fails to file the ISF-5 in a FROB scenario, it will be the NVO, not the importer, that will be liable, Clark said. Also, if an NVOCC is the responsible party for filing the ISF, the NVOCC will be the party fined if an ISF is filed late, he said.