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International traders brace for penalty phase of new Customs rules

by Tad Thompson | January 14, 2010
Customs house brokers have been preparing their customers -- and international produce shippers -- for a new phase of regulatory enforcement that will soon take effect.

U.S. Customs & Border Protection will begin enforcing the Importer Security Filing rule Jan. 26 with stiff financial penalties.

The ISF rule has actually been in effect since Jan. 25, 2009. But U.S. Customs gave international traders of all commercial items a year to adjust to the rules. Now, failure to comply with ISF will result in penalties to importers that might total as much as $15,000 per shipping container.

According to Miami Customs house broker Patricia Compres, vice president of Customized Brokers Inc., "The ISF rule pertains to cargo shipped via ocean. ISF filings for sea containers are required 24 hours before the cargo is loaded at the country of origin. Bulk palletized vessels must file 24 hours before the vessel arrives in the United States."

Ms. Compres said that the penalty is $5,000 per shipment. There can be separate penalties if an ISF filing is not provided to U.S. Customs within 24 hours prior to an ocean vessel's loading at origin; is inaccurate or incomplete; or is amended and inaccurate.

If all three of these violations are involved with one shipment, a $15,000 penalty can be impsed, Ms. Compres said.

Customs broker Ana Ramos, a partner in The Perishables Specialist Inc. in Doral, FL, noted that these are among several regulations implemented since the Sept. 11 terrorist attacks to safeguard the United States. ISF's purpose is to enable U.S. Customs to issue a "do not load" indicator to the shipping lines in order to prevent a suspicious container from reaching U.S. soil.

A Philadelphia Customs broker, Edward Fitzgerald of Barthco International Inc., said, "This is a security measure that is pushing back the borders. It is very similar to what is being done in air transportation. If you are flying out of the Bahamas or Bermuda, you clear Customs at those departure ports. So it's similar to what they are doing, but with freight. It gives Customs a broader advance notice of what is coming to the United States."

Mr. Fitzgerald, Barthco's assistant vice president of import operations and the import manager, added that the ISF rules "definitely change the way business is done, as far as documentation on the forwarding and export side of the business."

Ms. Compres expressed a number of concerns surrounding ISF. Foremost, she noted that exporters typically provide the information to the importers, who usually file the ISF. Ms. Compres said that she is troubled by the concept of one company being held liable for information that it does not control.

"The real problem here, aside from the monetary issue, is that importers will receive the penalty, yet they have no control of the information that has to be given by the exporter or shipper in XYZ country," she said. "Customs is saying they may not release the cargo if there are ISF violations. But, they haven't put that in writing."

Ms. Compres envisions a scenario where "an importer places an order for three containers from a melon shipper in Guatemala. The shippers are to send the load on Sunday. But the moment the shipper makes the booking, he should be providing all information required of ISF and they have to send the importer all of that information."

She added that such information must address who packed the load, who consolidated the load, where it was consolidated, who the importers are, what the product is and what the bill of lading number is.

Ms. Compres noted that if containers receive a "do not load" Customs order at origin -- and thus are left on a pier -- then exporters may become more highly motivated to assure that the ISF information is provided correct and timely.

Beyond this, "then the other problem is that Customs says you won't know you had a problem for six months," Ms. Compres said. "Buyers liquidate no more than 30 days out. How do you know there might be a $15,000 penalty six months out? This is really serious business."

The Customs house brokers interviewed by The Produce News indicated they have been working for at least a year to bring their customers and exporting shippers up to speed for the Jan. 26 penalty implementation date.

"If the industry doesn't know by now, they should know" about the ISF rules, Ms. Ramos added.

Mr. Fitzgerald acknowledged that there are concerns with ISF, but, he said, "I think there will be a relatively smooth transition. Many of the shippers and importers have been very proactive. The importer of record is the responsible party to file information" so importers bear the weight of penalties. Receiving correct information from the exporter is a matter of working out an agreement between the two parties. "If there is not timely information, that is a disconnect. The nature of the perishable business is timeliness. This is a hurdle because you are dealing with a perishable product -- compared to machinery or steel or copy paper -- that has a shelf life."