Tuesday, April 21, 2009

How Much Could Importers Pay for ISF Violations?

Even though CBP is not issuing penalties related to ISF until January 2010, the trade continues to speculate how enforcement will be structured. While all of the articles on the subject indicate that importers will be subject to liquidated damages penalties of $5,000 per violation, it is still unclear as to what constitutes a violation. CBP provides some guidance in the ISF FAQ posted on their website. When asked if there could be multiple violations on one ISF, the following answer was given: “While there may be multiple errors on an ISF transmission, CBP will issue liquidated damages for $5,000 for each ISF transmission that is not timely, complete and/or accurate.” Right away, we see that there could be more than one penalty issued for a single shipment since the ISF could be filed untimely and it could contain errors. Ouch!

Remember, the ISF Importer is ultimately responsible for the timely, accurate and complete submission of the ISF filing. Who is the ISF importer?
Part 149.1 of the CBP Regulations states: “For purposes of this part, ‘Importer Security Filing (ISF) Importer’ means the party causing goods to arrive within the limits of a port in the United States by vessel. ISF Importer will be the goods' owner, purchaser, consignee, or agent such as a licensed customs broker.” If the importer enlists the services of a broker to file the data and an error is made or the data is not filed timely, which party gets the penalty? Similar to filing entry documentation, the importer is ultimately liable for the accuracy of the filing. Therefore, the importer could be liable for a minimum of $5000 per filing. Consider a worst-case scenario. The ISF data is not filed timely ($5,000), the first transmission contains an error ($5,000) and the second transmission to fix the first one contains an error. ($5,000). In this situation, it appears the importer could be responsible for $15,000 in penalties for one filing. Hopefully, the chances of this scenario occurring in actual practice are slim. It would not be a happy surprise for importers to receive a penalty letter containing a bill for $15,000. To reduce the chances of penalties, importers and agents should work very closely to reduce the potential for any errors. Additionally, the trade should consider working together with CBP to find a more palatable penalty structure.

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