[Title 19 CFR B]
[Code of Federal Regulations (annual edition) - April 1, 2002 Edition]
[Title 19 - CUSTOMS DUTIES]
[Chapter I - UNITED STATES CUSTOMS SERVICE, DEPARTMENT OF THE TREASURY]
[Part 146 - FOREIGN TRADE ZONES]
[Subpart B - Inventory Control and Recordkeeping System]
[From the U.S. Government Printing Office]


19CUSTOMS DUTIES22002-04-012002-04-01falseBSubpart BCUSTOMS DUTIESUNITED STATES CUSTOMS SERVICE, DEPARTMENT OF THE TREASURYFOREIGN TRADE ZONES
          Subpart B--Inventory Control and Recordkeeping System



Sec. 146.21  General requirements.

    (a) Systems capability. The operator shall maintain either manual or 
automated inventory control and recordkeeping systems or combination 
manual and automated systems capable of:
    (1) Accounting for all merchandise, including domestic status 
merchandise, temporarily deposited, admitted, granted a zone status and/
or status change, stored, exhibited, manipulated, manufactured, 
destroyed, transferred, and/or removed from a zone;
    (2) Producing accurate and timely reports and documents as required 
by this part;
    (3) Identifying shortages and overages of merchandise in a zone in 
sufficient detail to determine the quantity, description, tariff 
classification, zone status, and value of the missing or excess 
merchandise;
    (4) Providing all the information necessary to make entry for 
merchandise being transferred to the Customs territory;
    (5) Providing an audit trail to Customs forms from admission through 
manipulation, manufacture, destruction or transfer of merchandise from a 
zone either by zone lot or Customs authorized inventory method.
    (b) Procedures manual. (1) The operator shall provide the port 
director with an English language copy of its written inventory control 
and recordkeeping systems procedures manual in accordance with the 
requirements of this part.
    (2) The operator shall keep current its procedures manual and shall 
submit to the port director any change at the time of its 
implementation.
    (3) The operator may authorize a zone user to maintain its 
individual inventory control and recordkeeping system and procedures 
manual. The operator shall furnish a copy of the zone user's procedures 
manual, including any subsequent changes, to the port director. However, 
the operator will remain responsible to Customs and liable under its 
bond for supervision, defects in, or failures of a system.
    (4) The operator's procedures manual and subsequent changes will be 
furnished to the port director for information purposes only. Customs 
receipt of a manual does not indicate approval or rejection of a system.
    (c) Liability of operator. Upon zone activation approval the 
operator remains liable for complying with all inventory control and 
recordkeeping system requirements set forth in this part.



Sec. 146.22  Admission of merchandise to a zone.

    (a) Identification. All merchandise will be recorded in a receiving 
report or document using a zone lot number or unique identifier. All 
merchandise, except domestic status merchandise for which no permit for 
admission is required under Sec. 146.43, will be traceable to a Customs 
Form 214 and accompanying documentation.
    (b) Reconciliation. Quantities received will be reconciled to a 
receiving report or document such as an invoice with any discrepancy 
reported to the port director as provided in Sec. 146.37.
    (c) Incomplete documentation. Merchandise received without complete 
Customs documentation or which is unacceptable to the inventory control 
and recordkeeping system will be recorded in a suspense account or 
record until documentation is complete or the

[[Page 98]]

system is capable of accepting the information, at which time it will be 
formally admitted to the zone under Sec. 146.32 or 146.40. The receiving 
report or document will provide sufficient information to identify the 
merchandise and distinguish it from other merchandise. The suspense 
account or record will be completely documented for Customs review to 
explain the differences noted and corrections made.
    (d) Recordation. Merchandise received will be accurately recorded in 
the inventory system records from the receiving report or document using 
the zone lot number or unique identifier for traceability. The inventory 
record will state the quantity and date admitted, cost or value where 
applicable, zone status, and description of the merchandise, including 
any part or stock number.
    (e) Harbor maintenance fee. When imported cargo is unloaded from a 
commercial vessel at a U.S. port and admitted into a foreign trade zone, 
the applicant for admission of that cargo into the zone may be subject 
to the harbor maintenance fee as set forth in Sec. 24.24 of this 
chapter.

[T.D. 86-16, 51 FR 5049, Feb. 11, 1986, as amended by T.D. 87-44, 52 FR 
10211, Mar. 30, 1987; 52 FR 10970, Apr. 6, 1987]



Sec. 146.23  Accountability for merchandise in a zone.

    (a) Identification of merchandise--(1) General. A zone lot number or 
unique identifier will be used to identify and trace merchandise.
    (2) Fungible merchandise. Fungible merchandise may be identified by 
an inventory method authorized by Customs, which is consistently 
applied, such as First-In-First-Out (FIFO) and using a unique 
identifier.
    (b) Inventory records. The inventory records will specify by zone 
lot number or unique identifier:
    (1) Location of merchandise;
    (2) Zone status;
    (3) Cost or value, unless operator's or user's financial records 
maintain cost or value and the records are made available for Customs 
review;
    (4) Beginning balance, cumulative receipts and removals, 
adjustments, and current balance on hand by date and quantity;
    (5) Destruction of merchandise; and
    (6) Scrap, waste, and by-products.
    (c) Physical inventory. The operator shall take at least an annual 
physical inventory of all merchandise in the zone (unless continuous 
cycle counts are taken as part of an ongoing inventory control program) 
with prior notification of the date(s) given to Customs for any 
supervision of the inventory deemed necessary. The operator shall notify 
the port director of any discrepancies in accordance with Sec. 146.53.



Sec. 146.24  Transfer of merchandise from a zone.

    (a) Accountability. (1) All zone status merchandise transferred from 
a zone will be accurately recorded within the inventory control and 
recordkeeping system.
    (2) The inventory control and recordkeeping system for merchandise 
transfers must have the capability to trace all transfers back to a zone 
admission under a Customs authorized inventory method.
    (b) Information. The inventory control and recordkeeping system must 
be capable of providing all information necessary to make entry for 
transfer of merchandise from the zone.



Sec. 146.25  Annual reconciliation.

    (a) Report. The operator shall prepare a reconciliation report 
within 90 days after the end of the zone/subzone year unless the port 
director authorizes an extension for reasonable cause. The operator 
shall retain that annual reconciliation report for a spot check or audit 
by Customs, and need not furnish it to Customs unless requested. There 
is no form specified for the preparation of the report.
    (b) Information required. The report must contain a description of 
merchandise for each zone lot or unique identifer, zone status, quantity 
on hand at the beginning of the year, cumulative receipts and transfers 
(by unit), quantity on hand at the end of the year, and cumulative 
positive and negative adjustments (by unit) made during the year.
    (c) Certification. The operator shall submit to the port director 
within 10 working days after the annual reconciliation report, a letter 
signed by

[[Page 99]]

the operator certifying that the annual reconciliation has been 
prepared, is available for Customs review, and is accurate. The 
certification letter must contain the name and street address of the 
operator, where the required records are available for Customs review; 
and the name, title, and telephone number of the person having custody 
of the records. Reporting of shortages and overages based on the annual 
reconciliation will be made in accordance with Sec. 146.53. These 
reports must accompany the certification letter.



Sec. 146.26  System review.

    The operator shall perform an annual internal review of the 
inventory control and recordkeeping system and shall report to the port 
director any deficiency discovered and corrective action taken, to 
ensure that the system meets the requirements of this part.