[Federal Register Volume 63, Number 25 (Friday, February 6, 1998)]
[Notices]
[Pages 6257-6264]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-3069]


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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

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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