CBP Issues Penalty and Mitigation Guidelines for 10+2 Filings

July 17, 2009

Today, U.S. Customs and Border Protection (CBP) issued guidelines for the mitigation of penalties related to Importer Security Filings (ISF, commonly referred to as 10+2 filing) incurred by carriers and ISF importers for failure to provide the required advance electronic information to CBP within the appropriate timeframe as specified in 19 CFR 149.2. Effective immediately, these guidelines are intended to assist CBP officials in determining appropriate penalties for ISF violations.

In general, ISF importers can be assessed liquidated damages and other penalties, including unlading holds, if they:

• Fail to file an ISF;
• File a late ISF;
• Submit an ISF containing inaccurate information;
• Fail to update the ISF if, after filing and before the goods arrive within the limits of a port in the U.S., there are changes to the information filed or if more accurate information becomes available;
• Submit an inaccurate ISF update; or
• Fail to withdraw an ISF as required by 19 CFR 149.2(e).

According to the guidelines, CBP may cancel damage claims for ISF violations under the following conditions are met:

• First violation. If an ISF importer incurs a liquidated damages claim for filing a late or inaccurate ISF or ISF update, the claim may be cancelled upon payment of an amount between $1,000 and $2,000, depending on the presence of mitigating or aggravating factors if CBP determines that law enforcement goals were not compromised by the violation.
• Subsequent violations. If an ISF importer incurs a subsequent damages claim, the claim may be cancelled upon payment of $2,500 if CBP determines that law enforcement goals were not compromised.
• No relief will be granted if CBP determines that that law enforcement goals were comprised by the violation.

Furthermore, while reviewing any violation, CBP will consider the following mitigating factors in determining the final penalty to be assessed (not exhaustive):

• Evidence of progress in the implementation of ISF requirement during the flexible enforcement period (January 26, 2009 through January 26, 2010).
• Small number of violations compared to the number of shipments for which ISFs were required.
• Tier 2 or Tier 3 members of Customs-Trade Partnership Against Terrorism (C-TPAT) may receive additional mitigation of up to 50% of the normal mitigation amount.
• Demonstrated remedial action has been taken to prevent future violations.
• ISF information was filed late because of vessel diversion due to factors outside the ISF Importer’s control (e.g. due to weather).
• If the presenting party acquired the information from another party in accordance with ordinary commercial practice, and can demonstrate that it reasonable believed the information to be true, and it was not reasonably able to verify the information, in penalties involving inaccurate filings. (This may warrant total cancellation of a claim without payment).

However, CBP notes that the following aggravating factors may prohibit it from mitigating penalties:

•  Lack of cooperation with CBP.
•  Evidence of smuggling or attempt to introduce merchandise contrary to the law.
•  Multiple errors on the ISF.
•  Rising error rate which is indicative of deteriorating performance in the ISF transmissions.

In instances where an ISF is not filed for goods that have arrived in the U.S, CBP will withhold the release or transfer of the cargo until CBP receives the required ISF information and has had the opportunity to review the documentation.

For carriers, CBP may assess penalties in the amount of $50,000 if they fail to submit a complete, accurate and timely vessel stow plan as required by the 10+2 regulations under 19 CFR 113.64(f). As for importers, CBP may cancel damage claims for vessel stow plan violations if certain conditions are met. However, carriers do have to pay significantly more on the first violation (between $5,000 and $25,000 depending on mitigating or aggravating factors) and on subsequent violations (not less than $25,000) to have damage claims cancelled by CBP. Again, no relief will be granted if CBP determines that law enforcement goals were compromised by the violation.

CBP will consider the same mitigating and aggravating factors as those for ISF importers in assessing final damage claims against carriers for violations of the 10+2 regulations.

To view CBP's complete guidelines, as published in today's Customs Bulletin, click here (Notice begins on page 29).