HAMPTON ROADS GLOBAL BUSINESS CONFERENCE Norfolk, Virginia September 2009

1. HAMPTON ROADSGLOBAL BUSINESS CONFERENCENorfolk, VirginiaSeptember 2009 Import Compliance Importer Security Filing Penalty Mitigation Guidelines Leonard L. Fleisig Troutman Sanders LLP Washington, D.C. leonard.fleisig@troutmansanders.com 202.274.2863

2. Introduction • The flexible enforcement period ends on January 26, 2010! • On January 27th, 2010 the dogs of war (or at least the imposition of liquidated damages and penalties) will begin in earnest. • This is what you can expect . . .

3. Carrier Penalties Why this matters to the importer community

4. Indemnity Provisions • Check your service contracts and bill of lading terms and conditions • You will likely see revisions to indemnity provisions • Carriers will want to pass along their fines and penalties to the ‘responsible party’

5. Vessel Stow Plan& Container Status Message Penalties • In General • In addition to liquidated damages carriers may be subject to: • DNL holds • Denial of preliminary entry permit • ‘other’ applicable penalties

6. Carrier Liquidated Damages

7. Vessel Stow Plan Penalties • Vessel Stow Plan Damages • Up to $50,000 per stow plan • Plus, if needed, additional penalties for repeated violations

8. Mitigation • Failure to File • First violation • $5k-$10k depending on mitigating factors • Subsequent violations • $25-$50k depending on mitigating factors • Late or inaccurate file • First violation • $2.5k - $10k depending on mitigating factors • Subsequent violations • $5k - $10k depending on mitigating factors

9. Mitigating Factors • Evidence of progress in implementation during flexible enforcement period • Factors beyond carrier’s control • Bad weather, other ‘acts of God’ • Carriers validated in C-TPAT may achieve additional 50% off the normal mitigation amount • Inaccurate information received: • In accordance with ordinary commercial practices and that it reasonably believed the information for be true and accurate.

10. Aggravating Factors • Lack of cooperation • Evidence of smuggling • Multiple errors on vessel stow plan • Rising error rate in recent performance

11. Container Status Messages • Failure to file • Late filing • Inaccurate filing • Up to $5,000 per CSM with a maximum of $100,000 per vessel arrival • Additional penalties for serious or repetitive violations

12. Mitigation • Failure to file • First violation • $1k-$2k per CSM • Subsequently • $2.5k-$5k per CSM • Late/Inaccurate filing • First violation • $500 - $1,000 • Subsequently • $1.5k - $5k

13. Mitigating Factors • Evidence of progress during flexible enforcement period • Small % of violations relative to total submitted by carrier • Carriers validated in C-TPAT may get an additional 50% mitigation • Demonstrated remedial action • Carrier reasonably relied on information received from others

14. Aggravating Factors • Lack of cooperation • Evidence of smuggling • Multiple errors by carrier • Rising error rate

15. ISF Penalties • Mistakes are inevitable • The key here is taking steps to minimize mistakes and to make that process transparent to you can demonstrate to CBP that you have a plan in place

16. ISF Penalties • It is a violation to • fail to submit an ISF • submit a late ISF • submit an inaccurate ISF

17. Failure to File • These are not liquidated damages relative to a bond because no bond has been filed • CBP shall withhold release/transfer of cargo until information is received and CBP has opportunity to review documentation and examine merchandise if necessary • CBP may also refuse permit to unload and if cargo is unloaded it is subject to seizure • No mitigation under these guidelines

18. Penalties • Late filing • $5k per late ISF • Inaccurate filing • $5k per inaccurate ISF • Updates • $5k per inaccurate ISF update • Withdrawals • $5k for failure to withdraw an ISF when required (goods no longer destined for US)

19. Mitigation • First violation • $1k-$2k • Subsequent violations • $2.5k-$5k • No relief will be granted if CBP determines that law enforcement goals were compromised by the violation

20. Mitigating Factors • Evidence of progress in implementation during flexible enforcement period • Small number of violations relative to total shipments made by ISF importer • Certified Tier 2 or Tier 3 C-TPAT members may receive up to 50% additional mitigation • Filed late due to vessel diversion, weather, other acts outside importers control • ISF filer reasonably relied on information from valid sources (vendor etc.) and had no means to verify. This is grounds for zeroing out of claim

21. Aggravating Factors • Lack of cooperation • Evidence of smuggling • Multiple errors • Rising error rate

22. Conclusions • Key is to have a process • Coordination and communication along the supply chain • Keep process transparent so you can demonstrate reasonable care

23. Leonard L. Fleisig Troutman Sanders LLP Washington, D.C. leonard.fleisig@troutmansanders.com 202.274.2863