[Federal Register Volume 60, Number 171 (Tuesday, September 5, 1995)]
[Notices]
[Pages 46141-46145]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-21909]



-----------------------------------------------------------------------


DEPARTMENT OF THE TREASURY

Notice to Test the Use of Reconciliation for Adjustments Made to 
the Price of Imported Merchandise by Related Party Companies under 26 
U.S.C. 482

AGENCY: Customs Service, Department of the Treasury.

ACTION: Final notice.

-----------------------------------------------------------------------

SUMMARY: This notice announces Customs plan to conduct a test regarding 
the use of reconciliation for those related party importers which have 
reason to believe upward adjustments may be made to the price of 
imported merchandise for tax purposes pursuant to 26 U.S.C. 482. This 
notice invites public participation in the test, and sets out the 
eligibility requirements for voluntary participation in the testing of 
reconciliation, for this purpose, and describes the basis on which 
Customs will select participants.

DATES: The test will commence no earlier than October 1, 1995, and will 
run until December 31, 1996. To participate in this reconciliation 
test, the application must be filed and approved by Customs on or 
before October 1, 1995.

ADDRESSES: To be considered for voluntary participation in this test 
applications should be submitted to Mr. William F. Inch, Director, 
Office of Regulatory Audit, Office of Strategic Trade, U.S. Customs 
Service, 1301 Constitution Avenue, NW., Room 2311, Washington, DC 
20229-0001.

FOR FURTHER INFORMATION CONTACT: Matthew Krimski 202-927-0411.

SUPPLEMENTARY INFORMATION:

Background

Section 1059A of the Internal Revenue Code

    Section 1059A of the Internal Revenue Code provides that in related 
party transactions the amount of any costs--
    (1) Which are taken into account in computing the basis or 
inventory cost of such property by the purchaser, and
    (2) Which are also taken into account in computing the customs 
value of such property shall not, for purposes of computing such basis 
or inventory cost for purposes of this chapter, be greater than the 
amount of such costs taken into account in computing such customs 
value.
    The legislative history of section 1059A indicates that Congress 
intended to preclude the ``whipsaw'' effect on U.S. revenue which 
occurs when a party is allowed to claim a price for ``computing the 
customs value of such property by the purchaser'' that is lower than 
the price claimed for tax purposes.
    When section 1059A was enacted, Congress was aware that the Customs 
value statute recently had been amended to make price paid the critical 
cost factor taken into account by the Customs Service in valuing goods 
for duty purposes. The legislative history of section 1059A also 
indicates that Congress wanted section 1059A to address this situation 
by attempting to place a ceiling on ``the amount of any (such) costs'' 
that can be claimed for tax purposes. All of the applicable legislative 
reports indicate, without exception, that Congress intended that 
section 1059A would instill some uniformity on the amount of costs 
which may be claimed to the IRS for tax purposes by limiting the amount 
of such costs to the amount claimed to, and taken into account by, the 
Customs Service in computing the Customs value.
    The legislative history did state that appropriate adjustments may 
be made in cases where customs pricing rules differ from appropriate 
tax rules--as, for example, with the inclusion or exclusion of freight 
charges. Finally, the history states section 1059A applies to transfer 
prices subject to section 482 of the Internal Revenue Code.
    In July of 1994, the Internal Revenue Service (IRS) issued final 
regulations implementing 26 U.S.C. 482. The IRS subsequently began 
considering whether and to what extent the 1059A regulations should be 
amended in the context of the new section 482 regulations. The section 
482 regulations, specifically 26 CFR 1.482-1(a)(3), permits a 
controlled taxpayer, if necessary to reflect an ``arm's length 
result,'' to ``report on timely filed U.S. income tax return (including 
extensions) the results of its controlled transactions based upon 
prices different from those actually charged.'' The IRS is considering 
whether the 1059A regulations should be amended to allow the taxpayer, 
under appropriate circumstances, to make the upward section 482 
adjustment.
    This document announces a test that will facilitate the IRS/Customs 
decision 

[[Page 46142]]
as to whether reconciliation procedures provide a viable and 
appropriate circumstance for a taxpayer/importer to make a post entry 
upward adjustment to the price of imported merchandise.

Customs Value Law

    For Customs purposes the appraised value of imported merchandise is 
determined pursuant to section 402 of the Tariff Act of 1930, as 
amended by the Trade Agreements Act (TAA) of 1979. Transaction value is 
the primary basis of appraisement. Transaction value is defined in 
section 402(b)(1) as the ``price actually paid or payable for the 
merchandise when sold for exportation to the United States'' plus 
specified statutory additions.
    Pursuant to section 402(b)(2)(A)(iv) the transaction value of 
imported merchandise shall be the appraised value only if the buyer and 
seller are not related, or if the buyer and the seller are related, the 
transaction value is acceptable under 402(b)(2)(B). Section 
402(b)(2)(B) provides that transaction value between a related buyer 
and seller is acceptable if the buyer demonstrates that the declared 
transaction value meets one of the following two tests: (1) 
Circumstances of the Sale or (2) Test Values.
    The reconciliation test, announced in this document, is designed 
for participants that engage in related party transactions.

Related Party Transactions

    Under section 402(g) of the TAA the following persons are treated 
as related:
    (1) Members of the same family, including brothers and sisters 
(whether by whole or half blood), spouse, ancestors, and lineal 
descendants.
    (2) Any officer or director of an organization and such 
organization.
    (3) An officer or director of an organization and an officer or 
director of another organization, if each such individual is also an 
officer or director in the other organization.
    (4) Partners.
    (5) Employer and employee.
    (6) Any person directly or indirectly owning, controlling, or 
holding with power to vote, 5 percent or more of the outstanding voting 
stock or shares of any organization and such organization.
    (7) Two or more persons directly or indirectly controlling, 
controlled by, or under common control with, any person.
    For purposes of 402(g)(G), the phrase ``two or more persons 
directly or indirectly controlling, controlled by, or under common 
control with, any person'' is understood to cover the following 
situations:
    (1) Where one of them directly or indirectly controls the other;
    (2) Where both of them are directly or indirectly controlled by a 
third person; or
    (3) Where together they directly or indirectly control a third 
person.
    For purposes of this test, Customs will consider the fact that the 
related party importer has reason to believe that an upward adjustment 
may be made to the price as evidence that the relationship may have 
affected the price actually paid or payable for the imported 
merchandise. Therefore, transaction value may not be acceptable.
    Rather, the merchandise may be appraised under section 402(f). The 
appraised value pursuant to section 402(f) will be derived from the 
transaction value method. That is, the appraised value will be the 
price for the imported merchandise after the upward section 482 
adjustment is undertaken by the importer/taxpayer plus the applicable 
statutory additions: Packing, selling commissions, assists, royalties/
license fees and proceeds of subsequent resale. In order to participate 
in the test, the importer/taxpayer must agree that 402(f) is the proper 
basis of appraisement, in the event an upward section 482 adjustment 
is, in fact, claimed for tax purposes.

Title VI of the North American Free Trade Agreement Implementation Act

    In order for the importer to comply with Customs value law, when 
making upward adjustments, a mechanism must be established that permits 
the importer to submit information related to the upward adjustment 
after the time of entry. Customs has determined that the reconciliation 
provisions of the North American Free Trade Agreement Implementation 
Act (the Act) create a possible vehicle permitting these circumstances. 
Specifically, Title VI of the Act, Public Law 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 in 
Subtitle B of the Act amends section 484 of the Tariff Act of 1930 by 
establishing a new subsection (b) entitled ``Reconciliation''. 
Reconciliation is a planned component of the NCAP. Section 631 of the 
Act authorizes tests of planned NCAP components. Section 101.9(b) of 
the Customs Regulations, provides the regulations governing the testing 
of NCAP components. See T.D. 95-21 (60 FR 14211, March 16, 1995).
    This test is established pursuant to those regulations.

Reconciliation

    Reconciliation will allow an importer to provide Customs with 
information not available at the time of entry summary filing and which 
is necessary to ascertain the final classification and appraisement of 
imported merchandise. The reconciliation must be filed no later than 15 
months from the date of the first entry summary filed under that 
reconciliation.
    A reconciliation permits the liquidation of an entry summary/
summaries despite the fact that undetermined information will be 
transmitted to Customs at a later time through the reconciliation 
process. Assuming there are no other outstanding issues, the entry 
summaries will be liquidated for all purposes other than that which is 
identified by the importer as pending reconciliation. The 
reconciliation will be liquidated in accordance with 19 U.S.C. 1500. 
The liquidation of the reconciliation may be protested, in accordance 
with 19 U.S.C. 1514, but the protest may only pertain to issues covered 
by the liquidated reconciliation.
    A draft notice was published requesting comments from interested 
parties on July 5, 1995. We received ten comments and the following is 
Customs analysis and response to those comments.

Discussion of Comments

Bond Requirement

    Comment: The commenter, a surety company, states that language 
should be added to clearly define the bond requirements for the 
reconciliation entry.
    Customs Response: All entries which are pending reconciliation must 
be secured by a continuous bond. Customs will allow only one surety for 
all entries under the reconciliation. If a participant changes sureties 
during the reconciliation period, Customs must be notified before the 
change is actually made. No additional entries will be added to the 
first reconciliation, and a new reconciliation entry will be initiated. 
In this situation, Customs will issue a separate reconciliation entry 
number for the future entries to be filed during the remainder of the 
reconciliation period. Both reconciliation summaries will be due at the 
close of the reconciliation period.
    A separate bond will not be required for the reconciliation entry. 
The continuous bond on the subject entries will provide coverage for 
the 

[[Page 46143]]
reconciliation entry. The Basic Importation and Entry Bond Conditions 
under 19 CFR 113.62 provide for an agreement of the principal and 
surety to pay, as demanded by Customs, all additional duties, taxes, 
and charges subsequently found due, legally fixed, and imposed on any 
entry secured by the bond. The bond conditions as prescribed by 
regulation also provide for agreement by the principal to file within 
the time and in the manner prescribed by law and regulation, 
documentation to enable Customs to properly assess duties on the 
merchandise, collect accurate statistics with respect to the 
merchandise, and determine whether applicable law and regulation are 
met.

Bond Sufficiency

    Comment: The commenter, a surety company, is concerned that a 
continuous bond may not adequately cover the amount due on the 
reconciliation entry.
    Customs Response: For purposes of this test, Customs believes the 
continuous bond for the entry summaries will adequately cover the 
amount due on the reconciliation entry. Customs will monitor each 
reconciliation individually and should additional coverage be deemed 
necessary, it will be requested. Customs is conducting research into 
bond sufficiency from the standpoint of the Chief Financial Officers 
Act, with respect to all programs under the Mod Act.

Notice to Sureties

    Comment: The commenter, a surety company, states that Customs must 
notify the surety bonding the entries subject to reconciliation that 
the importer is using reconciliation. Accordingly, the commenter 
suggests that Customs advises the surety, electronically if possible, 
as to which entries are subject to reconciliation as well as the 
specific issue pending reconciliation.
    Customs Response: Upon acceptance into this reconciliation 
prototype, Customs will issue a confirmation letter to the participant. 
This letter will provide the reconciliation entry number which is to be 
utilized. In this document, Customs will also confirm that all entries 
filed on behalf of the applicant, within the designated time frame, 
meeting the scope as defined by the applicant, will be subject to 
reconciliation of the entered value pending upward adjustments in 
accordance with 26 U.S.C. 482. A courtesy copy of this confirmation 
letter will be sent to the surety company, which is designated in the 
application. This will serve as the notice to the surety that all 
entries filed within the designated time frame, meeting the scope as 
defined by the applicant, will be subject to reconciliation of the 
entered value. The value element on the subject entries will be 
liquidated on the reconciliation entry.

Identification of Reconciliation

    Comment: The commenter, a surety company, asks how Customs will 
identify such reconciliation.
    Customs Response: Each reconciliation will be identified by a 
separate entry number issued by Customs.

Scope of Reconciliation

    Comment: The commenter, a surety company, is concerned that Customs 
will be withholding liquidation pending reconciliation of the valuation 
on all entries filed by the applicant, when in fact, not all 
merchandise on those entries may be subject to the possible upward 
adjustment.
    Customs Response: For the purposes of this reconciliation 
prototype, the importer is required to provide, in the application, the 
scope of the reconciliation. The scope will be defined in the 
application to include the importer, filer, surety, merchandise (by 
Harmonized Tariff Schedule number) which will be subject to the 
reconciliation, and reconciliation time frame (October 1, 1995 through 
March 31, 1996, or the end of their tax year, whichever comes first). 
During the reconciliation period, the entered value, with respect to 
upward 482 adjustments, on the entries meeting the designated scope 
criteria will be held open pending the reconciliation.
Liquidation

    Comment: The commenter, a surety company, requests information 
regarding the liquidation of the reconciliation.
    Customs Response: The reconciliation is an entry, identified by 
entry type 09. The reconciliation will permit the liquidation of the 
entries despite the fact that the undetermined value information will 
be provided to Customs at a later time. Upon liquidation of the 
entries, any Customs decision entering into that liquidation, e.g., 
classification, may be protested pursuant to 19 U.S.C. 1514. When the 
value information is provided in the reconciliation, the reconciliation 
will be treated as an entry and liquidated. The liquidation of the 
reconciliation may also be protested but the protest may only pertain 
to elements contained in the liquidated reconciliation, i.e., the 
protest may not re-visit elements previously liquidated in the entries.
    Customs will take action to liquidate all reconciliation entries 
filed pursuant to this prototype, and extend the liquidation if 
necessary. Should the reconciliation NOT be filed, the importer will be 
subject to liquidated damages as the terms of the bond have been 
breached. In such a case, Customs will analyze the individual situation 
and liquidate the reconciliation appropriately.

Possible Abuse of Reconciliation

    Comment: The commenter, a surety company, states that Customs 
should limit the number of reconciliations an importer can use, so as 
to avoid separate reconciliations for each issue for each entry.
    Customs Response: For the purposes of this test, the only element 
open for reconciliation is valuation, specifically an adjustment to the 
price made to comply with 26 U.S.C. 482. Customs will be able to 
adequately monitor the amount of reconciliations requested through the 
application process. The intent of the reconciliation is to link all 
entries with common, undetermined value information to one 
reconciliation entry.

Expansion to Include Downward Adjustments

    Comment: The test should be expanded to include both upward and 
downward adjustments.
    Customs Response: This test is designed to address a specific issue 
identified by the Internal Revenue Service. That is, if an importer 
must make an upward adjustment to its transfer price in order to comply 
with 26 U.S.C. 482, section 1059A acts as a bar to such adjustment if 
the lower price was declared to Customs. The section 1059A bar does not 
apply to situations in which the importer contemplates making a 
downward adjustment to the price. Given the restricted scope of the 
test, Customs has concluded that the test will continue to be limited 
to importers that contemplate making an upward adjustment to their 
transfer prices to comply with 26 U.S.C. 482. However, Customs is 
analyzing whether downward adjustments to prices can and should be 
addressed in future reconciliation tests.
Bases of Appraisement

    Comment: There is no reason why section 1401a(a)(I)(f) must be the 
applicable basis of appraisement in the proposed test.
    Customs Response: As was stated in the initial notice, Customs 
considers the 

[[Page 46144]]
fact that the related party importer has reason to believe that an 
upward adjustment may be made to the price of the imported merchandise 
as evidence that the relationship may have affected the price actually 
paid or payable for the merchandise. Therefore, transaction value will 
not be considered to be the proper basis of appraisement. The importer 
continues to have the right to have the hierarchy of appraisement 
applied to its transactions. However, if the importer claims another 
basis of appraisement, such as deductive value, then the importer will 
not be able to participate in the proposed test. This is due to the 
fact that the test is designed to determine how Customs can use the 
prices that the importer paid to the seller and the upward adjustments 
to those prices by using reconciliation. If a basis of appraisement is 
used that does not use these adjusted prices then the information is 
meaningless, for purposes of this test. Appraisement under section 
402(f) of the Tariff Act of 1930, as amended by the Trade Agreements 
Act of 1979 allows Customs to utilize the importer's information on the 
price it paid, and to reasonably appraise the merchandise using that 
information.

Providing Customs With IRS Form 5472

    Comment: One commenter responded with a suggestion that the 
Internal Revenue Service routinely provide the U.S. Customs Service 
with the IRS Form 5472 which requests information on import 
transactions and the related party status of the exporter/importer. The 
information on the Form 5472 would identify differences between the 
basis or inventory costs of imported goods as carried for IRS purposes 
and the Customs value of the imported goods. If such differences did 
exist, IRS Form 5472 requires an explanation for such differences and 
if supporting documentation exists in the United States.
    Customs Response: Under existing IRS confidentiality statutes, the 
routine transfer of IRS information to the U.S. Customs Service is 
prohibited. Only in cases where the Customs Service has a Customs 
Regulatory Audit planned or in progress, can Customs request certain 
specific information from the IRS and only in cases when the importer 
has refused to provide the information voluntarily. The existing 
provisions for these transfers are contained in Public Law 103-182 
passed December 8, 1993.

Description of Test

    This test will be limited to participants who meet the eligibility 
criteria set forth below. It will cover entry summaries filed by those 
participants from October 1, 1995 to March 31, 1996 or the end of the 
participant's tax year, whichever comes first. Each reconciliation is 
limited to one importer/filer/surety combination.
    By statute, reconciliation must be filed within 15 months of the 
entry summary. The reconciliation entry (i.e. the intent to file the 
reconciliation) is considered filed when the application is submitted 
to Customs. For purposes of this test, participants must file the 
reconciliation summary, which provides the outstanding value 
information, within 15 months of the filing of the first affected entry 
summary or by December 31, 1996, whichever comes first. All 
reconciliation entries will be filed to the attention of Matthew 
Krimski, Office of Regulatory Audit, Office of Strategic Trade, U.S. 
Customs Service, 1301 Constitution Avenue, NW, Washington, DC 20229. 
Customs will advise participants where additional duties resulting from 
the reconciliation are to be tendered.
    All entries which are pending reconciliation must be secured by a 
continuous bond. Customs will allow only one surety for all entries 
under the reconciliation. If a participant changes sureties during the 
reconciliation period, Customs must be notified before the change 
actually is made. No additional entries will be added to the first 
reconciliation, and a new reconciliation entry will be initiated. In 
this situation, Customs will issue a separate reconciliation entry 
number for the future entries to be filed during the remainder of the 
reconciliation period. Both reconciliation summaries will be due at the 
close of the reconciliation period.
    The continuous bond on the subject entries will provide coverage 
for the reconciliation entry. The Basic Importation and Entry Bond 
Conditions under 19 CFR 113.2 provide for an agreement of the principal 
and surety to pay as demanded by Customs all additional duties, taxes, 
and charges subsequently found due, legally fixed and imposed on any 
entry secured by the bond. The bond conditions as prescribed by 
regulation also provide for agreement by the principal to file within 
the time and in the manner prescribed by law and regulation, 
documentation to enable Customs to properly assess duties on the 
merchandise, collect accurate statistics with respect to the 
merchandise and determine whether applicable law and regulation are 
met.
    The reconciliation is an entry identified by entry type 09. The 
reconciliation will permit the liquidation of the entries despite the 
fact that the undetermined value information will be provided to 
Customs at a later time. Upon liquidation of the entries, any Customs 
decision entering into liquidation e.g. classification, may be 
protested pursuant to 19 U.S.C. 1514. When the value information is 
provided in the reconciliation, the reconciliation will be treated as 
an entry and liquidated. The liquidation of the reconciliation also may 
be protested, but the protest may only pertain to elements contained in 
the liquidated reconciliation, i.e. the protest may not re-visit 
elements previously liquidated in the entry.

     Note: In those cases in which the Harmonized Tariff Schedule 
(HTS) classification is determined by the unit value, the 
classification for those commodities also will be held open pending 
the reconciliation.

    Customs will take action to liquidate all reconciliation entries 
filed pursuant to this prototype and extend the liquidation if 
necessary. Should the reconciliation not be filed, the importer will be 
subject to liquidation damages as the terms of the bond have been 
breached. In such cases, Customs will analyze the individual situation 
and liquidate the reconciliation appropriately.

Application

    Applications will be submitted to Mr. William F. Inch, Director, 
Office of Regulatory Audit, United States Customs Service, 1301 
Constitution Ave. NW., Room 2311, Washington, DC 20229-0001. All 
applicants will be notified in writing of approval or disapproval 
regarding test participation. All applicants who meet the eligibility 
criteria will be chosen to participate in this test. The application 
must address the ability to meet the eligibility requirements. The 
applicant must consent, in the application, to all the conditions set 
forth in the description of this test and eligibility criteria. The 
applicant must set forth in the application the date on which the 
applicant's tax year ends. The following information must be included 
in the application:
    1. Importer and IR number;
    2. Filer;
    3. Surety;
    4. Reconciliation Time frame (October 1, 1995 through end of tax 
year or March 31, 1996, whichever comes first;
    5. Merchandise, by Harmonized Tariff Schedule number, impacted by 
the possible 482 adjustment;
    6. Countries of origin of impacted merchandise; and
    7. Ports of entry through which the subject merchandise will be 
imported during the reconciliation period. 

[[Page 46145]]

    By applying, applicants agree that the value for merchandise 
covered by all entry summaries filed by them or on their behalf on or 
after October 1, 1995 until the end of the tax year or March 31, 1996, 
whichever comes first, shall be finally determined by the liquidation 
of the reconciliation filed in accordance with the test. The Office of 
Regulatory Audit will review the application to determine that the 
applicant has met all eligibility requirements.

Documentation Required to Support Reconciliation

    The approved participant shall maintain and produce upon Customs 
request all relevant documentation to support the change in the entered 
value. The reconciliation shall include the following information:
    1. The entry numbers and entry dates, total entered value and ports 
of entry of all entries filed with Customs falling within the scope of 
the test.
    2. Broken down by entry number, a cumulative list of units imported 
by classification number and the change (final entered value) to that 
entered value.
    3. Proposed duty due pursuant to reconciliation.
    In order to support the reconciliation, the approved applicant 
shall maintain and produce upon Customs request all relevant 
documentation to support the change in entered value. The approved 
applicant may be required to provide any or all of the following 
documentation:
    1. The IRS Schedule M-1, and the Form 1120 Corporate Tax Return.
    2. Any and all other supporting documentation filed along with the 
M-1 and the Form 1120 that was furnished to the IRS.
    3. Any or all IRS documents or communications with the participant 
regarding the relevant 482 adjustment.
    4. Any and all documentation including any books and records or 
computerized data to relate the 482 adjustment to the entries filed 
with Customs.
    Such information and supporting material should be provided in a 
format or electronic media commonly in use. Examples are an IBM 
compatible computer 3.5 disk utilizing a software product such as 
Access or Excel or other similar spreadsheet or database application 
such as Lotus 1, 2, 3.

Verification
    Customs Regulatory Audit, in conjunction with other Customs 
disciplines, will determine if any verification effort is necessary to 
establish the accuracy of the details submitted. The extent of the 
verification will be determined by Regulatory Audit, and if an audit is 
required, established Regulatory Audit procedures will be followed.

Eligibility Criteria

    In order to qualify for this test of reconciliation, importers must 
have reason to believe they may invoke the IRS regulations to make 
upward adjustments to the price of the imported merchandise. Importers 
must provide, on an entry-by-entry basis, the electronic entry of 
merchandise and the electronic entry summary of required information 
(ABI). Other requirements and conditions are as follows:
    1. The test only applies to the related party transactions engaged 
in by participants who qualify under Internal Revenue Service Section 
482 requirements to make upward adjustments and which are not subject 
to Antidumping/Countervailing Duty proceedings.
    2. Participants' tax year must end between October 31, 1995 and 
March 31, 1996.
    3. Customs decision to allow a company to participate in the test 
program will be made in consultation with the Internal Revenue Service.
    4. Each participant must provide U.S. Customs with the methodology 
that will be used to arrive at the final price of the imported 
merchandise.
    5. Each participant agrees that appraisement is under section 
402(f) of the Tariff Act of 1930, as amended by the Trade Agreements 
Act of 1979, if, in fact, an upward section 482 adjustment is made for 
tax purposes.
    6. Entries involving merchandise under this test will not be 
eligible for drawback.

Selectivity Criteria

    The Office of Regulatory Audit, in conjunction with other Customs 
disciplines, will review the application to ensure the eligibility 
requirements are met. All applicants who meet the eligibility criteria 
will be allowed to participate, provided no other Customs office 
objects.

Objectives of the Test

    The objectives of this test are:
    1. To work with the trade community to further compliance in the 
value area regarding related party transactions.
    2. To allow companies intending to make Internal Revenue Service 
Section 482 adjustments, which may ultimately result in an upward 
adjustment to the price for merchandise, the opportunity to reconcile 
their business operations regarding U.S. Customs and Internal Revenue 
Service requirements applicable to related party transactions.
    3. To determine if reconciliation is a viable method to ensure a 
coordinated and consistent Customs response to Internal Revenue Section 
482 adjustments which result in the upward adjustment of the Customs 
valuation under Section 1059A.
    5. To test the type of information needed by Customs to process a 
reconciliation.

Test Evaluation Criteria

    The criteria which will be used to evaluate whether or not 
reconciliation is a viable means to allow importers which make upward 
adjustments to the price of imported merchandise will be based on 
measurable outcomes which include:
    1. The number of participants;
    2. Customs resources expended to administer and monitor the 
program;
    3. Customs resources expended to verify final reconciliation entry 
claims and the methodologies applied;
    4. Amount of additional revenue collected;
    5. Survey of participants on the conduct of the test and its effect 
on their business operations; and
    6. IRS and Census satisfaction with the results of the test.

    Dated: August 30, 1995.
Edward F. Kwas,
Assistant Commissioner, Office of Strategic Trade.
[FR Doc. 95-21909 Filed 9-1-95; 8:45 am]
BILLING CODE 4820-02-P