Sep 29, 2009

Importer Security Filing Best Practices for Importers

Simply ISF

The process for compliance with ISF is much simpler than is being portrayed within the industry; most of the data elements required for compliance are readily available at the time a purchase order is created. There are 8 of the 11 data elements available at the time an order is created; this implies that the ISF can be prepared earlier than the CBP deadline. This is the most common misconception about the whole ISF Compliance process; Importers do not need to wait to have all data elements to submit an ISF. There are 9 required data elements that may result in a "no load" response from CBP, with the Bill of Lading number being the only one not immediately available at the time an order is created.

Requirements & Purpose

On January 26, 2009 the new Importer Security Filing and Additional Carrier Requirements took effect. The ISF is not optional but "mandatory" as required by the U.S. Department of Homeland Security. Importers or their agents are to electronically transmit to U.S. Customs and Border Protection (CBP) 8 data elements and the Bill of Lading Number, 24 hours before loading cargo onto a U.S. bound vessel. The Importer is also required to provide 2 more data elements 24 hours before the vessels arrival at a U.S. port.

The purpose is to enable CBP with the appropriate information to enhance national security while protecting the economic vitality of the United States. CBP is able to perform risk assessments on each shipment by analyzing ISF data prior to vessel loading at a port destined for the U.S.

We realize that the vessel carriers have their own ISF requirements to meet, but we will be concentrating only on the importer's best practices in this issue. Best practices, as we know them are to be used only as a guide to prepare an implementation of ISF. Many more best practices will be identified as we move along the ISF path.

Management Team Support

Any successful organizational change requires that the compliance managers or their designate get full support from upper management. Dependant on the size of your company a team of individuals from the departments of information technology, purchasing, contracting, finance, sales/marketing, shipping/receiving, transportation, customs compliance, human resources and facilities maintenance should work together to develop the companies ISF plan.

ISF Planning Committee

Senior management should establish an ISF Planning Committee.

• The committee should outline current supply chain practices, identify gaps, and make recommendations to adhere to ISF requirements.
• Include costs associated with the change.
• Present a completed plan to senior management to sign off on.
• Who will be submitting the ISF for the importer? Importer or Agent?

Supply Chain Partner Requirements

The importer will realize quickly in the ISF process how critical their supply chain business partners are to fulfilling the importers ISF. The company must have an outreach process to closely communicate with their business partners to ensure that ISF measures are in place and will be adhered to throughout the process.

• Identify all business partners; foreign supply chain entities, manufacturers, carriers (VOCC, NVOCC), consolidators, freight forwarders, customs brokers, 3PL, etc.
• Require all supply chain business partners to accept and implement the importers ISF requirements.
• Incorporate ISF requirements in contracts between the importer and their supply chain business partner.
• Establish ISF compliance indicator for your supply chain business partner. Upon contract renewal use this indicator to determine whether to continue doing business with them.
• Establish a uniform policy for all its subsidiaries and service providers regarding ISF.

Reasonable Care - Due Diligence

The importer must provide written internal/external policies and procedures on how to monitor the ISF process.

• Identify whether all import processes are sound and meet all ISF regulatory requirements.
• Recognize systems' failures and what the contingency plan is?
• Implement ISF before 1/26/2009. Tweak systems as required.
• Submit to CBP a request for confidential treatment of inward/outward manifest.
• Attend CBP ISF Outreach programs.
• Attend ISF webinars.
• Join and attend trade associations ISF outreach.

Advanced Data Submission to CBP

The decision whether to be a self-filer or to have a designated agent file on your behalf, is probably the single most important decision you'll be can making. In fact, it's recommended for you to comparison shop before making this decision.

• Can the Customs Broker file an ISF Unified entry? This is a one-step process? Can it be filed before cargo is laded on the vessel to the U.S.?
• Identify certified ISF web-based service providers? Check out long term contracts? Per transaction fee, monthly fee, etc? Amendment fee? Compare a couple of service provider's features, benefits, costs before making a decision.
• Identify internal resources for ISF IT. What are the costs? Can you meet the 1/26/2010 deadline? Do you need to use an ISF service provider for EDI? What are the development/implementation costs, pros/cons?

Self Assessment

Importers should have in place an ISF Self Assessment program:

• Monitor compliance on a periodic basis.
• Assign this task internally to a responsible party.
• Identify all trading partners and compliance thereof. Make sure to look at the contracts as applicable.
• Create a checks and balances.
• Review ISF fines/penalties, mitigate as appropriate.
• Make changes to the process when necessary.
• Submit quarterly summary to Senior Management and/or ISF Planning Committee.

Conclusion

As mentioned at the beginning "best practices" as we know them now will change over time as all of us become more familiar with the implementation of ISF. We've only mentioned a few best practices in this newsletter, We're sure there are many more. This should at least trigger some activities used by some importers in preparing for this regulation.