December 9, 2021
Customs Filing Data Could Flag Compliance Earlier if Act Passes
A new legislative proposal could require importers to provide Customs with supply chain visibility further upstream and earlier than before.
The Customs Modernization Act of 2021 is designed to update Customs regulations so they reflect supply chain technology trends. It would give Customs and Border Protection more authority and tools to enforce compliance with Customs laws, regulations, and rules.
While the Act is still under consideration, the future of supply chain is certain to include additional scrutiny of shipment data, anyway.
Technological advances will assist in the rapid identification of red flags or potential compliance concerns. Expanded data use will allow greater enforcement by an expanded Customs workforce.
My advice to importers is to note key components in the Customs Modernization proposal now to prepare for later scenarios—and follow the larger trend towards scrutiny.
One of the more high-impact changes for importers relates to import filings.
Most imports require four types of submissions:
- Importer Security Filing (ISF), sometimes called a 10 + 2
- Automated Manifest System (AMS), sometimes called a manifest
- Cargo Release, also referred to as an entry
- Entry Summary
When CBP launched ISF, it agreed to not use the ISF data for enforcement. The idea was that minor, commonplace ISF changes don't impact CBP's ability to screen for security concerns.
Instead, CBP uses the entry and entry summary data to measure an importer's compliance.
Under this new proposal, CBP is asking Congress for permission to use the ISF and AMS data as an additional signal of compliance.
It’s likely CBP believes this additional data will allow them to identify shipments that require additional scrutiny.
That means the standard of accuracy for this data just went up, too, because, as of now, no action is required if ISF data changes after the filing of the entry.
The complexity the Act could create hinges on the nature of ISF and AMS data. The data in these filings is often preliminary and subject to change, so it may not be the best measure of how well a company follows the rules.
A requirement for earlier accuracy may also increase documentation, in the case of error, and delay shipments, if companies aren’t ready on time.
What You Can Do Now
This is when customs professionals can offer guidance to ensure companies are prepared for any transitions or trends:
- Schedule conversations with executive teams to let them know about the specific elements of the proposal. Explain that the Act is part of a trend towards greater customs compliance scrutiny.
- Consult with Flexport Trade Advisory or other trusted trade advisors for a compliance assessment. A thorough review of your data and documentation can help surface and mitigate risks.
- As part of your assessment, Trade Advisory can run mock audits. That way, if you’re ever actually audited, you’re more prepared. You may also surface additional issues to resolve before they become problems. While advisors are auditing, they’ll look for duty minimization opportunities, too.
- Start scenario planning, in case the Act passes. How can your company create processes that allow for earlier alignment of key data or the accommodation of last-minute changes?
The Reality of Upstream Readiness
Knowing what a change may require of your company requires understanding the process.
Under today’s rules, an ISF and manifest have to be filed 24 hours before a container is loaded on a vessel.
Most carriers and freight forwarders require that shippers provide the data earlier, though. It’s not unusual to submit data up to 72 or more hours in advance. This window gives your partners time to address your filings.
Under the new Act, shippers would have to complete documentation and ensure accuracy before tendering containers to truckers to deliver to the ports. Otherwise, they could be stuck updating data or correcting errors with little time to spare.
Additionally, shipment details can change in the hours between submitting data and loading a container on a vessel.
A common example: A factory may be delayed in producing one item and ship another item in its place.
Another example: A factory couldn’t produce enough dresses, because a machine broke down. They ship a bunch of t-shirts from the next shipment instead, just to fill the container.
Today, if an error is identified after the entry is filed, there is no requirement to update the ISF. The entry data supersedes and replaces the ISF data.
If this new rule is implemented, it’s possible that CBP could require an amendment to the ISF, so that the ISF data matches the entry data.
Filing amendments, updating documents, and communicating these changes to all of the involved parties could take up a large amount of time.
And if inconsistencies flag an import profile for escalated attention, companies could find themselves battling inspections, delays, and audits. If it looks like this could happen, I’ll be talking about it on my LinkedIn and Twitter, so be sure to follow me on social media and let me know your thoughts.
For help with compliant customs documentation, reach out to Flexport. Brokers are happy to answer questions or assist with additional services.