For Procrastinators, 10+2 Equals Pain

For Procrastinators, 10+2 Equals Pain

For the majority of importers, Jan. 26 will pass as any other Tuesday this year. But those who have ignored or missed the flood of preparatory information about Customs’ enforcement of the Importer Security Filing rule are in for a shock.

Starting Jan. 26, those opting to take that route will pay a price for noncompliance, not enough to put them out of business, but still enough to hurt.

“I think there are a lot of companies out there that are not filing because they elected not to do so, or more likely, they’re simply unaware of the requirement,” said Bruce Leeds, a Los Angeles trade attorney. Customs and Border Protection “has done a great job of outreach, but it’s hard to reach all those people.”

Mike Laden, principal at supply chain security and customs compliance consultant TradeInnovations, said there are two types of companies that find themselves in a precarious position: “the procrastinators and those who wrongly believed that this was going to go away. You have these companies that pinned their hopes on trade associations getting this thing derailed. They’ve been sitting on their hands.”

The ISF violator may be a small importer who only makes one or two entries a year, but size doesn’t really matter. “Two weeks ago, we were on the phone with one fairly large importer — several thousand entries per year — and they’re just beginning to design and implement ISF,” Laden said. “That’s cutting it very close — too close for my comfort.”

The rule, commonly known as 10+2, obligates importers and ocean carriers to report 12 data elements that don’t appear on the ship’s manifest and file the information 24 hours before the ship sails from a foreign port for the United States. Customs said it needs the details to better identify high-risk cargo that warrants closer scrutiny. It’s a key to the agency’s supply chain security strategy.

“We’ve been getting a lot more questions from folks, and it’s fairly evident that they weren’t prepared. But that’s not the vast majority of what we’ve seen,” said Richard DiNucci, director of Customs’ Secure Freight Initiative. When enforcement starts, “We’re ready if issues turn up, but by and large, we’re pretty optimistic that we’re in good shape.”

Leeds said Customs would “go easy on companies that have made a diligent attempt to get their ISF filings in order. If the importer is trying to get it right, I think Customs is going easy on those folks. Rich (DiNucci) has said several times, ‘We don’t want the money; we want the data.’ Money is a tool to get the data.”

In the first few weeks or months of enforcement, Customs’ hammer will fall on importers who have not made ISF filings, Leeds said. Even then the response is likely to be relatively benign. “Customs will hold up the release of the cargo until the importer files the ISF and gets a bond,” he said. The worst penalty is an order to the carrier not to load an importer’s boxes if it doesn’t have an ISF bond.

“If everything is being done timely, getting that bond is not going to be a problem,” said Matthew Zehner, vice president of Roanoke Trade Services, a Schaumburg, Ill.-based insurance broker and sureties firm. “When it’s known there’s a violation — it’s late, you missed the deadline — it gets dicier.”

Because late filing by definition is a violation, Zehner said a surety knows Customs will make a claim against the bond. To get a bond, the importer will pay a premium — maybe $5,000 extra in cash — that the surety will keep until Customs’ claim is settled. An importer’s money could be tied up for years.

“We’re not going to just hand them the bond, and we’re not going to wait six months for Customs to issue penalties,” Zehner said. “We want to take our security in advance.”

When Customs announced the 24-hour rule in 2002, it sent a chill through the supply chain. With ISF, the trade generally commends Customs for its education efforts. “The shipping community knows that Customs has done a great job in telling the world about this new requirement,” Laden said.

“I think this one has the ability to disrupt or cause more pain and frustration for importers who didn’t get the message, because it touches everyone in the supply chain,” he said. “Remember, the 24-hour rule only affected the carriers . . . This change is unprecedented. It impacts the entire supply chain.”

Contact R.G. Edmonson at