CBP Proposal for Importer Security Filing and Additional Carrier Requirements "10+2 Initiative"

1. CBP Proposal for Importer Security Filing and Additional Carrier Requirements "10+2 Initiative" October 2008 (Reflects the Pre-NPRM Version)

2. Background and Development Process Targeting and Security Benefits Update on Current Status Questions Today’s Presentation on “10+2”

3. CBP has implemented a comprehensive, multi-layered cargo screening strategy designed to enhance national security while protecting the economic vitality of the United States. 24-Hour Manifest Rule Container Security Initiative (CSI) Customs-Trade Partnership Against Terrorism (C-TPAT) Non Intrusive Inspection (NII) Techniques Automated Targeting System (ATS) Advance Targeting Units (ATUs) National Targeting Centers (Cargo and Passenger) Secure Freight Initiative The information that CBP currently analyzes to generate its risk assessment prior to vessel loading is, for the most part, the ocean carrier’s or non-vessel operator’s (NVOCC) cargo declaration (i.e. manifest data). Internal and external reviews have shown that alone, manifest data is not sufficient to perform reliable targeting. Background

4. “One Dangerous Container is One Too Many” The “Hyundai Fortune” exploded in March 2006, 60 miles from the coast of Yemen. Stowaways Found at the LA-LB Seaport • The Security Filing (SF) is a Customs and Border Protection (CBP) proposal that will require importers and vessel operating carriers to provide additional advance trade data to CBP pursuant to Section 203 of the SAFE Port Act of 2006 and Trade Act of 2002.“24 Hour Rule” for Importers. • 1. Importer Security Filing (ISF) • One Importer Security Filing required per importer, per shipment, per vessel. Required 24 hours prior to lading. 10 elements*to be transmitted by theimporter (or designated agent). • 2. Additional Carrier Requirements • 2 data sets to be transmitted by the carrier

5. All cargo shipments arriving at US ports must be properly declared. Carriers and NVOCCs are required to provide CBP with cargo manifest data 24-hours prior to vessel lading. 19 CFR 4.7(a) Importers, or their designated customs brokers, are generally* required to provide CBP with entry data within 15 days of vessel arrival. In the sea mode, CBP will accept and process entry data up to 5 days prior to vessel arrival. 19 CFR 141 (*In-bond Movements) Entry type data has a profound effect on the ATS risk assessment process. Current Data Requirements

6. Manufacturer (Supplier) name/address Seller (Owner) name/address Container Stuffing location Consolidator name/address Buyer (Owner) name/address Ship to name/address Importer of record number Consignee number Country of origin Commodity HTS-6 Current Status Versus New Requirements Required Manifest Data Security Filing Data Entry Data Elements Generally, 24 Hrs Prior to Lading Generally, up to 15 Days After Arrival ISF-10 “Regular” Cargo • Bill of Lading Number • Foreign Port before vessel departs for U.S. • Carrier SCAC • Carrier Assigned Voyage Number • Date of Arrival at First U.S. Port • U.S. Port of Unlading • Quantity • Unit of measure of Quantity • First Foreign Place of Receipt • Commodity Description (or HTS-6) • Commodity Weight • Shipper Name • Shipper Address • Consignee Name • Consignee Address • Vessel Name • Vessel Country • Vessel Number • Foreign Port of Lading • Hazmat Code • Container numbers • Seal Numbers • Date of departure from Foreign Port • Time of Departure from Foreign Port • Entry Number & Type • Entry – Dist & Entry – Port • Filer Code • Importer of Record • Ultimate Consignee • Surety Number • Filing Date & Time • Importing Carrier • Vessel Name • Country of Origin • Exporting Country • Exporting Date • Foreign Port of Arrival • Estimated Arrival Date • Entry Value • HSUSA (10) • Manufacturer ID (3461, IT, FTZ) ISF-5 “Transit” Cargo (FROB, IE, TE) • Booking Party Name/Address • Ship to name/address • Commodity HTS-6 • Foreign Port of Unlading • Place of Delivery • Identification of: • Supply Chain Entities • Cargo Descriptions • Cargo Origins • Container Routing • Conveyance Routing Stow Plan Data Container Status Message (CSM) Data

7. “10+2” Security Filing Milestones • Advance Trade Data Initiative (June 2004) • CBP Targeting Taskforce (March-May 2006) • SAFE Port Act (October 2006) • Consultative Process (November 2006 - present) • Straw Man Paper and Formal COAC Consultations (Nov 2007 – Mar 2008) • ATDI 10+2 Testing (March 2007 – present) • Notice of Proposed Rule Making (January 2008- present) • www.regulations.gov USCBP-2007-0077

8. Advance Trade Data Initiative (ATDI) (Established 2004) • Voluntary Program Between CBP and the Trade Community • Electronic Data Sandbox What we knew: • The trade community relies on various documents and data to facilitate commerce and conduct day-to-day business. • What we learned about the data: • Additional trade data would significantly enhance both CBP’s automated and officer-based targeting efforts • Increase the transparency of key participants, cargo and events • Increase confidence in CBP’s trade facilitation function

9. ATDI Overview ATDI June 2004 – February 2007 ATDI is a Partnership With Trade To Identify Information In Today’s Supply Chains Capable of Strengthening DHS Risk Management Efforts Conveyance and Container Location & Intermodal Interchange Status Vessel Stow Plans Truck Status Proof of Delivery Purchase Order& Advance Shipping Notice Booking Confirmation & Routing Terminal Receipt & Drayage Detail Feeder Feeder U.S. Bound A significant amount of data is known about the average shipment more than 24 hours prior to vessel lading CBP 24 Hour Manifest CBP Entry and Entry Summary CBP Importer Security Filing Container Status Messages 24 HRs Prior to Lading 15 Days After Arrival

10. Who: Cargo Targeting Experts from the Nation’s seaports High-Level CBP Managers Industry experts Objectives Met: Identified sources of information Conducted a qualitative review of existing data elements Conclusions: Smuggling is smuggling. The right data at the right time is critical. Identified which additional elements should be mandated to improve security targeting. CBP Cargo Targeting Taskforce (CTT) (March-May 2006)

11. CTT Assessed Data Availability (March-May 2006)

12. Section 203 (a) (1): Secretary shall “…identify and seek the submission of data related to the movement of a shipment of cargo through the international supply chain…” Section 203 (b): Secretary shall “…require…additional data elements for improved high-risk targeting, including appropriate security elements of entry data…to be provided as advanced information …prior to lading…” at the foreign port. SAFE Port Act of 2006 (October 2006) • Established New Data Requirements

13. Consultative Process Required Requires consultation with stakeholders (including COAC) and that the Secretary “identify to them the need for such information and the appropriate timing of its submission”. Requires consideration of costs, benefits, and feasibility of requiring additional non-manifest data, reducing the time period for revising cargo manifests and for submission of certain elements of entry data. SAFE Port Act of 2006 (October 2006)

14. Required by the SAFE Port Act of 2006 Good Business Practice Strawman Proposal COAC Meetings (Nov 2006 – Feb 2007) Critical to the Success of “10+2” US Government Entities Foreign Government Entities World Customs Organization Advisory Committees (COAC, TSN, CESAC) Importing Community Customs Broker Community Carrier Community Freight Forwarding-Logistics Community Software Developers-Data Providers Consultative Process (October 2006 - present)

15. ATDI Security Filing “10+2” Testing • Proxy Testing of “10+2” Since March 2007 • “10+2” Data Formats Developed and Tested • Importer 10 Security Filing: “Stand Alone” and “Entry-Type” filings were created • Stow Plans: accepted industry standards • CSMs: accepted industry standards • Transmission Protocols • Existing CBP connections used (ABI, AMS) • Secure File Transfer Protocol (sFTP) used • E-mail used • Proof of Concept: Data Intake into CBP Systems Works Well • Over 57,400 Proxy Importer Security Filings Received • Over 1,000 Stow Plans Received • Over 95 Million CSMs Received • ATDI able to match ISFs and CSMs to manifest data (bills of lading)

16. NPRM posted January 2, 2008 for Public Comment (75 Days) Consistent with the direction of the SAFE Port Act of 2006 and the Trade Act of 2002, CBP will soon require the importer to provide an enhanced cargo declaration 24 hours prior to vessel lading to complement the manifest information. One Importer Security Filing (ISF-10) filing required per importer, per shipment, per vessel. If one shipment to one importer has multiple bills of lading, one ISF may satisfy the multiple bills of lading. Modified ISF (ISF-5) filing for transit and FROB cargo (5 elements) *** Vessel Mode of Transportation Only *** *** Bulk Shipments will be Exempt *** “10+2” Proposal (Importers)

17. Per the SAFE Port Act of 2006 and the Trade Act of 2002, CBP will now require the vessel operators and vessel operating carriers to provide two data sets: Vessel Stow Plans Generally required within 48 hours of foreign departure -or- Prior to arrival for trips lasting less than 48 hours Container Status Messages Required within 24 hours of creation/receipt in carrier equipment tracking system Carrier is not required to use new types of CSMs (as is, where is) “10+2” Proposal (Carriers) CBP will generally accept the common industry data standards for the carrier portion of the new proposed regulations.

18. Targeting and Security Benefits of “10+2” • Enhanced Risk Analysis Capabilities • Essential component of CBP’s multi-layered security strategy • Increase the transparency of key supply chain participants • Improve identification of cargo • Identify cargo and conveyance origins, routing and event timelines • Complement and validate manifest data that is collected 24 hours prior to lading • Improve Facilitation of Lawful International Trade • Increase confidence in CBP’s trade facilitation function by mitigating risk • Enforcement and facilitation decision making can be done much farther upstream • Results: • Allow CBP to Focus Resources on High-Risk Cargo

19. Bullet Casings Bomb Casings Gear Casings Motor Casings Sausage Casings Computer Casings Pipe Casings Tire Casings Greater Commodity Identification (ISF Data) What Are “Casings”? HTS 9306.30 HTS 1601.00 HTS 7304.200

20. Improved Targeting Capabilities (ISF Data) Container: INBU4944310 Source Description HTS C/O Role Party BILL OF LADING SHEETN/A N/AShipperXYZ LOGISTICS ConsigneeABC TRUCKING NEW SECURITY FILING DATA BED LINEN 630210 CN MFR/Supl.XINJIANG TOP BEDDING PRODUCTS SellerXINJIANG TOP BEDDING PRODUCTS Stuffing LocationXINJIANG, CN BuyerB & D IMPORT INC (PHX., AZ) Consolidator XYZ LOGISTICS ImporterB & D IMPORT INC (PHX., AZ) Ship ToName/Add. PRICE TRANSFER WHSE (L.B., CA)Consignee B & D IMPORT INC (PHX., AZ) NII Image Only NII Image and Manifest Data What’s in the box?

21. Earlier Decision Making C-TPAT entities will be reliably identified prior to lading Importer of Record Number Consignee Number Better Decision Making Tangible C-TPAT benefits will be applied far upstream No longer tied solely to entry data (24 hours or more prior to arrival) Stabilization of Automated Hold Process Immediate Transportation (IT) in-bonds scores will be stable Validation of Supply Chain Security Reviews New Entities and Locations Identified Container Stuffing Location Consolidator (Stuffer) name/address C-TPAT Benefits of “10+2”

22. Stow Plan Data (ATS Stow Plan Module) Identifies/Validates: • Unmanifested Cargo • High-Risk Cargo • Hazmat • Empty Containers • Freight Remaining on Board (FROB) • Specific Locations • Container Counts • By SCAC • Load Ports • Discharge Ports • Vessel Itineraries

23. Electronic Container Verification Operations Port of Newark (August-September 2008) 31 Vessels with Discrepancies 905 Containers with Discrepancies* 869 Unmanifested Containers (773 Empties) 96 Unmanifested With Cargo 8 Unmanifested With High Risk Cargo *Includes Check Digit Errors on Stow Plan; Deleted Bills of Lading with no Updates Stow Plan Testing Overview

24. Container Status Messages Equipment Tracking Mechanism Used Today By Industry Identifies/Validates: Common Event Types: • Match CSM to Manifest • Establish Container Origin • Container Routing • Volumetrics • Gate-In & Gate-Out • Loaded & Unloaded from Conveyance • Vessel Arrival & Vessel Departure Common Status Types: • Empty or Full

25. Public Comment period closed Tuesday, March 18, 2008 Less than 200 submissions (Approx. 115 “issues” identified) Technical Requirements (System Development) Want to know about file formats and transfer protocols (to better assess needed changes) Want a unique SF identification number generated by CBP; Messaging Components Implementation Process Want to know effective date Want to know method of phased-in implementation (incremental vs. big bang) A few commenters want a Pilot to be conducted first Enforcement Actions, Penalties and Liquidated Damages and Bond Provisions Concerned about extreme liquidated damages; receptive to “do not load” actions instead Cost, Benefit and Feasibility Study and Impact on Trade Harmonization with International Standards (WCO) Privacy and Disclosure Concerns Public Reaction & General Comments: NPRM

26. Going Forward • Need to know your supply chain partners • Manufacturers and Suppliers • Freight Forwarders • Require that the new data be collected now • Shippers, Manufacturers, Suppliers, Vendors, etc. have access to the “Scheduled Container Stuffing Location” and “Consolidator Name/Address” elements. • Know what you are importing before you import it • Begin the classification process earlier • Decide who will transmit the ISF on your behalf • There are many options available

27. The Final Rule is under review by the Office of Management and Budget (OMB). ATDI “10+2” on-boarding and testing continues. Most of the CBP system programming has already been tested and completed (ACS and ATS). ATDI data is available in ATS for operational use by the field. CBP released draft copies of the proposed “10+2” data formats for the Importer Security Filing portion of the proposed regulation. Copies were posted to CBP.gov on May 30, 2008 and further updated July 17 and September 17, 2008. http://www.cbp.gov/xp/cgov/trade/automated/automated_systems/sf_transaction_sets/ Security_Filing_Technical@cbp.dhs.gov Committed to a 60 Day Delayed Effective Date Committed to a 1 year Delayed Enforcement Period (Informed Compliance) Committed to a Comprehensive Outreach Program (Mirror 24 Hr. Manifest Rule) WCO SAFE Framework amendment process continues. “10+2” Update on Current Status

28. The proposed rules increases security risks; containers will wait longer on the dock before they are loaded and may be stored in unsecured locations. The requirements of the NPRM will cause economic harm to the importer and carrier without a commensurate increase in security. The regulatory requirements will cause an unreasonable paperwork burden on the public. This will economically disadvantage NVOCCs, importers and various other entities involved in international trade. The NPRM provides no support for requiring this information 24 hours prior to lading. This will add at least 2 to 4 days to the supply chain. Signed by: National Customs Brokers & Forwarders Association of America, Inc. (NCBFAA) Business Alliance for Customs Modernization (BACM) American Association of Exporters and Importers (AAEI) Joint Industry Group (JIG) Pacific Coast Council of Freight Forwarders and Customs Brokers (PCC) The International Association of NVOCCS, Inc. Los Angeles Customs Brokers and Freight Forwarders Association What they said about the 24-Hour Rule… By Letter Dated September 6, 2002 in response to NPRM (67 FR 51519) Note: These predictions did not come to pass.

29. Questions? John Jurgutis Chief Program Manager Secure Freight Initiative (Security Filing) Customs and Border Protection (202) 344-3714 john.jurgutis@dhs.gov