1. 1 RBNA/ITR3 | 11/17/2009 | © 2009 Robert Bosch LLC and affiliates. All rights reserved. Update on the Importer Security Filing ITA/GC Arthur O’Meara Robert Bosch LLC Wanda Sample Avalon Risk Management November 18, 2009

2. 2 Update: The Importer Security Filing, or 10+2 RBNA/ITR3 | 11/17/2009 | © 2009 Robert Bosch LLC and affiliates. All rights reserved. Contents  Overview  Current and Newly Required Data Elements  Top Five Error Message From CBP  Mitigation Guidelines  Update on ISF Bond Requirements

3. 3 Update: The Importer Security Filing, or 10+2 RBNA/ITR3 | 11/17/2009 | © 2009 Robert Bosch LLC and affiliates. All rights reserved. Overview  US Customs and Border Protection’s (CBP’s) Advanced Data Project, or “10+2” For all shipments arriving into the US via ocean… The importer must supply 10 newly required data elements and… The carrier must supply 2 newly required data elements… To be transmitted to CBP… No later than 24 hours before loading onto the ship.

4. 4 Update: The Importer Security Filing, or 10+2 RBNA/ITR3 | 11/17/2009 | © 2009 Robert Bosch LLC and affiliates. All rights reserved. Newly Required Security Filing Data: the “10” 24 Hours Prior to Lading  Seller (Owner) name/address  Buyer (Owner) name/address  Importer of record number  Consignee number  Manufacturer (Supplier) name/address  Ship to Party  Country of Origin  Commodity USHTS-6  Container Stuffing location  Consolidator name/address 1. Stow Plan Data 2. Container Status Message (CSM) Data  Entry number & type  Entry – district & port  Filer code  Importer of record number  Ultimate consignee number  Surety number  Filing date & time  Importing carrier  Vessel name  Country of origin  Exporting country  Exporting date  Foreign port of arrival  Estimated arrival date  Entry/Customs value  HTSUSA (10 digit)  Manufacturer ID Currently Required Entry Data (import clearance) Currently Required Manifest Data (24 hours prior to lading)  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 (description/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 Current and Newly Required Data Elements the “+2” data elements from steamship lines

5. 5 Update: The Importer Security Filing, or 10+2 RBNA/ITR3 | 11/17/2009 | © 2009 Robert Bosch LLC and affiliates. All rights reserved. Top Five Error Messages from CBP  Duplicate ISF Transaction  Invalid ISF Transaction Number  Invalid HTS Number  Missing Entity Identifier  Invalid Country Code  A single ISF may contain multiple errors

6. 6 Update: The Importer Security Filing, or 10+2 RBNA/ITR3 | 11/17/2009 | © 2009 Robert Bosch LLC and affiliates. All rights reserved. Mitigation Guidelines  It is a violation to:  Fail to submit an ISF (when one is required);  Submit a late ISF;  Submit an inaccurate ISF;  Submit an inaccurate update;  (1 st inaccurate update only)  Fail to withdraw an ISF.  No liquidated damages if no bond is in place CBP will disallow clearance/unlading Ms. Sample will discuss bonds

7. 7 Update: The Importer Security Filing, or 10+2 RBNA/ITR3 | 11/17/2009 | © 2009 Robert Bosch LLC and affiliates. All rights reserved. Mitigation Guidelines  Mitigating factors Importer’s efforts in 2009 and progress in 2010 Small % of violations C-TPAT Tier 2 or 3 Up to 50% mitigation of the normal mitigated amount Demonstrated remedial actions to address circumstances surrounding the violation Circumstances beyond importer’s control Reliance on accuracy of business partner (vendor…). Normally, can only be claimed once  No mitigation if law enforcement goals were compromised by the importer

8. 8 Update: The Importer Security Filing, or 10+2 RBNA/ITR3 | 11/17/2009 | © 2009 Robert Bosch LLC and affiliates. All rights reserved. Mitigation Guidelines  Aggravating factors Lack of cooperation with CBP Evidence of smuggling Recurring, multiple errors on one ISF Rising error %

9. 9 Update: The Importer Security Filing, or 10+2 RBNA/ITR3 | 11/17/2009 | © 2009 Robert Bosch LLC and affiliates. All rights reserved. Mitigation Guidelines  Liquidated Damages Amounts: First violation for: Late ISF or Inaccurate ISF or Inaccurate update, then Liquidated damages will be cancelled upon payment of $1000-$2000

10. 10 Update: The Importer Security Filing, or 10+2 RBNA/ITR3 | 11/17/2009 | © 2009 Robert Bosch LLC and affiliates. All rights reserved. Mitigation Guidelines  Liquidated Damages Amounts: Second violation for: Late ISF or Inaccurate ISF or Inaccurate update, then Liquidated damages will be cancelled upon payment of $2500  Additional Statutory Penalties for serious or repetitive violations

11. 11 Update: The Importer Security Filing, or 10+2 RBNA/ITR3 | 11/17/2009 | © 2009 Robert Bosch LLC and affiliates. All rights reserved. Mitigation Guidelines Summary It is a violation to: Fail to submit an ISF (when one is required); Submit a late ISF; Submit an inaccurate ISF; Submit an inaccurate update; (1 st inaccurate update only) Fail to withdraw an ISF. Mitigated fines for: Late ISF or Inaccurate ISF or Inaccurate ISF update

12. 12 Update: The Importer Security Filing, or 10+2 RBNA/ITR3 | 11/17/2009 | © 2009 Robert Bosch LLC and affiliates. All rights reserved. ISF Bonds

13. 13 Update: The Importer Security Filing, or 10+2 RBNA/ITR3 | 11/17/2009 | © 2009 Robert Bosch LLC and affiliates. All rights reserved. ISF Bonds  Bonds will be required on January 26, 2010  “Agents” may use their own Bond for ISF Filing Agent would also assume liability for ISF Filing Must execute Power-of-Attorney with ISF party Consider transfer of ISF risk through POA and/or contract 85% of ISFs are being filed through licensed Customs Broker  ISF Penalty Exposure $5,000 for single violation up to $10,000 maximum for multiple Bond liability is six years from commencement, based on statue CBP to issue liquidated damages within 1 year of violation  ISF Obligations Commence 24 hours before vessel departure Terminate when goods enter the first port of arrival or in-bond move, if there is no violation

14. 14 Update: The Importer Security Filing, or 10+2 RBNA/ITR3 | 11/17/2009 | © 2009 Robert Bosch LLC and affiliates. All rights reserved. ISF Bonds  Liquidated Damages Limited by bond amount, consider import vs. ISF liability Cannot be assessed if no bond contract in force CBP will assess penalties retroactively (estimated one year tail before ISF penalties would be known) CBP can always penalize under 1592D for negligence or fraud  Bond requirements waived for the following transactions: Type 3 – Household Goods/Personal Effects Type 4 – Government and Military Type 5 – Diplomatic Type 6 – Carnets Type 9 – International Mail

15. 15 Update: The Importer Security Filing, or 10+2 RBNA/ITR3 | 11/17/2009 | © 2009 Robert Bosch LLC and affiliates. All rights reserved. CBP301 Continuous Bond  Acceptable CF301 Bond types include: Activity Code 1 Import/Broker Bond Activity Code 2 Bonded Custodian Activity Code 3 International Carrier Activity Code 4 Foreign Trade Zone (FTZ)  No change in current bond calculation for ISF use CBP will consider in bond sufficiency reviews Liquidated damages capped by bond amount

16. 16 Update: The Importer Security Filing, or 10+2 RBNA/ITR3 | 11/17/2009 | © 2009 Robert Bosch LLC and affiliates. All rights reserved. CBP301 Single Transaction Bond  Use for unified filing only (entry and ISF) Less than 3% of all ISF transactions Cannot use for inland clearances or RLF  No change in current bond calculation for ISF use Value plus duty 3 times value if PGA involved  Bond reference number required for ISF  ISF transaction number added to bond  Cumbersome, paper process

17. 17 Update: The Importer Security Filing, or 10+2 RBNA/ITR3 | 11/17/2009 | © 2009 Robert Bosch LLC and affiliates. All rights reserved. Appendix D/ISF Continuous Bond  Available to separately bond ISF activity if desired or no C1/C2/C3/C4 bond already in force  Minimum required amount of $50,000  CBP tracking ISF activity in bond sufficiency review  Activity Code 16 captured in ACS and ACE  Current Procedures Bond filed with Revenue Division No application required by CBP Trade Names and Unincorporated Divisions allowed Co-Principals allowed  Revenue Division will post FAQ in 2 to 3 weeks

18. 18 Update: The Importer Security Filing, or 10+2 RBNA/ITR3 | 11/17/2009 | © 2009 Robert Bosch LLC and affiliates. All rights reserved. Appendix D/ISF Single Entry Bond  Bond amount will always be $10,000  Activity Code 16  Bond must have ISF transaction number  Bond must be filed within 12 hours of receiving the ISF transaction number  Submit bond to ISF_Bond@cbp.dhs.govISF_Bond@cbp.dhs.gov  Subject line include “ISF Transaction Number” only  CBP working on receipt to confirm bond has been filed  ISF filing date likely the execution date on bond Be prepared to secure bond in advance of filing ISF Timing is crucial Process is cumbersome and paper intensive

19. 19 Update: The Importer Security Filing, or 10+2 RBNA/ITR3 | 11/17/2009 | © 2009 Robert Bosch LLC and affiliates. All rights reserved. Conclusion  In Summary January 26, 2010 is not going away, be prepared for Bond Requirements and Full Enforcement C1 Import Bond provides easy and cost effective means to meet ISF bonding requirements Consider separate ISF Appendix D Continuous Bond only if high volume importer and ability to limit ISF exposure ISF bond underwriting: ISF report card and financial statement  Concerns Tail on exposure: untimely notification of ISF penalties with 6 year statute of limitations for CBP to make claim against bond, results in stacking exposures for surety 3% error rate against current ISF volume is significant even with mitigation; many feel error rate is grossly underestimated CBP ability to manage bond and penalty volume

20. 20 Update: The Importer Security Filing, or 10+2 RBNA/ITR3 | 11/17/2009 | © 2009 Robert Bosch LLC and affiliates. All rights reserved. Thank You!