[Federal Register Volume 62, Number 189 (Tuesday, September 30, 1997)]
[Notices]
[Pages 51181-51185]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-25930]


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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.

[[Page 51182]]

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,

[[Page 51183]]

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

[[Page 51185]]

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