As we prepare for the Thanksgiving holiday this week, one thing for which the trade can give thanks is that the highly controversial Importer Security Filing (ISF) rule, also commonly referred to as “10+2,” was published, Nov. 25, 2008, in the Federal Register by U.S. Customs and Border Protection (CBP) as an Interim Final Rule. http://www.federalregister. gov/OFRUpload/OFRData/2008-27048_PI.pdf Additionally, the trade can give thanks for a number of amendments to the proposed rule that have been made by CBP in response to the many comments received from the trade over the past 11 months, which should aid in meeting the new requirements.

Background

Section 203 of the SAFE Port Act mandated that CBP publish regulations to require the electronic transmission to CBP of additional data elements for improved high-risk targeting, including appropriate security elements of entry data. The goal was to require such advanced information with respect to cargo being imported into the U.S. prior to loading on vessels at foreign seaports.1

On Jan. 2, 2008, CBP published a Notice of Proposed Rulemaking (NPRM) proposing to require importers and carriers to submit additional information pertaining to cargo before the cargo is brought into the U.S. via vessel. The proposed rule is known to the trade as “10+2,” shorthand for the number of advance data elements CBP intends to collect – 10 from the importer and two from the carrier. The NPRM was followed by an extended comment period ending on March 18, 2008.2 Since publication of the NPRM, the trade has voiced serious concerns over the difficulty and potential costs to comply with the “10+2” requirements.

Subsequent to the close of the comment period, the trade continued a dialogue with CBP on the proposed rule via the Departmental Advisory Committee on Commercial Operations of Customs and Border Protection and Related Homeland Security Functions (COAC), as well as the Trade Support Network (TSN) and numerous trade associations. However, the dialogue was general in nature as CBP was unable to comment on any policy issues between the close of the comment period and publication of the Final Rule. Although substantial efforts were made by the trade to request a “pilot” program, as well as an interim final rule, CBP showed no interest in agreeing to either….until now.

What It Was

The proposed rule required importers to submit 10 data elements 24 hours prior to loading at the foreign port of export. Those 10 data elements included the following3:

  1. Manufacturer (or supplier) name and address
  2. Seller name and address
  3. Buyer name and address
  4. Ship to name and address
  5. Container stuffing location
  6. Consolidator (stuffer) name and address
  7. Importer of record number/Foreign Trade Zone (FTZ) applicant identification number
  8. Consignee number(s)
  9. Country of origin
  10. Commodity HTSUS number

Carriers were to provide the additional two elements, including the vessel stow plan and the container status messages.

The ISF could be filed by the importer4 or a designated/approved agent, such as a customs broker, who had the necessary bond, power of attorney and access to the approved systems for transmission of the data (ABI or AMS). CBP emphasized in the NPRM that the importer is ultimately the party responsible for the ISF, regardless of whether an agent was used for the filing.

In addition to the challenges presented in obtaining and filing the data in a timely manner, the NPRM included severe penalty language. Failure to file timely, accurately and completely would result in liquidated damages equal to the value of the merchandise involved in the default.

What It Will Be

Despite many concerns that may have been overlooked by CBP, the Interim Final Rule indicates that a number of the trade’s apprehensions were taken into consideration. Certainly, the fact that this has been published as an “interim” final rule is an indication of that fact.

The following provides an overview of key areas that have been amended from the NPRM.

  • To provide sufficient time for the trade to adjust to the new requirements, CBP will “show restraint” in enforcing the rule during a period of 12 months after the effective date for all aspects of the filing rule.5 The effective date of the rule will be 60 days from the date of publication (Jan. 26, 2009).
  • Two elements of the ISF will be subject to flexibility as to the timing. This includes the Container Stuffing Location and the Consolidator (stuffer) name and address. The ISF Importer must submit these elements as early as possible, and in any event no later than 24 hours prior to arrival in a U.S. port (or upon lading at the foreign port if that is later than 24 hours prior to arrival in a U.S. port).
  • Four elements will be subject to flexibility with respect to interpretation. Those elements include the Manufacturer (supplier), Ship-to party, Country of Origin and Commodity HTSUS number. Although there is no special timing flexibility for these elements – they still must be filed 24 hours prior to lading – CBP will allow a range of acceptable responses based on facts available to the importer at the time.6 The ISF Importer will be required to update their filing with respect to those elements as soon as precise information is available, and in no event later than 24 hours prior to arrival at a U.S. port (or upon lading at the foreign port if that is later than 24 hours prior to arrival in a U.S. port).
  • The liquidated damages amount for violations of the ISF requirements have been changed from the value of the merchandise, as proposed, to $5,000 per violation.
  • The requirement for break bulk cargo to be included on vessel stow plans has been removed.
  • It has been clarified that Container Status Messages (CMS) are required for empty containers.
  • The label for the party required to submit the ISF has been changed from “importer” to “ISF Importer,” which is further clarified as the owner, purchaser, consignee or agent such as a licensed customs broker.
  • Provisions were made for the creation of an Importer Security Filing bond (19 CFR § 113.63).
  • Further clarification was provided that powers of attorney must be in English, and powers of attorney and letters of revocation must be retained for five years from revocation.

Structural Review and Flexible Enforcement

The purpose of the flexibility provided in the above changes is to allow CBP to conduct a “structured review” of the elements, including an evaluation of any specific compliance difficulties that the trade may encounter with respect to the elements. The structured review will cover a range of enterprises, from small to large, and will include both integrated and nonintegrated supply chains.

The review will be further enhanced by any comments filed in response to the Interim Final Rule, as well as by feedback provided in CBP’s formal outreach program. Outreach programs will be conducted during the first months of implementation, and will include regional seminars and trade roundtable discussions at all major seaports of entry, trade community advice from operators with established processes in complying with the regulatory requirements, and CBP seminars that focus on all topics related to this rule. Additionally, all materials discussed and presented at the various seminars will be posted on the CBP website at http://www.cbp.gov/xp/cgov/trade/cargo_security/carriers/security_ filing/, along with Frequently Asked Questions (FAQs) and a general “How to Guide.”

Comment Period

While the Interim Final Rule will have the full force and effect of law, by publishing it in this manner, CBP is able to collect additional comments that will be helpful in conducting the structural review of the ISF. Further, it will allow the trade the opportunity to provide additional comments concerning the actual impact of the rule on business operations.

CBP will be collecting additional comments only on specific areas of the Interim Final Rule. Interested parties are invited to submit written comments on only the six data elements for which CBP is providing some flexibility (as outlined above). CBP will also accept comments on the revised Regulatory Assessment and Final Regulatory Flexibility Analysis, including compliance costs for various industry segments, the impact of the flexibilities provided in the rule and the barriers to submitting the ISF 24 hours prior to lading.

Comments may be submitted (identified by docket number) by one of the following methods:

  1. Federal eRulemaking Portal: www.regulations.gov. Follow the instructions for submitting comments via docket number USCBP-2007-0077.
  2. Mail: Border Security Regulations Branch, Office of International Trade, U.S. Customs and Border Protection, 799 9th Street N.W., Washington, DC 20001.

Comments must be received on or before June 1, 2009. All submissions must include the agency name and document number for this rulemaking. All comments will be posted without change to www.regulations.gov, including any personal information supplied.

Conclusion

Although there have been some noticeable changes from the NPRM, many requirements of “10+2” remain the same. The publishing of the Interim Final Rule brings the regulation to reality. The phased-in implementation will provide the trade with an opportunity to work through the challenges without immediate penalties, as well as provide further feedback to CBP to ensure the final rule is workable. For this we can be thankful.

However, much work will be needed to put systems and internal procedures in place to ensure compliance. So over Thanksgiving, give thanks for the amendments, but rest up for what will certainly be a challenging 14 months implementing “10+2.”

If you have any questions on the “10+2” Interim Final Rule, or would like assistance in drafting comments or preparing your company for implementation, please do not hesitate to contact Karen Lobdell, Director, Trade Security & Supply Chain Services at Karen. lobdell@dbr.com, or (312) 569-1066, or any member of the Drinker Biddle Customs and Trade team. Karen serves on the Trade Support Network’s (TSN) Supply Chain Security Committee, and has also served on the American Association of Exporters and Importers “10+2” Task Force.