Modification of National Customs Automation Program Test Regarding Reconciliation

DEPARTMENT OF THE TREASURY

Customs Service

Modification of National Customs Automation Program Test

Regarding Reconciliation

AGENCY: Customs Service, Treasury.

ACTION: General notice.

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SUMMARY: A notice published in the Federal Register on February 6,

1997, announced Customs plan to conduct a prototype test of

reconciliation. This document is a replacement for that notice. This

document notifies the trade community of changes to the prototype test

and sets forth the policy which makes this prototype the exclusive

means to reconcile entries, pursuant to 19 U.S.C. 1484(b). The

prototype will henceforth be referred to as the Automated Commercial

System (ACS) Reconciliation Prototype.

This document invites public comments concerning any aspect of the

planned test, informs interested members of the public of the

requirements for voluntary participation, and establishes the process

for developing evaluation criteria. To participate in this prototype,

certain information, as outlined in this notice, must be filed with

Customs prior to filing Reconciliations. It is important to note that

resources expended by the trade and Customs on these prototypes may not

carry forward to the final program.

EFFECTIVE DATE: The testing period of this prototype will commence no

earlier than October 1, 1998, will run for approximately two years, and

may be extended. The prototype will be limited to consumption entries

filed on or after October 1, 1998, through September 30, 2000. Comments

concerning the test are requested by November 14, 1997. A subsequent

notice will be published in the Federal Register to announce the

opening date of the application period, and specify any changes made to

this prototype as a result of the comments received from the public.

ADDRESSES: Written comments regarding this notice should be addressed

to Ms. Shari McCann, Reconciliation Team, U.S. Customs Service, 1301

Constitution Ave, NW, Room 1315, Washington, DC, 20229-0001.

FOR FURTHER INFORMATION CONTACT: Ms. Shari McCann, at (202) 927-1106,

or Mr. Don Luther at (202) 927-0915.

SUPPLEMENTARY INFORMATION:

Background

Title VI of the North American Free Trade Agreement Implementation

Act (the Act), Pub.L. 103-182, 107 Stat. 2057 (December 8, 1993),

contains provisions pertaining to Customs Modernization (107 Stat.

2170). Subtitle B of Title VI establishes the National Customs

Automation Program (NCAP)--an automated and electronic system for the

processing of commercial importations. Section 637 of the Act amended

Section 484 of the Tariff Act of 1930 to establish a new subsection

(b), entitled ``Reconciliation'', a planned component of the NCAP.

Section 101.9(b) of the Customs Regulations (19 CFR 101.9(b)) provides

for the testing of NCAP components. See, TD 95-21. This test is

established pursuant to those regulations. This document modifies the

prototype test of reconciliation that was announced in the Federal

Register (62 FR 5673) on February 6, 1997, and replaces that document.

In General

Concurrent with this Automated Commercial System (ACS)

Reconciliation Prototype, Customs is designing a reconciliation

component under the National Customs Automation Program Prototype

(NCAP/P) in the Automated Commercial Environment (see, 62 FR 14731,

dated March 27, 1997).

Thus, except for participation in the NCAP/P and upon

implementation of this prototype, any party who elects to reconcile

entries pursuant to 19 U.S.C. 1484(b) may only do so through this

prototype. This prototype will serve as the exclusive means to

reconcile entries for (1) value, (2) classification, (3) merchandise

entered under Harmonized Tariff Schedule of the United States (HTSUS)

heading 9802 or (4) merchandise entered under the North American Free

Trade Agreement (NAFTA). All practices with respect to block

liquidation/block appraisement (liquidating one entry summary or some

entry summaries for a periodic adjustment affecting many entry

summaries) will cease and such post-entry adjustments will take place

via the ACS Reconciliation Prototype. All importers may apply for this

prototype. Details on the application process are explained below.

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The Concept of Reconciliation

When certain information (other than that related to the

admissibility of merchandise) is not determinable at the time of entry

summary, an importer may later provide Customs with that information on

a Reconciliation. A Reconciliation is treated as an entry for purposes

of liquidation, reliquidation, and protest.

A notice of intention to file a reconciliation (``Notice of

Intent'') identifies an undeterminable issue, transfers that issue to a

Reconciliation and permits the liquidation of the underlying entry as

to all issues other than those which are transferred to the

Reconciliation. During this prototype, the importer will ``flag'' the

underlying entries with an electronic indicator, which will serve as

the Notice of Intent. By providing a Notice of Intent, an importer is

requesting that a certain issue or group of issues be separated from

the entry summary. The importer voluntarily requests and accepts that

the issue(s) identified in the notice of intent remain open and

outstanding. The importer remains responsible for filing a

Reconciliation, and liable for any duties, fees, and taxes resulting

from the filing and/or liquidation of the Reconciliation. The Notice of

Intent creates an obligation on the importer to file the

Reconciliation. Importers participating in this prototype will

recognize that the liquidation of the underlying entries pertains only

to those issues not identified by the importer on the notice of intent.

Upon liquidation of any underlying entry summary, any decision by

Customs entering into that liquidation, e.g., classification, may be

protested pursuant to 19 U.S.C. 1514. When the outstanding issue, e.g.,

value as determined by the actual costs, is later furnished in the

Reconciliation, the Reconciliation will be liquidated. The liquidation

of the Reconciliation will be posted to the Bulletin Notice of

Liquidation, and may be protested pursuant to 19 U.S.C. 1514, but the

protest may only pertain to the issue(s) flagged for reconciliation

(i.e., the protest may not re-visit issues previously liquidated on the

underlying entry summary).

Under the statutory mandate of 19 U.S.C. 1484, the importer is

responsible for using reasonable care in declaring at entry the proper

value, classification and rate of duty applicable to imported

merchandise. The public is reminded that the obligation to use

reasonable care applies to all aspects of this prototype, including the

filing and flagging of the underlying entries and the filing of the

Reconciliation.

Inherent in the concept of reconciliation is the fact that, because

certain issues are kept open pending filing of the Reconciliation, the

information regarding these issues and the resulting liability for the

duties, taxes and fees previously asserted by the importer may change

when the Reconciliation is filed. Therefore, for the duration of this

prototype, Customs will not accept drawback claims or drawback

certificates on underlying entries flagged for reconciliation until the

Reconciliation is filed with all duties, taxes and fees paid. In the

case of a drawback claim and a reconciliation refund against the same

underlying entries, the importer is responsible for ensuring that

claims for refunds in excess of the duties paid are not filed with

Customs and for substantiating how the separate refund requests apply

to different merchandise.

Prototype Objectives

The Reconciliation team's objectives for this prototype are to:

1. Work with the trade community, other agencies, and other parties

affected by this program in the design, conduct, and evaluation of the

prototype;

2. Obtain experience through the prototype for use in the design of

operational procedures, automated systems, and regulations; and

3. Implement reconciliation on a national level in conjunction with

the Trade Compliance Redesign.

Description of the ACS Reconciliation Prototype

1. Issues To Be Reconciled

The ACS Reconciliation Prototype will allow the following issues to

be flagged for reconciliation: value, HTSUS heading 9802, NAFTA, and

classification on a limited basis.

a. Value--The ACS Reconciliation Prototype is open to

reconciliation of all value issues.

b. 9802--The issue of 9802 includes only the value aspect involved

with this HTSUS provision, e.g., reconciling the estimated to actual

costs.

c. NAFTA--Reconciliation may be used as a vehicle to file post-

importation refund claims under 19 U.S.C. 1520(d). NAFTA

Reconciliations are subject to the obligations under 19 CFR part 181,

subpart D. Presentation of the NAFTA Certificate of Origin to Customs

is waived for the purposes of this prototype, but the filer must retain

these documents, which shall be provided to Customs upon request.

Filers are reminded that interest shall accrue from the date on which

the claim for NAFTA eligibility is made (the date of the

Reconciliation) to the date of liquidation or reliquidation of the

Reconciliation.

The obligation opened by the Notice of Intent applies to all

Reconciliations, including NAFTA, even if the participant finally

concludes it cannot file a valid 520(d) claim, in which instance the

NAFTA Reconciliation would be filed with no change.

d. Classification--Classification issues will be eligible for

reconciliation only when such issues have been formally established as

the subject of a pending administrative ruling, protest or court

action.

A Reconciliation of value, 9802 and/or classification shall be

filed within 15 months of the date of the oldest entry summary flagged

for and grouped on that Reconciliation. A Reconciliation may cover any

combination of value, 9802 and classification. Should the issues of

value, 9802 and/or classification on one entry summary be flagged for

reconciliation, one Reconciliation covering all three issues will be

filed.

A NAFTA Reconciliation must be filed within 12 months of the date

of importation of the oldest entry summary flagged for and grouped on

that Reconciliation. NAFTA Reconciliations will not be combined with

other issues, because of NAFTA's unique nature and different due dates,

and so that Customs may expedite the processing of such refunds.

2. Chain of Events

a. Initial application--As part of an importer's application to

participate in the ACS Reconciliation Prototype, the importer will

provide information including descriptions of the specific issues to be

reconciled, the merchandise and Harmonized Tariff Schedule (HTSUS)

classification, and which ports the importer uses or intends to use.

b. Entries flagged for reconciliation--

i. Any entry summary (see below for eligible entry types) that is

flagged for reconciliation must be filed via the Automated Broker

Interface (ABI). An electronic indicator, or ``flag,'' signifying that

these entries are to be reconciled, must be provided at the header

level. The flag designates that the indicated issue(s) for the entire

entry summary (not just a specific line) is subject to reconciliation.

ii. For purposes of this prototype, the ``flag'' serves as the

importer's Notice of Intent to file a Reconciliation.

iii. The importer must use reasonable care in filing the entry

summary,

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including but not limited to declaring the proper value, classification

and rate of duty on the underlying entry summary. The importer must

provide a good faith value estimate, and deposit the appropriate

duties, taxes, and fees at time of entry summary.

iv. Entry summaries flagged for reconciliation will require a

continuous bond, which must be accompanied by a rider. The rider shall

read as follows:

By this rider to the Customs Form 301, No. ______________,

executed on ____________, by ________________, as principal,

importer No. ________, an ________________, as surety, code No.

________________, which is effective on ________________, the

principal and surety agree that this bond covers all Reconciliations

pursuant to 19 U.S.C. 1484(b) that are elected on any entries

secured by this bond, and that all conditions set out in Section

113.62, Customs Regulations, are applicable thereto.

The continuous bond obligated on the underlying entries, along with

the rider, will be used to cover the Reconciliation.

v. All entries subject to one Reconciliation must be covered by one

surety. Each Reconciliation must be covered by one surety, i.e., two

sureties cannot cover the same Reconciliation.

vi. Entry summaries may be flagged for reconciliation until the

close of the test period. Reconciliations may be filed after the close

of the test period.

c. Liquidation of underlying entry summaries--Liquidation of the

underlying entry summary will occur as with any entry summary.

Importers who choose to participate in this prototype will recognize

that the liquidation of the underlying entries pertains only to those

issues not identified by the importer as reconcilable. Upon liquidation

of the underlying entries, any decisions of the Customs Service

entering into that liquidation can be protested pursuant to 19 U.S.C.

1514. The liquidation of the Reconciliation will be posted to the

Bulletin Notice of Liquidation, and any decision of the Customs Service

pertaining to that liquidation may also be protested (pursuant to 19

U.S.C. 1514).

d. Importer Electronically Transmits the Reconciliation via ABI--

i. When the importer has finalized the outstanding information, and

has the answer to the issue in question, the filer will electronically

(via ABI) transmit the Reconciliation to Customs. The Reconciliation

will be a new entry type 09.

ii. Transmission of a Reconciliation for value, 9802 and/or

classification must occur within 15 months of the date of the oldest

entry summary flagged for and grouped on that Reconciliation.

Transmission of a NAFTA Reconciliation must occur within 12 months of

the date of importation of the oldest entry summary flagged for and

grouped on that Reconciliation.

iii. Each Reconciliation will be limited to one importer of record,

i.e., the underlying entries and the Reconciliation must have the same

importer of record.

iv. This prototype will allow up to 9,999 underlying entries per

Reconciliation.

v. The importer must clearly document how the information in the

Reconciliation was derived, and provide all supporting documentation to

Customs when the Reconciliation is filed. The Reconciliation must

include complete supporting documentation for the information provided,

to substantiate the importer's claim. The supporting documentation must

include details at the entry line level. Supporting documents may

include, but are not limited to:

(a) CF 247--Cost Submission

(b) detailed line-level spreadsheets

(c) landed cost analysis sheets

(d) invoices, purchase orders, and contracts.

vi. While entry summaries may be flagged until the close of the

test period, Reconciliations may be filed and liquidated after the

closing date of the test.

vii. The structure of the Reconciliation will include a header,

association file, and line item data:

(a) Header--The Reconciliation header will include the following

data elements:

(i) Reconciliation entry number

(ii) Reconciliation entry type (09)

(iii) Reconciliation date (date of filing)

(iv) Issue(s) being reconciled

(v) IRS number

(vi) Surety code

(vii)Port of entry code (= processing port)

(viii) Summary date of oldest underlying entry (if the

reconciliation issue is value, 9802 or classification)

(ix) Date of import of oldest underlying entry (if the

reconciliation issue is NAFTA)

(x) The total of the original duties, taxes, and fees (fees broken

out by ``class code'') which were deposited on the underlying entries

(xi) The total of the reconciled duties, taxes, and fees (fees

broken out by ``class code'') which should have been paid for the

underlying entries, had the complete information been available to the

importer at the time of filing the underlying entries

(xii) The total amount of interest deposited on filing of the

Reconciliation, if the filer elects to do so

(xiii) Comment field: This field is to be used to explain any

details of the Reconciliation, e.g., Assist declaration on part XYZ for

the period 10/1/98 -9/30/99.

(b) Association file--The association file will include the list of

underlying entry numbers and the Reconciliation revenue adjustment,

broken out by entry. The association file will consist of the following

data elements:

(i) The underlying entry numbers and ports of entry which were

previously flagged and grouped on this Reconciliation

(ii) The original amount of duties, taxes and fees (fees broken out

by ``class code'') per underlying entry which were deposited at entry

summary

(iii) The reconciled amount of duty, taxes and fees (fees broken

out by ``class code'') which should have been paid for each of the

underlying entries, had the complete information been available to the

importer at the time of filing the underlying entry summary

(iv) If the Reconciliation results in additional duties due

Customs, the filer may deposit interest at time of filing the

Reconciliation. Interest must be calculated by and broken out to each

underlying entry.

(c) Line item data--Aggregate line item data will be manually

submitted via hard copy CF 7501. Each reconciliation line item will be

consolidated for all of the underlying entries listed in the

association file. Each combination of HTSUS, country of origin, SPI and

month of release will require a separate line. The Reconciliation line

data elements will include:

(i) HTS

(ii) SPI (if changed)

(iii) Country of origin

(iv) Quantity (if changed)

(v) Value

(vi) Month of release

The reconciled line information will be provided below the original

information, as follows:

(Original) HTS SPI C/O Quantity Value Release month

(Reconciled) HTS SPI C/O Quantity Value Release month

e. Payment--If the Reconciliation results in a revenue change,

Customs will issue one bill or refund per Reconciliation. If the

Reconciliation results in additional duties due Customs, payment must

be made via check, statement or Automated Clearing House at the time of

filing the Reconciliation. The filer may deposit interest at time of

Reconciliation filing. If the Reconciliation results in additional

duties due the importer,

[[Page 51184]]

Customs will issue a refund within 30 days of liquidation of the

Reconciliation. Final interest will be assessed or refunded as

appropriate.

f. Liquidation of Reconciliation--

i. The Reconciliation will be reviewed and liquidated, and one bill

or refund issued if a revenue change is appropriate. Bill/refund

amounts will be calculated against the duty as shown in the association

file upon liquidation of the Reconciliation. Importers will recognize

that there may be instances where no bill or refund is necessary.

Interest will be calculated in accordance with 19 U.S.C. 1505.

ii. On a matter of dispute, the importer may follow normal protest

procedures (pursuant to 19 U.S.C. 1514) with regard to the

Reconciliation.

II. Eligibility Criteria

1. Reconciliation is to be used to group entries together for a

common, outstanding issue. Entries flagged for reconciliation which

have the same outstanding information should all be grouped on one

Reconciliation, e.g., entries flagged for reconciliation over a one

year period awaiting finalization of assist information should be

grouped on one Reconciliation where the assist information is provided.

2. Adequate bond coverage must exist for the Reconciliation.

3. Participants must be capable of filing the underlying entry and

Reconciliation information electronically, via the Automated Broker

Interface (ABI).

4. The following entries types are eligible for reconciliation

under this prototype:

a. Entry type 01: Free and dutiable consumption entries

b. Entry type 02*: Quota/visa consumption entries

c. Entry type 03*: Antidumping/ Countervailing duty (AD/CVD)

consumption entries

d. Entry type 06: Foreign Trade Zone consumption entries

e. Entry type 07*: Quota/visa and AD/CVD combination consumption

entries

*Quota and AD/CVD entries may be reconciled for value,

classification, 9802 and/or NAFTA. The issues of AD/CVD final rate and

scope determination, quota category or any admissibility issue are not

eligible reconciliation issues under this prototype.

5. The underlying entries flagged for a Reconciliation may be filed

at any port, including any combination of ports.

6. The Reconciliation and supporting documentation may be filed at

any port location. Certain ports will be established as reconciliation

processing ports. The ABI transmission of the Reconciliation must

reflect one of the Customs-identified processing ports in the port code

field. Customs will identify and announce the reconciliation processing

ports in the Federal Register.

Utilizing the logic of the Remote Location Filing programming,

participant profiles will be established in ACS. Participants must

identify those locations from where the ABI transmissions will be

filed.

7. Participants must agree to participate in the evaluation of this

test.

Application to Participate in the ACS Reconciliation Prototype

This prototype is open to all importers. As stated above, this

prototype will serve as the exclusive authority to reconcile entries,

outside of any other Customs-designated prototypes. This notice

requests importers to apply for participation in this prototype by

submitting the following information:

1. Importer name and IRS number

2. Broker name(s) and filer code(s)

3. Surety name(s) and surety code(s)

4. Bond coverage (reconciliation rider mentioned above)

A copy of the rider and identification of the port in which the

continuous bond and rider are filed must be included in the

application.

5. Commodities covered under the Reconciliation

6. Processing port which will be used

7. Port(s) at which underlying entries and Reconciliation will be

filed

8. Port location from where ABI transmission is sent (may be same

as #7)

9. Number of entries anticipated to be covered by the

Reconciliation

10. Description of specific issue(s) which will be reconciled

11. Point of contact and telephone number

12. Any comments on prototype participation

The application may be submitted by the importer's broker and/or

attorney, if duly authorized. This information should be submitted to

Ms. Shari McCann, Reconciliation Team, U.S. Customs Service, 1301

Constitution Ave, NW, Room 1315, Washington, DC, 20229. A subsequent

notice will be published in the Federal Register to announce the

opening date of the application period. By applying to participate in

this test, the importer is agreeing to participate pursuant to the

terms of the test as defined in this notice.

Applications may be submitted throughout the duration of the

prototype. Applicants will be notified in writing of their acceptance

or denial into the prototype. An applicant who has been denied

participation in the prototype may re-apply after 30 days of the notice

of denial.

Interested candidates should note that participation in this test

will not constitute confidential information, and that lists of

participants will be made available on the Customs Electronic Bulletin

Board.

Misconduct Under Prototype

If a filer attempts to submit data relating to prohibited

merchandise, abuses reconciliation by using it when the reconciliation

issue is not truly undeterminable at time of entry summary; submits

entry types not authorized for reconciliation; is consistently late in

filing the Reconciliation or depositing the duties, fees and taxes;

fails to supply Customs with sufficient supporting documentation for

the Reconciliation; is habitually delinquent in the payment of bills

from Customs; or otherwise fails to follow the procedures outlined

herein, or applicable laws and regulations, then the filer may be

subject to liquidated damages, penalties and/or other administrative

sanctions and/or prevented from participation in future prototypes.

Regulatory Provisions Suspended

Certain requirements of Sec. 113.62 of the Customs Regulations (19

CFR 113.62), pertaining to basic importation and entry bond conditions,

will be suspended during this prototype. Certain provisions in parts

141 and 142 of the Customs Regulations (19 CFR 141 and 19 CFR 142),

pertaining to entry, and of part 159 of the Customs Regulations (19 CFR

part 159), pertaining to liquidation of duties, will also be suspended

during this prototype.

Absent any specified alternate procedure, the current regulations

apply.

III. Test Evaluation Criteria

Once the initial comment period has closed, Customs will review all

public comments received concerning any aspect of the test program or

procedures, answer any questions in light of those comments, and

establish baseline measures and evaluation methods and criteria.

Interim evaluations of the prototype will be published on the Customs

Electronic Bulletin Board, and the results of the final prototype

evaluation will be published in the Federal Register as required by 19

CFR 101.9(b). The following evaluation

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methods and criteria have been suggested:

1. Baseline measurements to be established through dataqueries and

questionnaires

2. Reports to be run through use of dataquery throughout the

prototype

3. Questionnaires from both trade participants and Customs to be

used before, during and after the prototype period.

Customs may assess any or all of the following evaluation criteria

from both Customs and the trade participants:

1. Workload impact (workload shifts/volume, cycle times, etc.)

2. Cost savings (staff, interest, issuance of fewer checks or

bills, tracking refunds/bills, reduction in contingent liabilities,

etc.)

3. Policy and procedure accommodation

4. Trade compliance impact

5. Problem resolution

6. System efficiency

7. Operational efficiency

8. Other issues identified by the participant group.

Customs will request that test participants be active in the

evaluation, identifying costs and savings experienced in this

prototype.

Dated: September 25, 1997.

Albert W. Tennant,

Acting Assistant Commissioner, Office of Field Operations

[FR Doc. 97-25930 Filed 9-29-97; 8:45 am]

BILLING CODE 4820-02-P