NCBFAA Customs Committee

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080123 v.1.0Ken Bargteil remarked that the definition of “Importer” is very different from current usage,and poses significant problems in the context of I.E.’s, T&E’s and FTZ admissions.Gary Ryan wondered what impact the proposed ISF would have on the use of singletransaction bonds. Darrell Sekin questioned the requirement for customs brokers to obtain abond for filing the ISF when there is no equivalent requirement for a customs broker to file adeclaration and entry; that is clearly inconsistent. He also wondered how bond sufficiencywould be determined. Gary Ryan underscored the fact that “10 + 2” has been mandated bylaw, that it’s going to happen. He asked if we need to have a full day meeting just on 10+2.Ken Bargteil replied that if work on the comments required a meeting he would arrange for ateleconference. Art Litman added that if we do have a meeting we should ask the Forwardingand NVOCC Committees to join us. Mary Jo Muoio agreed that the comments need to reflectthe input of these three Committees and that our challenge is to achieve a consensus position.Art Litman reported that “10 + 2” will likely be implemented at the same time as the ACEA2 drop. The Customs Committee should work on how we can mitigate the impact of theseprocess and systems changes to our core business. Art Litman thinks it could be really ugly inJanuary 2009 when ESAR A2 hits. Harold Brauner said that we need to give CBP guidanceon how to correct the ISF and make it agree with the entry. Alan Klestadt said that the NPRMrequirement for the filer to verify reasonably the ISF data is similar to section 4.7 in the24-Hour Rule, and we need to comment on it.Broker Self Assessment (A.Litman)Art Litman advised that CBP has been looking to increasing the maximum penalty for1641 violations to $300,000. The Large Broker and Forwarder Subcommittee conceived ofthe Broker Self Assessment proposal as a way to change the subject from penalties tocompliance improvement.Ken Bargteil recalled that at the Customs Committee September 26, 2007 meeting aSubcommittee was formed to work with CBP in developing a voluntary program that wouldprovide a framework for customs broker compliance management, and facilitate theevaluation of participating firms from a holistic perspective. Chip Bown, Amy Magnus andKen Bargteil are the primary contacts for CBP in this engagement. The subcommittee hasbeen working on the broad features of this program.Kiko Zuniga reported that CBP introduced the idea of a Broker Self Assessment programat the last COAC meeting. He said that this would have to be a voluntary program with thepurpose of self improvement based on internal controls, not CBP audit. Alan Klestadtcautioned that we must be careful what we wish for. He came away from discussions withKen Bargteil, Dan Baldwin and Angela Downey in August persuaded that CBP sees BSA as ameans to enforce standards on customs brokers in a similar manner as they have done withC-TPAT. There would be little practical difference in substituting CBP validation forregulatory audit, and learning that if you meet minimum standards, you are O.K. and if notthere is exposure. Alan Klestadt recommended that we have to proceed carefully. Thisprogram leads to uncharted territory and there are no guarantees.Ken Bargteil said be that as it may, we can’t back out. In fact, we need to accelerate ourefforts and take care to keep our progress in synch with CBP’s timeline for this. The programshould focus on management controls, internal procedures and methods that a customs brokercan use to provide for compliance. Anne-Marie Bush said that it sounded a lot like an ISOdiscipline. Alan Klestadt said that we may be over thinking BSA; that CBP doesn’t reallyPage 4 of 4
080123 v.1.0know what they want, and this could very easily become just a tool for penalties. He believesCBP is thinking along the lines of standards and best practices to be used as benchmarksagainst which performance can be measured and substandard results penalized.It was observed that most NCBFAA members have internal controls, measurablestandards, and prescribed processes that employees follow for making entry. BSA has to bevoluntary and be sufficiently flexibility to allow the entire gamut of firms comprisingNCBFAA membership an opportunity to subscribe. It should provide a CBP sanctioned wayfor our members to self-regulate, and our sector to enhance its image. Better performance isthe goal. Ken Bargteil suggested that the BSA Subcommittee should focus on the “process”and not the “product”, like entry rejects.Darrell Sekin said that we’ve already bought into this with our CCS program! DanBaldwin is looking for another hammer. Alan Klestadt said that this gives us an opportunityto obtain a prior disclosure provision for customs brokers. The question is what will it costus. Dan Meylor asked if this could simply morph into a guideline for customs broker audits.Anne-Marie Bush expressed her concern that BSA could take on the aspect of C-TPAT, witha “make work” web-based fill in the blanks requirement. Art Litman added that CBPindicated that the want C-TPAT to be a prerequisite for BSA.Edit Lite (A.Litman)Art Litman advised that the CATAIR for ESAR is coming together. The first draftCATAIR was made available to the TSN Trade Engagement and the goal is to make itavailable to the trade by March. Current A2.2 implementation plans will involve transactionsin both ACE and ACS. Art Litman said that he thinks the biggest challenge we will face isadapting our business processes as automation moves from ACS to ACE.CBP has completed most of the data edit decomposition and presented a catalogue ofthose that will not be reproduced in ACE to Art Litman and Celeste Catano. Art Litmandistributed copies of that catalogue at the meeting. He will lead the TSN “Edit Lite”Subcommittee that will study the data edits CBP has determined to be expendable and make asuitable response. CBP has committed to consider any objections raised by the trade to theelimination of specific edits, but it will fall to software vendors and self-programmers toenhance their systems in order to compensate for any edits CBP fails to reproduce in ACE.CBP’s strategy includes programming controls to ensure that the trade has compensated foreliminated edits; rather than reproduce the edits they will audit the input.There is reason to suspect that this is a top down decision that is not supported by theprogram managers. There can be no doubt that “Edit Lite” exposes the trade community toliability for errors in ACE that would have been rejected by ACS data edits. Inconsistenciesin CBP policy and legal arguments have been exposed, but to no avail. One of thesearguments involves a recent court case which resulted in CBP being held responsible for theirfailure to provide a system edit. The lesson CBP took from the case is that their propensityfor edits gave the court reason to accord the trade an undue reliance on system edits. CBPreasons that only by reducing edits will the court hold the trade responsible for knowing therules. CBP also relies on the Mod Act standard for reasonable care to justify “Edit Lite”, butthey do not admit to challenges that the parallel principle calling for shared responsibilityargues for duplication of ACS edits in ACE. Likewise, CBP does not allow that “Edit Lite”will compromise there responsibility to protect the revenue.Page 5 of 5
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NCBFAA Customs Committee

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