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Liquidated Damages for ISF Non-Compliance

Introduction:
While ISF regulations have been in place since January of 2009, and the enforcement period began in January of 2010, Customs and Border Protection has been pretty lenient when it comes to issuances of liquidated damages. CBP has been using a “measured and commonsense approach”1 and importers that have been filing have been able to avoid liquidated damages for the most part. On July 9, 2013 CBP will begin full enforcement of ISF. Liquidated damages will be issued against ISF importers and carriers for non-compliance.

Parties involved:
In order to have a robust and compliant ISF Program several parties must be working on the same page. These parties include the importer, shipper, broker and carrier and filers. Importers should work with their supply chain (including shippers, carriers and filers) to set up a process that all parties will follow on ocean shipments to the United States. A good process will include metrics and KPI’s. 

Responsibility:
Importers are ultimately responsible for complying with all ISF requirements on each shipment. While most importers will use an agent or broker as the filer, the responsibility still lies with the importer. It is of the utmost importance that importers have clearly defined shipping processes that include and emphasize the importance of ISF compliance. Carriers are responsible for filing certain data points as well. Shippers need to work with the ISF Importers to provide correct information on a timely basis. Filers need to see that all information is obtained and correct before anything is filed.

Penalties:
Full enforcement dictates that Customs and Border Protection will begin to issue Do Not Load messages to the foreign ports and will also begin to levy fines against importers. Liquidated damages can be issued for various reasons, and penalties of up to $5000 can be issued for each of the following:

1. Failure to file ISF
2. Late filing of an ISF
3. Filing an incorrect ISF
4. Inaccurate updates to an ISF Filing
5. Failure to withdraw an invalid filing.

Mitigating & Aggravating Factors:
There are 6 mitigating factors that can help decrease the amount of the liquidated damages levied against an importer or carrier. They are as follows:

1. Evidence of progress in implementing ISF compliance during the phase-in period.
2. A small number of violations compared to total ISFs.
3. C-TPAT Tiers 2 and 3 importers will receive consideration for up to 50 percent of the normal mitigation amount.
4. The importer has demonstrated that remedial actions have been taken to address the circumstances surrounding the violation.
5. Inaccurate filings from circumstances beyond the importer’s control, such as vessel diversions from weather.
6. Receiving incorrect information from another party in the supply chain, if this information is found to be incorrect at a date later than allowed under the correction timeline. Under certain circumstances, the liquidated damages may be canceled without payment.


There are also four aggravating factors that will lead to harsher penalties and increased scrutiny. They are:

1. Lack of cooperation with CBP
2. Smuggling attempts or other laws broken in the shipment,
3. Multiple errors on the ISF
4. A rising error rate on overall ISFs.

It is important for any importer to demonstrate that they are using reasonable care in regards to ISF filings. A clearly defined process, quality controls and metrics should be in place, as should qualified personnel and a training program.

Conclusion:
In order to be prepared for this period of full-compliance it is of the utmost importance that importers have the correct processes and controls in place. It is important that importers are working with suppliers, filers, forwarders, brokers, and vessel operators that are likeminded in the areas of ISF and Trade Compliance. Whether it is a systems solution, expertise setting up a process, or a broker / forwarder RFQ, Allyn International can help your company effectively move forward into this full-compliance era with confidence. Allyn’s expertise and experience in managing ISF for a number of clients allows us to draw on numerous best practices and implement the procedures that will work best for you. Now is the time to recognize the importance of ISF compliance and by partnering with Allyn you will certainly be putting your best foot forward and moving toward a compliant ISF program.

About Allyn:
Incorporated in 1992 Allyn is a professional services and consulting firm with over 150 employees located worldwide. Allyn has offices in 8 countries on 3 continents, including our HQ in Ft. Myers, FL, Prague, CZ, and Shanghai, CN. Allyn’s core services are trade compliance, logistics and tax consulting. Allyn has 20+ years experience in many industries such as power generation, oil and gas, drilling and mining, automotive, electronic, semiconductor, paintings and coatings, medical devices, process equipment manufacturing, construction equipment, and telecommunications.
 

 

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