November 14, 2008

The Importer Security Filing (ISF) initiative, also known as 10+2, may soon take effect. As your business partner, Customs Brokerage from UPS will be able to file the additional information for you electronically. This will affect ocean freight only.

The proposed regulation will require carriers to submit 2 additional pieces of information (the 2 of the 10+2) in order to enhance the security of the maritime environment. The additional information includes: (1) a vessel stow plan used to transmit information about the physical location of cargo loaded aboard a vessel bound for the U.S; and (2) container status messages, which report container movements and changes in status (e.g., empty or full).

The Importer Security Filing requires the following 10 data elements from the importer or importer's agent (the 10 of the 10 + 2):

• Manufacturer (or supplier) name and address
• Seller (or owner) name and address
• Buyer (or owner) name and address
• Ship-to name and address
• Container stuffing location
• Consolidator (stuffer) name and address
• Importer of record number/foreign trade zone applicant identification number
• Consignee number(s)
• Country of origin, and
• Commodity Harmonized Tariff Schedule number

Based on the proposed rule, U.S. importers must submit the required security data electronically to CBP 24 hours prior to loading ocean containers on vessels destined for the U.S. For additional information on ISF requirements, please visit the following web site: http://www.cbp.gov/xp/cgov/newsroom/news_releases/archives/2008_news_releases/
jan_2008/01022008.xml

Under the proposed rule, CBP will allow an importer to designate an agent to act on their behalf to submit the ISF. It is our intent to offer our services as an agent for your convenience at a reasonable cost. Our pricing for this service will be determined after CBP issues the final rule later this year, and we've had the opportunity to finalize our systems and processes.

We plan to capture the ISF information in a simple, compliant, and timely manner from both internal and external sources. Additionally, the solution we envision will be able to share data between multiple systems, submit data to CBP, and provide accurate and timely client visibility, messaging, and reporting.

Below is the fourth in a series of questions and answers to help familiarize you with 10+2.

Frequently Asked Questions

Controls

1. What types of controls will be implemented to be sure the ISF record is submitted on time for all shipments?

Our security filing system will contain workflow functionality and a series of internal alerts to ensure all ISF records are executed on a timely basis.  We will also provide exception reporting and other visibility tools to our clients for the purpose of monitoring ISF status.

2. We will want to revise our SOP once the final version of 10+2 is announced and will likely change the SOP to require that product cannot be laden unless UPS is satisfied that the ISF acceptance has been received. How is UPS planning on handling this issue company wide?

Our origin offices will be trained and required to not arrange delivery of containers they have control of to the pier without ISF acceptance.  Our ISF team will ensure that an ISF acceptance message is sent to any party in your supply chain who has control of the container.

Miscellaneous

3. Will we be able to file the entry summary at the same time as the ISF record?

Eventually the possibility will exist; however, CBP has stated that during the initiation of the program this functionality will not be available. A timeline for completion was not provided.

4. Please provide any "best practices" developed by other companies regarding 10 + 2.

The first best practice concerns the collection of ISF information as follows –

The importer to provide as many of the ISF data elements as possible at the time the purchase order is placed with the seller:

• Buyer (or owner) name and address
• Ship to name and address
• Importer of record number/foreign trade zone (FTZ) applicant identification number
• Consignee number(s)
• Commodity HTSUS number (6-digit level required, 10-digit level optional)

The seller to provide that data as well as additional data below to the forwarder at time of booking request:

• Manufacturer (or supplier) name and address
• Seller (or owner) name and address
• Container stuffing location
• Consolidator (stuffer) name and address
• Country of origin

The forwarder will then provide final data elements and transfer to the submitting agent:

• Master bill of lading number (MBL)
• House bill of lading (HBL)
• Vessel name
• Lloyd's code
• SCAC codes
• Container number

Other best practices are –

• Change terms of sale to gain greater control of choice of forwarder to better control communication of ISF elements from forwarder to ISF submission agent
• Establish new contracts or renegotiate existing contracts with foreign suppliers to hold financially accountable for cost in delays due to missing, incomplete, or inaccurate ISF data or potential penalties resulting from the supplier failing to hold container for delivery to the pier until an ISF acceptance is received
• Use the services of an ISF agent, broker, forwarder, and supplier management from the same company to best ensure quick, accurate, and efficient transfer of ISF data to the ISF agent and relay of ISF acceptance back to the party controlling delivery of the container to the pier
• Work internally or through outside providers to develop a master file of classification data for all imported commodities
• Ensure written ISF procedures exist for importer and all parties in the supply chain
• If product is purchased domestically, ensure domestic suppliers who import the product are prepared for ISF in order to reduce impact to inventory
• Engage ISF parties now in exercises to gather and transfer ISF data within the timeframe of ISF requirements in order to identify weak areas that may later impact timely ISF submission

5. Can unsolicited shipments be refused/rejected? 

Yes, a company can choose to not act as importer of record for a shipment which was not expected, or otherwise laden on board a vessel at origin without the required ISF acceptance.

6. What challenges with data collecting, submission, and correction could impact ISF filing? 

Although importers or their supply chain partners (shippers, forwarders, 3rd party logistics providers) will be expected to ensure that all required information is provided for the filing at the time of booking, the biggest challenge for filing the ISF could be receiving all necessary information timely, and the accuracy of such information to minimize transmission errors and the need for validation.  

7. Who at UPS is spearheading UPS’ preparation for 10+2?

UPS has a large, cross functional team preparing for 10+2.  The team's responsibilities include an IT solution, client communication, brokerage impact, forwarding/NVOCC impact, compliance, etc. 

8. Will origin offices meet with our suppliers to explain any new forms and information that will be required from them?

Yes, we will have a global outreach program by local representatives to assist suppliers in understanding new requirements and how best to relay ISF data to us.

9. How will CBP phase in the Importer Security Filing and enforcement?

CBP has indicated verbally that once the rule is final they will allow a 60-day grace period for implementation followed by a year before CBP imposes monetary penalties to importers for non-compliance.  During that year, CBP plans to issue Informed Compliance Notices to importers who fail to meet ISF requirements.

• Can CBP use the new data for more than security purposes—in other words, to track down importers or brokers for commercial violations?

The Notice of Proposed Rulemaking dated January 2, 2008, contained the following statement, "Furthermore, in developing the regulations, CBP, as required, has taken into consideration the remaining parameters set forth in the statute, where applicable, including: That the use of the additional information collected pursuant to these regulations is to be only for ensuring cargo safety and security and preventing smuggling and not for determining merchandise entry or for any other commercial enforcement purposes;…"

• What are the general confidentiality issues an importer should consider?

ISF is not considered 'customs business' and therefore the confidentiality rules that apply to brokers do not apply to ISF agents who may not be brokers.  This raises concern for some importers because of the sensitive nature of their trade information. 

Additionally, many shippers are reluctant to share the identity of the actual manufacturer with the US importer for fear the importer will contract directly with the manufacturer.  While CBP allows reporting of the supplier if the manufacturer is not known, many full containers are factory-loaded and the stuffing name/location is reported in the ISF record, so the importer will essentially become aware of the identity of the manufacturer. 

• Will there be less stringent ISF requirements for C-TPAT members?

CBP has not indicated to date C-TPAT participants will have less stringent requirements than non-C-TPAT participants, though recently, the House Ways and Means Committee has urged CBP and DHC to consider creating benefit to C-TPAT participants.