Revised National Customs Automation Program Test Regarding Reconciliation

DEPARTMENT OF THE TREASURY

Customs Service

Revised National Customs Automation Program Test Regarding

Reconciliation

AGENCY: Customs Service, Treasury.

ACTION: General notice.

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SUMMARY: On February 6, 1997, a notice was published in the Federal

Register announcing a Customs prototype test of reconciliation. A

subsequent notice, published in the Federal Register on September 30,

1997, announced modifications to the originally planned test. In

response to comments received pursuant to that notice and discussions

with the trade community, Customs has made further enhancements to the

reconciliation prototype. These enhancements include a blanket

application option to entry-by-entry flagging and, for Reconciliations

involving duties, taxes, or fees due, the option of filing aggregate

data for the Reconciliation in lieu of entry-by-entry data. This

document serves as a replacement for all previous notices for this

prototype, which is known as the ACS Reconciliation Prototype. The

changes to the prototype detailed herein do not affect the previously

announced start date of October 1, 1998, nor do they affect the policy

which makes this prototype the exclusive means to reconcile entries,

pursuant to 19 U.S.C. 1484(b).

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. This document also serves to open

the application period. Certain information, as outlined in this

notice, must be filed in an application with Customs prior to an

applicant being approved for participation. It is important to note

that certain aspects of this prototype may be modified prior to

implementation of the final reconciliation program.

EFFECTIVE DATES: 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 this notice and applications to participate in the prototype

are requested by March 31, 1998.

[[Page 6258]]

ADDRESSES: Written comments regarding this notice and/or applications

to participate in this prototype should be addressed to Ms. Shari

McCann, Reconciliation Team, U.S. Customs Service, 1300 Pennsylvania

Ave, NW, Room 5.2A, 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 replaces

earlier notices concerning the reconciliation prototype test, published

in the Federal Register on February 6, 1997 (62 FR 5673), announcing

the initial Customs prototype test of reconciliation, and on September

30, 1997 (62 FR 51181), modifying the initial prototype).

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. 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).

Importers must be aware of the distinction between prior disclosure

and reconciliation. A prior disclosure exists when a person concerned

discloses the circumstances of a violation pursuant to the Customs

Regulations. The person disclosing this information must do so before,

or without knowledge of, the commencement of a formal investigation of

that violation. Reconciliation is the process by which an importer

notifies Customs of undeterminable information, and by which the

outstanding information is provided to Customs at a later date. Under

reconciliation, the importer is not disclosing a violation, but rather

identifying information which is undeterminable and will be provided at

a later time.

Definitions

1. Reconciliation: The process which allows an importer to identify

undeterminable information (other than that affecting admissibility) to

Customs, and provide the outstanding information at a later date.

Reconciliation also refers to the entry on which the outstanding

information is provided.

2. Underlying Entry Summary: A consumption entry summary flagged

for reconciliation.

3. Flagging an entry for reconciliation: Identifying to Customs

that an entry summary is subject to reconciliation for a defined

issue(s). There are two ways an importer can flag an entry summary for

reconciliation:

a. Entry-by-entry flagging: The importer electronically via ABI

inputs an indicator on all entries which are subject to reconciliation.

This indicator identifies the issue(s) subject to reconciliation.

b. Blanket application: Prior to filing entries subject to

reconciliation, the importer provides Customs a letter which contains

the importer of record number, the time period in which entries are

subject to reconciliation, and the issue(s) subject to reconciliation.

Customs will input an electronic indicator on ALL entries for that

importer for that time period, which will identify them as being

subject to reconciliation for the issue(s) indicated.

4. Entry-By-Entry Reconciliation: A Reconciliation in which the

revenue adjustment is specifically provided for each affected entry

summary.

5. Aggregate Reconciliation: A Reconciliation filed with summarized

data showing reconciled adjustments at an aggregate level. A list of

the affected entries is required, but the revenue change need not be

broken out according to individual underlying entries. Aggregate

Reconciliations may be used only where all adjustments covered by the

Reconciliation result in absolute increases in duties, taxes, and fees.

Drawback is not available on the increased/reconciled adjustment.

6. Absolute increase: Each and every underlying entry summary

covered by the Reconciliation results in an increase or no change in

duties, taxes, and fees. Only absolute increases are eligible for

Aggregate Reconciliations.

Examples: Where entries A and B are both covered by a

Reconciliation, the Reconciliation would have an Absolute Increase

if the changes to both entries would be increases or no changes. If

A increased and B decreased, even if A's increase is greater than

B's decrease, this is NOT an Absolute Increase. See Netting, below.

Note: This principle applies at the entry level rather than at

the line level. That is, regardless of decreases on individual lines

on entry A, as long as the total change for entry A resulted in an

increase in duties, taxes, and fees, it could be considered part of

an Absolute Increase.

7. Netting: Situations in which increases AND decreases resulted at

the end of the reconciliation period. In any netting situation, the

importer has the following options:

a. File an Entry-By-Entry Reconciliation to account for both the

increases and decreases, or

b. Divide the Reconciliation into two pieces: An Aggregate

Reconciliation for the increase and an Entry-By-Entry Reconciliation

for the decrease.

Description of the ACS Reconciliation Prototype

Customs goals in the design of this prototype are to (1) make

progress under this key component of the Mod Act, (2) establish

uniformity in an area which has traditionally operated under a variety

of procedures, (3) provide financial safeguards, and (4) institute a

legal mechanism for reconciling entries.

A. Exclusive Means

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

[[Page 6259]]

the exclusive means to reconcile entries for (1) value, 2)

classification on a limited basis, (3) merchandise entered under

Harmonized Tariff Schedule of the United States (HTSUS) heading 9802,

and/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 with a periodic adjustment affecting many entry summaries)

will cease and such post-entry adjustments will only take place via the

ACS Reconciliation Prototype. All importers may apply for this

prototype. Details on the application process are explained below.

Outside of reconciliation, the only alternative post-entry adjustment

will be to file a Supplemental Information Letter for each affected

entry summary, with appropriate corrective data and duty tenders. (For

information on the Supplemental Information Letter, see Automated

Broker Interface (ABI) administrative message #97-0727, posted on 8/4/

97, entitled ``314 Day Liq Cycle--Trade Notice.'') As always, importers

retain the right to request extension of liquidation of entry

summaries, as described in 19 CFR 159.12(a)(ii).

B. Notice of Intent

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

Intent'') identifies an undeterminable issue, transfers liability for

that issue to a Reconciliation and permits the liquidation of the

underlying entry summary as to all issues other than those which are

transferred to the Reconciliation. 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, taxes, and fees 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.

The underlying entries flagged for a Reconciliation may be filed at

any port, including any combination of ports. The following entries

types are eligible for reconciliation under this prototype:

1. Entry type 01: Free and dutiable formal consumption entries;

2. Entry type 02*: Quota/visa consumption entries;

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

consumption entries;

4. Entry type 06: Foreign Trade Zone consumption entries; and

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

entries.

* Quota and AD/CVD entries may not be reconciled for

classification; they may only be reconciled for HTSUS heading 9802,

value and/or NAFTA. The issues of AD/CVD final rate and scope

determination, quota category or any admissibility issue are likewise

not eligible reconciliation issues under this prototype.

(1) Option: Entry-by-Entry Flag

During this prototype, the importer may ``flag'' the underlying

entries at time of filing via an ABI indicator, which will serve as the

Notice of Intent.

(2) Option: Blanket Application Flag

Those importers who find that a large majority of their entry

summaries require flagging may provide their Notice of Intent by filing

a ``blanket application'' in lieu of entry-by-entry flags. The blanket

application will consist of written notice by the importer showing the

Importer of Record number, range of dates in which the underlying entry

summaries will be subject to reconciliation, and a list of the issues

subject to reconciliation. This application must be received by Customs

no later than seven working days prior to transmission of the first

entry subject to the Reconciliation. Upon receipt of the blanket

application, Customs will automatically apply the above-mentioned

electronic flag to all entry summaries filed by the importer during the

specified time period.

C. 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.

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

reconciliation of all value issues.

2. HTSUS heading 9802--The issue of 9802 includes only the value

aspect involved with this HTSUS provision, e.g., reconciling the

estimated to actual costs.

3. 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 of 19 CFR part 181,

subpart D. The importer must possess a valid Certificate of Origin at

the time of making a NAFTA claim. Presentation of the NAFTA Certificate

of Origin to Customs is waived for the purposes of this prototype, but

the filer must retain this document, which shall be provided to Customs

upon request. The Certificate of Origin is part of the a1A list (19

U.S.C. 1508(a)(1)(A)), and covered by the recordkeeping provisions of

the Customs laws. Filers are reminded that interest shall accrue from

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

the NAFTA Reconciliation) to the date of liquidation or reliquidation

of the Reconciliation. The obligation to file a Reconciliation 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.

4. Classification--Classification issues will be eligible for

reconciliation only when such issues have been formally established as

the subject of a pending administrative ruling (including

preclassification rulings), protest, or court action.

Reconciliation for classification issues other than those listed

above is not permitted. Reconciliation for quantity is also not

permitted. These issues are very closely linked to admissibility, and

therefore are not eligible for reconciliation. Post-entry adjustments

for these issues may still be made however, using the Supplemental

Information Letter process. (For information on this process, see ABI

administrative message #97-0727, 8/4/97.)

D. Reconciliation--Menu Approach

By this notice, Customs is offering a variety of choices in

reconciliation to meet a variety of business needs. Importers may find

it helpful to view these alternatives as a ``menu'' approach. It should

be noted that the following menu choices are for the type of

Reconciliation filed. They are not conditioned on the method of

flagging used. In other words, an importer can flag entries either

individually or via a blanket application, and reconcile those entries

via an Aggregate or Entry-By-Entry Reconciliation.

1. Entry-by-Entry Reconciliation

a. This option can be used for all reconciliation adjustments,

including refunds of duties, taxes, and fees.

b. The continuous bond on the underlying entries will be used to

cover the Reconciliation.

c. Customs will accept no drawback claims on the underlying entries

until

[[Page 6260]]

the Reconciliation is filed with duties, taxes, and fees deposited.

d. The revenue adjustment will be broken down to entry-by-entry

detail for all underlying entry summaries.

e. After the Reconciliation has been filed, drawback may be claimed

against the underlying entries and, if appropriate, the reconciled

increase.

f. Reconciliation of any issue which covers Antidumping and/or

Countervailing duty entries must be submitted as an Entry-By-Entry

Reconciliation.

2. Aggregate Reconciliation

a. This option applies only to those situations which involve an

absolute increase, i.e., each and every entry covered by the

Reconciliation results in an increase or no change in duties, taxes,

and fees. If netting is involved to reach a net increase, this option

does not apply. (See Definitions section of this notice for more

details.)

For example, entry 123 covers product A. Entry 234 covers product

B. An assist was provided for product A, which resulted in an increase

in duty. The value of product B was affected by currency fluctuations,

which resulted in a decrease in duty. An Aggregate Reconciliation

cannot be filed to cover both entry 123 and entry 234. Remember, this

restriction against netting applies only to netting between different

entries. If entry 456 covers both products A and B, as long as entry

456 as a whole had an increase in duties, taxes and fees, it may be

included in an Aggregate Reconciliation.

b. The continuous bond on the underlying entries will be used to

cover the Reconciliation.

c. Customs will accept no drawback claims on the underlying entries

until the Reconciliation is filed with duties, taxes, and fees

deposited.

d. The Reconciliation will include a list of all underlying

entries, but will not require the revenue adjustment to be broken down

by entry.

e. After the Reconciliation has been filed, drawback may be claimed

against the underlying entries, but may NOT be claimed against the

reconciled increase. All parties are hereby notified that no drawback

refunds will be issued on the reconciled adjustment, e.g., if the duty

paid on the underlying entry summary is $10,000, and the overall

reconciliation increase adjustment is $1,000, the $10,000 is eligible

for a drawback refund. The $1,000 is not eligible for a drawback

refund. By opting to file an Aggregate Reconciliation, all participants

understand that they waive their ability to claim drawback or transfer

drawback rights for the amount of the reconciled increase.

E. Filing of Reconciliation--Grouping, Timeliness and Location

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 awaiting

finalization of assist information should be grouped on one

Reconciliation where the assist information is provided.

A Reconciliation of value, HTSUS heading 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, HTSUS heading 9802 and classification

issues. Should the issues of value, HTSUS heading 9802 and/or

classification on one entry summary be flagged for reconciliation, the

participant shall address all those issues on the same Reconciliation.

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 may 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.

One underlying entry summary may have up to two Reconciliations,

one for any combination of classification, HTSUS heading 9802 and/or

value, and one for NAFTA.

A Reconciliation which is not filed by the appropriate deadline

will be handled as a liquidated damages claim for failure to file.

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 the appropriate Customs-identified processing port, and

respective commodity team, on the header record. Customs will notify

participants of the appropriate processing ports and commodity teams.

Please note that entries filed in Puerto Rico or the Virgin Islands

must be reconciled on separate Reconciliations. Reconciliations cannot

combine underlying entries filed in Puerto Rico with underlying entries

filed at any other port, or entries filed in the Virgin Islands with

entries filed at any other port. This limitation is due to the fact

that revenue deposited on or refunded from entries filed in the Virgin

Islands and Puerto Rico are attributed to separate accounts for those

territories than entries filed at other ports.

F. Effect of Reconciliation on Drawback

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. Customs will therefore not accept

drawback claims or certificates on underlying entries flagged for

reconciliation until the Reconciliation is filed with all duties,

taxes, and fees deposited. In the case of a drawback claim and a

reconciliation refund against the same underlying entries, the importer

is responsible for ensuring that a claim for a refund in excess of the

duties paid is not filed with Customs and for substantiating how the

drawback and reconciliation refund requests apply to different

merchandise.

Since drawback is paid on a per-entry basis, reconciled adjustments

filed with aggregate data are not eligible for drawback. As the

adjustment made pursuant to an Aggregate Reconciliation is not

connected to specific entry summaries, it would be impossible for

Customs to ensure that those duties were indeed entitled to drawback,

and/or that the duty for which the drawback was claimed had not been

previously refunded on the underlying entry summary(ies).

G. Filing of Reconciliation--Bond Issues

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.,--------------------------------------------

and,-------------------------------------------------------------------

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. Adequate bond

coverage must exist for the Reconciliation.

[[Page 6261]]

All underlying entries subject to one Reconciliation must be

covered by one surety and one continuous bond. Each Reconciliation must

be covered by one surety, i.e., two sureties cannot cover the same

Reconciliation. Termination of the continuous bond, either by Customs,

the bond principal or surety will result in the closing of the

Reconciliation to the addition of further underlying entries.

H. ACS Reconciliation Prototype--Chain of Events

1. 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 corresponding Harmonized Tariff Schedule (HTS)

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

Customs will notify the applicant in writing of their acceptance or

denial into the prototype. (See ``Application to Participate in ACS

Reconciliation Prototype'' below.)

2. Entries flagged for Reconciliation

a. Any entry summary that is flagged for reconciliation must be

filed via ABI. An electronic indicator, or ``flag'', signifying that

these entries are to be reconciled, will be applied 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.

b. As mentioned above, there is also a ``blanket application''

option, in which ACS will automatically set the flag for all of an

importer's entries for a given period for a given issue(s). The same

responsibilities and liabilities apply to these entries as those

flagged individually.

c. For purposes of this prototype, the ``flag'' (set either by the

filer or by Customs in accordance with a blanket application) serves as

the importer's Notice of Intent to file a Reconciliation.

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

summary, including but not limited to declaring the proper value,

classification, and rate of duty on the underlying entry summary,

regardless of whether a particular issue has been flagged for

reconciliation. For example, if the entry is subject to value

reconciliation, the importer must still use reasonable care in

providing a good faith value estimate, and deposit the appropriate

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

e. Entry summaries may be flagged for reconciliation until the

close of the test period.

3. Liquidation of Underlying Entry Summaries

Liquidation of the underlying entry summary will occur as with any

entry summary and will be posted to the Bulletin Notice of Liquidation.

Importers who participate in this prototype will recognize that the

liquidation of the underlying entry summary pertains only to those

issues not identified by the importer as subject to reconciliation.

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. It should be noted that liquidation of the

underlying entry summaries can, but does not necessarily, precede the

filing of the Reconciliation.

4. Importer Electronically Transmits the Reconciliation via ABI

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

has the answer to the issue in question, the filer, using reasonable

care, will electronically (via ABI) transmit the Reconciliation to

Customs. The Reconciliation will be a new entry type 09.

b. Transmission of a Reconciliation for value, HTSUS heading 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.

c. 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.

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

Reconciliation.

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

Reconciliation was derived. The importer must maintain all supporting

documentation required to substantiate the declaration made via the

Reconciliation, and provide this information to Customs or Census upon

request. Supporting documents may include, but are not limited to:

i. CF 247--Cost Submission;

ii. Detailed line-level spreadsheets;

iii. Landed cost analysis sheets;

iv. Invoices, purchase orders, and contracts; and

v. Documents supporting apportionment of assists in accordance with

19 CFR 152.103(e).

The recordkeeping provisions of the Customs laws apply to the

Reconciliation and all supporting documentation as described above.

f. 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.

g. For both the entry-by-entry and aggregate methods of

reconciliation, the structure of the Reconciliation will include a

header, association file, and line item data. Where there are

differences in the type of Reconciliation, they are noted below. Upon

request, Customs will provide applicants and other interested parties

with sample Reconciliations of each type. Customs will provide

participants with instructions for reconciliation programming.

Importers are encouraged not to begin programming until that time.

i. Header--The Reconciliation header will include the following

data elements:

(a) Reconciliation entry number;

(b) Port of entry code (= processing port);

(c) Responsible commodity team;

(d) Reconciliation type (Entry-By-Entry or Aggregate);

(e) Reconciliation date (date of filing);

(f) Issue(s) being reconciled;

(g) IRS number;

(h) Surety code;

(i) Summary date of oldest underlying entry summary (if the

reconciliation issue is value, HTSUS heading 9802 or classification);

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

reconciliation issue is NAFTA);

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

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

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

broken out by ``class code'');

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

Reconciliation. Please note: Customs is in the process of analyzing

business-realistic options for interest calculation which are revenue-

neutral and do not link to every underlying entry. A subsequent Federal

Register notice will be published with any options for interest

calculation. Until such further notice, interest must be calculated in

accordance with 19 U.S.C. 1505; and

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

of the Reconciliation, e.g., assist declaration

[[Page 6262]]

on part XYZ for the period 10/1/1998 -9/30/1999.

ii. Association file--For both Entry-By-Entry and Aggregate

Reconciliations, the association file will contain:

(a) The underlying entry numbers, and ports of entry, which were

previously flagged and grouped on the Reconciliation.

For Entry-By-Entry Reconciliations only, the following elements are

also required:

(b) The actual amount of duties, taxes and fees (fees broken out by

``class code'') deposited per underlying entry summary;

(c) The reconciled amount of duties, 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 summaries; and

(d) If the Reconciliation results in additional duties or fees due

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

Reconciliation. Interest must be calculated in accordance with 19

U.S.C. 1505.

iii. Line item data--The line item data for both the Entry-By-Entry

and Aggregate Reconciliations will NOT be filed via ABI. For both types

of Reconciliation, this data will be submitted both in hard copy and in

commercial spreadsheet format via diskette. The data elements shown

below will be required for this portion of all Reconciliations. 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, Special Program Indicator (SPI) and calendar year of

release will require a separate line. This line item data shall be

presented in the format shown in the sample spreadsheet below:

BILLING CODE 4820-02-P

[GRAPHIC] [TIFF OMITTED] TN06FE98.018

BILLING CODE 4820-02-C

(a) The Bureau of the Census has certain requirements for specific

reconcilable issues:

(i) Classification: Reconciliations for classification must include

the data elements of quantity and port(s). (The port(s) may be reported

at the first two digit level, e.g., Port 4601 = 46.) If ``ALL'' is

indicated in the ``Port'' column, Census will understand that the

change provided by that line applies to all ports in which the importer

entered the subject merchandise.

A Reconciliation of a classification change requires that the

summarized data lines must be connected to illustrate the shift from

one HTS classification to another. In the spreadsheet which appears

above, an example is included in which a ruling determined that a

portion of the merchandise entered under HTSUS subheading 4011.10.5000

should have been classified under HTSUS subheading 4011.10.1000 (lines

11a and 11b of the spreadsheet). The data

[[Page 6263]]

provided in the Reconciliation must show Customs and Census which

portion shifted from the original HTS classification to the reconciled

HTS classification, and which portion did not change.

The classification change illustrated in lines 11a and 11b of the

spreadsheet resulted in an increase in duties due Customs, i.e., the

portion of the merchandise that changed classification went from a 3.6%

to a 4% duty rate. This example could be filed as an Entry-by-Entry or

Aggregate Reconciliation. Remember: should the classification change

result in a decrease in duties, taxes, and fees, the Reconciliation

must be filed as an Entry-By-Entry Reconciliation.

(ii) HTSUS heading 9802: Similar to classification, a

Reconciliation of HTSUS heading 9802 must also provide the port(s)

covered (port(s) at the first two digits), and a link between the

original data submitted and the reconciled data. Census needs to be

able to capture the shift in value, in order to know how to adjust the

statistics for both the HTSUS Chapter 1-97 provision and for the HTSUS

heading 9802 provision. An example of a 9802 change is also provided in

the spreadsheet above.

Should the HTSUS heading 9802 change result in a decrease in

duties, taxes, and fees, the Reconciliation must be filed as an Entry-

By-Entry Reconciliation.

h. 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, taxes, or fees due

Customs, payment must be made via check or Automated Clearing House at

the time of filing the Reconciliation. In such cases, the filer must

deposit interest at time of Reconciliation filing. If the

Reconciliation results in a refund due the importer, Customs will issue

the refund within 30 days of liquidation of the Reconciliation. Final

interest will be assessed or refunded as appropriate pursuant to 19

U.S.C. 1505.

i. Liquidation of Reconciliation--

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

or refund issued if a revenue change is appropriate. 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. The liquidation of the Reconciliation will be posted to the

Bulletin Notice of Liquidation.

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

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

pertaining to the liquidation of the Reconciliation.

Eligibility Criteria

1. Participants must be capable of filing the underlying entry

summary and Reconciliation information electronically, via ABI.

2. Adequate bond coverage must exist for the Reconciliation.

Participants must have on file a rider and a continuous bond, which

will be obligated on the underlying entries and used to cover the

Reconciliation.

Reasonable Care and Recordkeeping

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

responsible for using reasonable care in declaring at entry, among

other things, 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.

Auditable and verifiable financial records must be the basis for

any Reconciliation. Accordingly, the importer is required to maintain

all records to support the Reconciliation, whether an Entry-By-Entry or

Aggregate Reconciliation, pursuant to Customs recordkeeping laws, and

maintain a system of records providing an audit trail between the data

provided in the Reconciliation and the importer's books and records.

Upon request by Customs and/or Census, further information in

support of the Reconciliation must be provided by the importer. For

example, Customs may, for verification purposes, request that the

importer break down a certain (HTSUS/country of origin) line by part

number, contract number, etc., and provide the documentation to support

the change made at that level. The importer will have to track the

adjustment to entry if requested by Customs. Census may in certain

circumstances request that the yearly change for a given [HTSUS/country

of origin/SPI] be broken down to quarterly adjustments, in order to

capture seasonal fluctuations.

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 means 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 (description and HTS no.)covered under the

Reconciliation;

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

filed;

7. Port location from where ABI transmission will be sent (may be

same as #6);

8. Number of entries anticipated to be covered by the

Reconciliation;

9. Detailed description of specific issue(s) to be reconciled; and

10. Point of contact and telephone number.

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

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

March 31, 1998 to Ms. Shari McCann, Reconciliation Team, U.S. Customs

Service, 1300 Pennsylvania Ave, NW, Room 5.2A, Washington, DC 20229-

0001. 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 until the start of the prototype and

throughout the duration of the prototype. Priority review will be given

to applications received by March 31, 1998. Applicants will be notified

in writing of their acceptance or denial into the prototype. Applicants

are reminded that they cannot begin participation in the prototype

until they have received acceptance from Customs. An applicant who has

been denied participation in the prototype may re-apply after 30 days

of the notice of denial. An applicant may appeal a denial within 30

days of the notice of denial to the Director, Trade Compliance.

Interested candidates should note that participation in this test

will not constitute confidential information, and that lists of

participants will be made available. All laws and regulations

concerning commercial confidential information apply.

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; fails to

exercise reasonable care in filing underlying entries or

[[Page 6264]]

Reconciliations; fails to abide by the terms and conditions of this

notice; submits entry types not authorized for reconciliation; is

consistently late in filing the Reconciliation or depositing duties,

taxes, and fees; 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

applicable laws and regulations, then the participant may be suspended

from the prototype, subject to liquidated damages, penalties, and/or

other administrative sanctions, and/or prevented from participation in

future prototypes. Any action commenced by Customs for misconduct may

be appealed through existing procedures or, if none exist, to the

Director, Trade Compliance, within 30 days of the action.

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, in Part 159 of the Customs Regulations (19 CFR

Part 159), pertaining to liquidation of duties, and in Part 181 of the

Customs Regulations (19 CFR 181), pertaining to the North American Free

Trade Agreement, will also be suspended during this prototype.

Absent any specified alternate procedure, the current regulations

apply.

Test Evaluation Criteria

Participants are strongly encouraged to participate in the

evaluation of the ACS Reconciliation Prototype. 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 methods and criteria have been suggested:

1. Baseline measurements to be established through data analysis

and questionnaires;

2. Reports to be run through use of data analysis throughout the

prototype; and

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. Statistical needs; and

9. 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: February 3, 1998.

Audrey Adams,

Acting Assistant Commissioner, Office of Field Operations.

[FR Doc. 98-3069 Filed 2-5-98; 8:45 am]

BILLING CODE 4820-02-P