Bulk vs. Break-Bulk for ISF purposes…

So, there was obviously a lot of confusion about what is in and what is out when you get past containerized freight.  Are steels rods in or out?  Is Natural Gas in or out? What about timber?

When CBP put out their most recent FAQ updates, I even misread it the first time thinking they were expanding ISF to everything including loose items.

When I was doing seminars in the fall on ISF, I used to advise (very generally) that if it is secured to the vessel, then ISF is probably required.  If not, then probably not.  That’s a rather broad generalization, but it holds true most of the time.

RoRo (Roll on/Roll off) Vehicles? IN – they are generally secured on the vessels.

Bulk Grain in the belly of a sea-faring vessel? – OUT – that’s not secured but more pumped in…

Grain in containers (much of the grain from up here in Washington state is railed over from Eastern Washington to Seattle or Tacoma via rail in containers) – IN – that’s pretty straightforward.

Since there was obviously a lot of confusion on this, CBP gave us an itemized list (which I have excerpted for you below):

Break-bulk shipments, while exempt from the vessel stow plan and CSM requirements, require the filing of an ISF*.

For the purposes of the Importer Security Filing rule, the following definition will be used for bulk cargo:

“Homogenous cargo that is stowed loose in the hold and is not enclosed in any    container such as a box, bale, bag, cask, or the like.  Such cargo is also described as bulk freight.  Specifically, bulk cargo is composed of either: (A) free flowing articles such as oil, grain, coal, ore, and the like which can be pumped or run through a chute or handled by dumping; or (B) uniform cargo that stows as solidly as bulk cargo and requires mechanical handling for lading and discharging.”

*Customs and Border Protection (CBP), Cargo & Conveyance Security (CCS), has determined that the following list of commodities and commodity types can be classified as bulk cargo.  To be classified as bulk, this cargo may not be containerized and must be easily identifiable as laden on the vessel.  Any bundling of the following commodities must only be for the purposes of securing the cargo.  This list may be changed and updated as deemed appropriate by CBP.

• Coils of steel and other metals
• Rails of steel and other metals
• Wire rods of steel and other metals (may be coiled or flat)
• Ingots of metal (precious or otherwise)
• Round bars of steel or other metal
• Deformed Bars/Rebars (of metal)
• Plates (of metal)
• Billets (of metal)
• Slabs (of metal)
• Pipes (of metal)
• Beams (of metal)
• Tubes/Tubing (of metal)
• Angles, shapes and sections (of metal)
• Sheets (of metal)
• Expanded metal
• Flat bars (of metal)
• Strand wire (of metal)
• Sawn Timber/Lumber as a commodity (not as packaging material)
• Paperboard/Fiberboard/Plywood as a commodity (not as packaging material)
• Paper products as commodity (wood pulp, newsprint and paper rolls and not as packaging material)
• Certain perishable goods, not in boxes, bags or containerized, and not frozen, but laden and stowed in a way similar to other types of bulk cargo (includes seafood and produce)
• Blooms (similar to “billets and of metal)
• Anodes/Cathodes, in sheets only (may be corrugated)

Hopefully that’s more clear now…

Customs posts new ISF FAQs

CBP posted yesterday an updated FAQ document for ISF.  There is a lot of good information and clarifications now that we are into enforcement.  If any of the below topics apply to your supply chain, it would be a good idea to go and read the detail behind this as there are a few key changes that may cause a few “gotchas” (I was particularly zoning in on the BULK issue…).  It can be found on their ISF webpage here:

http://www.cbp.gov/xp/cgov/trade/cargo_security/carriers/security_filing/

Highlights of the clarifications and updates  include:

• SCAC codes for AMS filers who don’t have one
• Amendments for Flexible filing option
• ISF-10 to ISF-5 conversion options (yes, it can be done and no, it doesn’t require Port Director approval like the ISF-5 to ISF-10 conversion)
• Updated phone number for the CBP client rep office
• Master (or Regular) vs. House Bill of Lading clarification
• Process for “Bill Not of File” after an accepted ISF
• Process for Single Transaction Bonds
• Statute of Limitations for Violations for bonds (6 years! per 28 U.S.C. § 2415)
• Minimum Single Transaction bond = $50,000 (might make sense to get a continuous bond?)
• Process confirmation for Single Transaction bond follow-up (email and linking of the transactions…again, continuous bond anyone?)
• Break-Bulk (including RoRo) REQUIRES ISF… (see pg 19 of FAQs – exempt from stow plan, but ISF IS REQUIRED)
• New designation for OCS shipments
• Enforcement – Escalation process
• Flexible timing for Stuffing Location/Consolidator remain in place…for now (24 hours prior to arrival vs. 24 hours prior to load for those 2 data elements – but waiting on them can be rework for you or your service provider)
• When in doubt between ISF-10 and ISF-5, error on the side of caution and use ISF-10
• Customs has confirmed that they WILL eventually be validating postal codes (but aren’t as of yet, and will advise the trade when that changes)
• Clarifications on process for Splits and Rolls

If any of the above situations impact you, it would be best to talk to your service provider or software provider to ensure that your specific business scenarios are covered and processes are in place internally or with the service provider to ensure you remain 100% compliant.

Another Common ISF challenge – Address Formatting Issues…

So, as a lot of importers have been working on automating to whatever extent was possible (updating their PO transmissions, creating new ones, etc.) the data for the newly implemented Importer Security Filing (ISF) program, many of them realized that the data that they had in their systems had formatting or other challenges that make this a little less straightforward.  These challenges have caused many importers to have to spend a great deal of time cleaning up the data in order for it to be usable via 3rd party software or their service provider.  Let’s look at some of these challenges – they probably will impact you.

Field Length.  Most address fields are 35 characters long.  Luckily, CBP gives you up to 6 lines (plus name, city, state/province, postal code and country) so even those lengthy addresses in Asia, Latin America and even the UK should be easily accommodated.  Ideally, an importer would set up their database to wrap the address at word changes.

Postal Codes.  CBP will be validating field length and format on postal codes by country.  Since most systems don’t check this, it is often a garbage field outside the home country.  For now, CBP is checking length for a few countries (notably US and China) but we can expect this to get more strict as CBP does want good data.

Coded fields.  Country and State/Province are coded fields.  Country uses ISO 3166-1 alpha-2 which is what most systems do in fact use today (score!) – e.g., US = United States, CN = China, FR = France.  Country is always required today.  State/Province, however, uses a UN subdivision indicator where in most systems this is a text field outside the US and even when coded is not likely to be using the same codes as Customs.  Customs is currently validating this field but is currently only requiring it for the US.  This too shall probably become more strict as time goes on.  Where you are not using the same codes as CBP internally and you are sending this data out, you may need to build some tables in between that translate your code to CBP’s code prior to sending the data out.

All address details in a block.  Many systems don’t distinguish City, Postal Code, etc. as separate fields – this seems to be more the case with non-US based companies with a US presence.  Many of these companies are just breaking out the fields into the address lines 1-6.  Long term, this will also run afoul of data integrity questions with CBP and will require companies to fix it.

Is there a silver bullet to fix these things?  Unfortunately nothing that I’ve seen out there – you might be able to do some mass editing in Excel but for many companies it is going to be pretty significant surgery or a rather nasty work around that may not be great long term.  Probably the most common work around I’ve seen is where a company simply splits the address lines at each 35 characters, even if it is mid-word.  Another one is avoiding the state field all together (but remember it is required for US addresses).   This might be ok for now, but I’m guessing CBP won’t be too keen on this long term.

While we have entered into “full enforcement” as of last week, Customs is now issuing warning letter but all indications are that fines and penalties won’t begin in earnest until 2nd Quarter 2010.  Up to this point, CBP has not put a ton of emphasis on the data quality (as they have been more focused on timeliness and quantity) – the monthly filer stats barely touch on this beyond the rejects.

As we get into the more strict enforcement, CBP will really be looking at the data and where data isn’t “clean”, they will begin to start digging deeper into it and tightening the proverbial screws.  Better to get in front of this while there is still some time to do it in a measured way.  Won’t be very fun if there is a Notice of Action requiring you take measures to fix this in a quick time frame.

Whoever is creating addresses in the ERP where you want to use this data for ISF – give them some pointers on how to enter addresses.  CBP’s transaction sets for ISF can be found here if you want more details behind lengths and validations:

http://www.cbp.gov/xp/cgov/trade/automated/automated_systems/sf_transaction_sets/

Bill on File and other ISF Bill of Lading issues…

So, when ISF was first introduced, there was a good amount of speculation and discussion on the housebill vs. the master and what about sub house bills!?!?

The reality is that this can get very complicated and very challenging to make sure you have the right one.  What you don’t want to have happen is the famous “No Bill on File” message.

So what is “Bill on File”?

Bill on File is a message that CBP sends back to the AMS carrier after submission when an AMS transaction successfully links to an ISF transaction.  In order for this magic to happen, the ISF must be transmitted at the same level as the carrier submits on their manifest via AMS.  If you are using a forwarder, it is generally the forwarders housebill.  If you are using a direct contract with the steamship line, then it will be the masterbill.   The key, though, is to make sure you tell Customs which type it is and make sure that the AMS is also transmitted the exact same way.

Another key match element is the carrier’s SCAC code (Standard Carrier Alpha Code).  This is an element that identifies the issuer of the bill of lading and is a 4 digit code.   The SCAC code is managed by the National Motor Freight Association (NMFC – http://www.nmfta.org/Pages/Scac.aspx ) and is out there for truck, rail and sea carriers in the US.  There are tens of thousands of them.  And some carriers have multiple codes based on region or division.  A good example of this is NYK.  NYKS is the SCAC code for the Line, and NYKL is the SCAC code for NYK Logistics (NYK’s consolidator).  The NVOCC’s will also have a SCAC code (e.g., EXDO for Expeditors) but could have many (e.g., Panalpina has PNE1, PNE2, PNEP and PPN1 just to name a few).

What is absolutely critical here is that the ISF needs to be transmitted EXACTLY as the AMS in order for the magic link to occur.   No magic link? No movement.  Fines. Penalties. You get the drift.

For the ISF filer, make sure you know EXACTLY how the bill of lading will be transmitted to Customs via the AMS Manifest.  If you and/or your service provider have clear instructions and they are documented in your Standard Operating Procedures for ISF, you should be able to minimize this particular challenge!

It’s “Official” from DHS – ISF is “live”

Press release yesterday from Secretary Napolitano of the Department of Homeland Security (DHS):

http://www.dhs.gov/ynews/releases/pr_1264608972865.shtm

I haven’t heard of anyone getting one of the “notices” of non-compliance (from what I’ve been reading, it sounds like a written warning – like if you get caught speeding – “Just don’t let it happen again”) yet but I’m guessing they have started to flow.  Since CBP has said that they won’t be assessing fines or stopping loading yet, I’m guessing they aren’t doing a formal Notice of Action (CF29) just yet.

It will be interesting to see how this will all continue to evolve through the May timeframe.

Of course, I wouldn’t want to be the importer who isn’t ready and the first “poster child” penalty case…

ISF goes into full enforcement today!

Good article in the Journal of Commerce this morning – I believe the quotes from DeNucci came from the conference that the NCBFAA scheduled late last week.

You can read the entire article here:

http://www.joc.com/node/416260

Good things to know about enforcement – focus will be notifications and advisories but penalties and delayswill most likely not be going strong in terms of impacting the supply chain until May 2010.  CBP will be putting companies on notice but doesn’t sound like they will be going out of their way to hit importers with “tough love” unless there is some really egregious activity.  With the challenges that CBP is having with capturing the key date element (container loading) to assess the 24 hour timeliness,  it is good to see that this is going to be a little less dramatic than a lot of us were fearing today.

Importers that aren’t 100% compliant have a slight breather in terms of fiduciary impact, but it shouldn’t be seen as a “Free Pass” to wait until mid-year to focus on this.

Let the games begin!

ISF enforcement begins next Tuesday – Checklist to prepare to make sure you are ready

So, we are now just 2 business days away from the full enforcement period for Importer Security Filing (ISF).  It is a good idea to run down the checklist of things that your company should have in place to make sure that you are ready and will not experience any supply chain delays and disruptions after Tuesday when enforcement is in full effect.

• Are you 100% filing now for all applicable Ocean shipments?
• Is the data accurate, timely and complete?
• Do you have a plan in place for getting information to your service providers for shipments subject to ISF5?
• Do you know who is preparing and submitting your filings for all transactions, especially if you use lots different brokers and/or forwarders?
• Is your bond squared away?
• How are you getting visibility to all of your ISF transactions (especially if you are using multiple providers)?
• Are you comparing your ISF data to your 7501 clearance data (and ideally the AMS data being filed with the carriers) to identify potential discrepancies or compliance issues before CBP does?
• Have you seen your report card from Customs for 2009 filing?  Are you set up to get your report cards directly from CBP if you are eligible?
• Are you managing your HS codes by Part/Style/SKU ID and sharing that info with your filers and brokers to ensure consistency of classification?
• Do you have a plan in place to measure and score compliance?
• Are you leveraging the data that is already in your supply chain to the fullest?
• Do you have the right processes and systems in place to manage this?
• Are you doing everything you can to mitigate and minimize penalty exposure due to ISF?

Yes, that is a lot to think about and a lot to have sorted out.  If you feel pretty good about all the answers for your company then congratulations.  If you aren’t so confident, there is still work to be done.  I think the big thing will be to see how CBP begins enforcement next week and the impact of the “ISF Jail” on the trade.

ISF bonds vs. Continuous Bonds

When the flexible enforcement period ends on 26 January 2010, importers that have traditionally used a single transaction bond will be required to have an ISF bond (on top of your import bond).  If you have a continuous bond, however, you should be ok (but it is always wise to check with your surety or bond provider).

ISF bond requirements are a bit complex and also have a number of added steps that make this even more onerous for the importer.  In many cases, except for the casual importer, a continuous bond will more than pay for itself.   The value requirements for the ISF bond are a little different as well due to the “teeth” with fines and penalties associated with the ISF transaction.

Customs did answer a lot of questions (including about the new required processes) in their FAQ document later in 2009 (which can be found here).

Not sure what to do?  Talk to CBP or your bond issuer/customs broker.

American Shipper Article on ISF

There was a really good article in American Shipper this month on ISF with some interesting stats:

• 3.65 million filings to date
• 110,000 filings/week
• 1950 filers (via ABI or AMS)
• 103,000 importers
• 3% incomplete or rejected
• on-time – 50-60%
• more than 80% of possible filings are being filed

Still a lot of work to do and many importers still have frustration over issues that have been out there throughout the year – getting B/L numbers timely, definition of “on time”, use of flexible fields (but amendments mean rework and higher cost!)

The article starts on page 14 of the January print edition or here online (subscription required):

http://www.americanshipper.com/NewWeb/News/american-shipper-magazine/logistics/148111–stretch-run.html

Remember:  Enforcement begins January 26th.  CBP should be publishing a final FINAL rule soon after.

January 26, 2010 is soon approaching. Is enforcement for real?

Customs and Border Protection (CBP) has continued to reinforce throughout the year of flexible enforcement that they intend to begin full enforcement promptly on January 26^th.  Customs will be looking at 3 categories of compliance – Accuracy (is the information submitted correct to the best of your knowledge?), Timeliness (is the information available when CBP requires it? – i.e., 24 hours prior to vessel loading) and Completeness (do you have all the data elements on each transaction and do you have an ISF for every shipment?).

Fines begin at $5,000 (USD) per assessment.  Importers can also be assessed with liquidated damages up to the value of the merchandise.  Liquidated damages may be assessed due to inaccurate or late submissions or failure to withdraw an ISF (e.g., when a booking is canceled).

While CBP has stated that they are really trying to get importers to file and to file accurately, the incentives (or rather disincentives) of fines, penalties and liquidated damages are the hammers to make sure that happens.

Aggravating factors that will have an impact on enforcement actions include:

• Lack of cooperation with CBP
• Smuggling attempts and other actions contrary to law in association with the shipment
• Multiple errors on one ISF
• A rising error rate calculated over all ISFs

CBP has stated over the course of the flexible enforcement period in 2009 that all activity of the importer during that period would be taken into consideration as a mitigating factor with any enforcement action.

CBP has also created an ISF Jail at the destination.  All cargo will be held in this “jail” (or General Order) at the destination with a “do not release” message when an ISF is not submitted after January 26^th.

While CBP will probably focus enforcement on the largest and most egregious offenders, all importers will be subject to these guidelines starting on January 26^th.  Do you have a program in place to be ready and thus mitigate the risks of non-compliance?